One in four Brits ‘don’t know the difference between a credit and debit card’
Current and savings accounts also confuse people, with one in five Brits admitting they don’t know the difference between the two.
The study by MoneySuperMarket found over two thirds of UK adults (70%) are unclear about the rules regarding switching current accounts – with 16% of people incorrectly believing that it is not possible to switch if your current account is in its overdraft. A further 27% cannot correctly explain what the term APR stands for (see all the definitions in the jargon buster below).
Elsewhere, just over a third (39%) of people cannot explain what an insurance premium is and a further third (37%) of people do not accurately understand the term standard variable rate tariff.
In the mortgage space, nearly half of UK adults (47%) do not correctly understand the term ‘loan to value’, while 27% have the same challenge with the term ‘fixed rate mortgage’.
Claudia Nicholls, commercial director for money at MoneySuperMarket, said: ‘‘If you’re at home under lockdown and with a little time to spend on learning new skills, maybe consider setting aside some time to fill in your personal finance knowledge gaps – it can really help you see your finances in a new light and reduce any concerns you might have about not understanding elements of certain products you might have or are considering.”
Debit vs. credit card – when you spend money with a debit card, it takes it from your bank account, whereas a credit card charges it to your credit card company.
An insurance premium – the amount of money an individual or business pays for an insurance policy.
Current accounts are generally used for managing day to day transactions while savings accounts are deposit accounts that can help you grow your money.
Switching current accounts – it is possible to switch current accounts if you are in your overdraft but you will still have to pay back whatever you owe your old bank.
APR stands for Annual Percentage Rate and refers to the annual rate of interest charged to borrowers.
A standard variable tariff is an energy supply contract with an indefinite length that does not have a fixed term applying to the terms and conditions. It’s an energy supplier’s basic offer.
‘Loan to value’ stands for the size of your mortgage in relation to the value of the property you want to purchase.
A fixed-rate mortgage has an interest rate that stays the same for an agreed period of time