Brits ‘need A-Level maths to work out best bank options’
It said banking jargon leaves Brits baffled, meaning they are likely to lose out on the best deals and interest at a time when household budgets are feeling the pinch.
The research by Tandem Bank found that commonly used banking terms such as ‘representative APR’, ‘debt consolidation’ and ‘deferred payment credit’ leave customers scratching their heads.
And acronyms such as ISA also leave individuals confused.
The bank commissioned Dr Christian Yates of the department of mathematical sciences at the University of Bath to create an exam-style paper using real life scenarios to illustrate the difficulties facing banking customers.
He suggested Brits need an A-Level understanding of maths, particularly algebra and calculus, to truly understand banking basics, as well as credit cards and mortgage repayments.
The research said more than 90% of Brits believe banks should use simpler language to explain the meaning and practical result of their most-used terms, while over a third (41%) said they would rather keep their money in a piggy bank than a bank.
Dr Yates said: “The general public requires a consistently high level of mathematics to understand and make sense of some fairly common financial situations. Not only do they have to get their heads around the myriad terms and acronyms that banks use, but they often need to have A-Level standard maths to accurately understand the ramifications of banking products, or simply how to best manage their finances.”
The top 10 banking terms Brits don’t understand
- MICR code – 96% (code for processing and clearing cheques)
- Offsetting – 89%
- Deferred payment credit –85%
- Representative APR – 79%
- Fixed-rate bond – 75%
- Cash flow statement – 73%
- Debt consolidation – 72%
- Base rate – 60%
- ISA – 59%
- Balance transfer – 43%
The survey of 2,000 people found that many more familiar terms leave people in the dark too. Over two fifths (44%) couldn’t correctly explain how ‘base rates’ work and nearly half didn’t understand ‘share prices’ (49%) or ‘tracker mortgages’ (47%). Over a third (36%) were not able to correctly identify that ‘ISA’ stands for ‘Individual Savings Account’.
Ricky Knox, founder and deputy CEO of Tandem Bank, said: “It’s always stressful going into an exam room, so it’s a pretty terrifying thought that we’re faced with that feeling when it comes to making everyday decisions about our own finances. Many high-street banks aren’t making it easy enough to comprehend the real financial implications of their products and are leaving most people in the dark, feeling like they’re about to sit an exam they’re vastly unprepared for.”