Understanding Your Bank Account Details Better

With so many different terms floating around, banking terminology can get really confusing. If you are someone who doesn’t know their AER from their APR and their PIN from their Chip, then this guide to common banking terms could enlighten you.

AER

AER stands for Annual Earnings Rate. AER is used to calculate the annual amount that you earn on an investment or savings account. The higher the AER, then the better the investment or savings account. If you are looking for a savings account then compare AER’s to work out where your money is going to make the most profit.

APR

APR stands for Annual Percentage Rate, and is the amount of interest that you pay each year on a loan or mortgage. The lower the APR then the less you will pay yearly on that item of borrowing. Items with high APR’s like credit cards have APR figures around 15-20% whereas mortgages have a low APR figure of about 5-7%. The quickest way to compare loans is to look at their APR values.

Chip and PIN

Chip and PIN is the current system used to pay for items or withdraw cash using a credit or debit card. The card has a 4-digit PIN, or personal identification number, that you enter into a cash machine or till machine in order to retrieve money or pay for goods. The chip on the card holds information that, combined with the PIN, allows the machine to identify you as the correct owner of the card. Chip and PIN is more secure than the previous magnetic strip and signature technology that was used a few years ago.

Overdraft

An overdraft is a sum of money that you are minus within an account. If you go beyond the amount of actual money you have in an account, then you go into the overdraft. Many accounts have a pre-arranged limit that allows you to go overdrawn, which can be useful, as unauthorised overdrafts will cost you a lot in interest and fees.

Phishing

If you use online banking, then Phishing is a term you might have heard of but you might not know what it means. Phishing is a form of scam or illegal attempt to get hold of your bank details online so that they can withdraw money from them. When online banking started this was a big problem, but with increased security measures the problem is getting better. Most Internet browsers include a Phishing filter to stop such practices from occurring.

Standing orders and Direct Debits

Standing orders and Direct Debits are similar in some ways, but different in others. Both involve a regular amount being transferred from one account to another. Standing orders are a regular, fixed amount that you pay to another person or company, usually monthly. Direct Debits are an amount of money, which can be fixed or varied, that is removed from your account at set intervals. One example of a Direct Debit is mortgage repayments.

Getting advice

If you are unsure about any other banking terms, then visiting your local bank branch or looking online might help. Never be afraid to ask about something, because if you don’t understand something that is part of your account policy, you could lose money or not be taking full advantages of the features on offer to you.

Peter Kenny is a writer for The Thrifty Scot. Please visit us at Best Current Accounts and Child Trust Funds Visit http://www.thriftyscot.co.uk

5 Steps To Opening An Offshore Bank Account

If you`re investing for the first time in an offshore account, it can be confusing. You must choose a reputable bank and handle the ins and outs of offshore accounting procedures. There are no first time investing procedures to follow. However, the following five simple steps will give you the information you need.

First, figure out how much you want to invest. If you can only invest $1,000, focus on the institutions that allow that minimum.

Next, which jurisdictions do you have access to? Keep in mind that the bank or institution must be authorized to deal with your particular country of residence. If jurisdictional issues prevent fund access, you may be required to use an appropriate structure; you can always use a mail redirection service as well to access to offshore investments without much problem.

Next, which specific fund do you want to invest in? To choose, search the Internet, read offshore investment guides and publications, or use an investment information provider.

Your research should focus on the fund's previous performance, its management and assets. Watch it for three to six months before you invest, and don't rush into anything.

Next, before you can invest, decide whether you want a broker or will do this yourself. If you choose a broker, you`ll next need to call the broker and have him or her make the needed arrangements. If you decide to do it yourself, request a current copy of the fund's prospectus and then begin the proper investment proceedings from there. To obtain a prospectus from the fund, fax a request for it. The following is a sample of how you might word it:

Dear XXXXXXXXX,

I am the investment administrator of a company domiciled in (insert tax haven here).

I would appreciate a current copy of your prospectus so that I may invest in your fund.

My mailing address is
XXXXXXXX
XXXXXXX
XXXXX

Kind regards,

XXXXXXXX

I have used this type of letter often. Even when I used an Australian postal address, the fund still sent the prospectus, even though they also sent a letter stating that they were not authorized to deal with Australian residents, and therefore could not take my investment. They did give their account details, though, for my information.

Finally, if you`ve met all criteria and want to go ahead with the investment, a bank draft is the easiest payment method. Just attach the check to the completed prospectus and send it to the fund.

When you set up the bank draft, if you use a bank with an international essence, you`ll likely raise fewer questions. You also cannot post the prospectus from a country that the fund is not authorized to deal with.

The above five steps should make your first offshore investment experience relatively easy and even fun. You should know that the fund may still deal with you even if all their criteria are not met, but following the steps above should be your easiest route to opening an offshore account.

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Should I Open a Business Bank Account?

When you are first starting your business it may seem an unnecessary hindrance to worry about how to manage your business transactions if you are starting off small. After all, it’s sales that matter, right?

However, it will be much simpler in the long run if you separate your personal finances from those of your business.

When you look back over time and need to analyse income and expenditure, it is much easier knowing that you only have to anaylse the transactions in one separate bank account. It certainly makes it less of a chore.

If you don’t separate business and personal items then you give yourself an extra job in that you have to identify and analyse each item into business or personal before you can assess your business cash flow. In short you give yourself an extra job.

Another benefit to separating business transactions comes if you decide to give the bookkeeping to someone else at a later date. That person would have a much harder time recognising which items were relevant business transactions because they are not as familiar with your transactions as you would be.

This would mean they would spend more time investigating transactions instead of carrying out the analysis. This of course would mean higher charges, not to mention a lot more questions to you regarding explanations of uncertain items.

Finally, you should be aware that the tax man takes a dim view when you mix business and personal items. After all, is it a business venture or merely a hobby that you are running?

You risk higher tax assessments if it is not clear what items are legitimate business expenses. It is silly to invite trouble when you can easily prove that you are in control of your business and have the relevant facts to hand. Separate bank accounts and records will achieve this for you.

Business bank account charges can be an issue, but currently in the UK there are a number of banks, particularly those operating online accounts, that will let you bank for free.

There are usually conditions however, namely trying to get as many of your transactions made by direct transfer (BACS, D/D etc.). It is just a matter of shopping around for the best deal.

Please don’t feel that you have to use the same bank as the one that runs your personal account. It is worth investigating if they will let you have a special deal, but don’t feel beholden to take it. Competition is rife in the banking industry and with a little persistence you should be able to secure a favourable deal.

A final word, if you do opt to open a separate bank account, then please make sure you put all business items through it. It is easy to pay for an item out of your personal account and then forget to allocate it to business expenditure.

Don’t forget that the item will more than likely be tax deductible and you want to make sure it is included in the accounts for your business.

Trevor Sadowski has worked in Accountancy for the past 23 years and has been a member of the Chartered Association of Certified Accountants (ACCA) since 1994.

Trevor currently provides contract accountancy support through short-term placements or interim management in the UK. To find out more about his accountancy services, visit his web site at http://www.moveaheadonline.com

How To Choose a Joint Bank Account

Every year thousands of new couples opt for a joint bank account to service their joint needs and responsibilities. In choosing a joint account, they are often misdirected out of hundreds of pounds by choosing bank accounts with free gifts instead of focusing on the important qualities of a good joint bank account. Freebies such as iPods, and gift vouchers may seem attractive at first but their value will quickly dwindle in comparison to the savings you could make by choosing a current account with a high interest free overdraft that that could see you through many a tight spell. In fact, only 3% of singletons would choose to close their own account and share their finances with their future partner.

Well over half (56%) say they would prefer to keep their options open in their next relationship - with money both in a joint account and in a separate account in their own name. Couples retain their independence While couples might be committed to one another, many are far from committed when it comes to their finances, with more than one in four couples (28%) opting not to have a joint account and insisting on keeping their money separate. Nearly one in ten (8%) people in a relationship don't trust their partner enough to share their finances. Nearly one in five (17%) of couples admit that having joint finances would lead to arguments. Forty one percent of have never even discussed the subject and chose to remain financially independent of one another. Women are particularly keen to assert their financial independence Nearly half (42%) of women in a relationship, say financial independence is important for them - compared to just one in four (24%) men.

Marginally less that half (47%) of women believe that they are better at managing the family finances that their male partners. Nearly one in four (23%) men think that women really are the ‘better half' and readily admit they are much more financially astute. Not that many couples are good at keeping track of their cash: Sixteen percent of couples admit to being unaware of the balance of their bank accounts at any given moment. Ten percent, while willing to hazard a guess admit that they would likely be as much as £200 inaccurate in their estimations. The tendency to stick with the same account rather than option for one with more suitable facilities, in some case for up to twenty years has resulted in around forty one percent of couple failing to keep their finances in good order.

It is no surprise to see that many people wish to maintain their financial independence. It would appear that many couple remain uncomfortable discussing their financial issues. There are benefits of having both independent and joint accounts. As with most financial services, there is a large discrepancy between the best and worst deals available to consumers today and as such it is worth shopping around for the best current account deals available for your particular needs. When it comes to shopping for a better bank account, there is a large level of inertia preventing the general pollution from doing so."

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