Citizens Advice financial capability

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1 BAC2 Table of bank account features Features Current Account Basic Bank Account Jam Jar Account Post Office Account Accepts universal credit payments Allows automated payments (Direct Debits and Standing Orders) Overdraft facility Some accounts offer a small buffer Cash card with PIN for cash machines May be restricted to bank machines only Can only be used at the Post Office Debit Card Sometimes Cheque Book Credit check needed to open an account Fees and charges Fees and interest on overdrafts, with penalties for returning DD s, SO s and cheques. Penalties for returning DD s or SO s. Monthly fee of 10-15, but no charges None 2015 Citizens Advice Intermediate banking handouts/sep16/v2 Citizens Advice financial capability

2 Which accounts suit these clients? Martin is single. He is just about to start his first job. His new boss says she needs his bank details to pay his wages in. Martin needs a little money to tide him over for the week before he gets paid. His new job is 9-5 on an industrial estate. Letitia is 18 and works. She has always been paid in cash. Her baby is due in a few months. She will make a claim for benefits when the baby is here and needs an account for this. She lives near a post office in an estate out of town. Simon has always worked for a weekly cash pay packet. His sister has been on at him to pay his gas and phone bill monthly from an account as she says it s cheaper. He also has some cash savings in a drawer in his house. Marwa and her husband had their last bank account closed because of money they owed. They have a post office card account. Their local post office is about to close. The nearest one will be a mile away Citizens Advice Intermediate banking handouts/sep16/v2 Citizens Advice financial capability

3 BAC3 What is a Debit Card? The Front of a card Most cards will say on them whether they are debit card or credit cards. This chip here is called the SIM like the one in your phone and is used at most tills. Once the SIM is inserted, you will have to then enter This 16-digit number is your card number, and is essential when shopping online or over the phone. All cards will have the cardholder name on them clearly. This symbol tells you what sort of card you have. This is a Mastercard, but both Visa and Visa Debit are very common too. This is the expiry date of your card Citizens Advice Intermediate banking handouts/sep16/v2 Citizens Advice financial capability

4 The Back of a card The magnetic strip, used for swipe readers This is the Card Security Code, which is essential when making online or telephone purchases. This security hologram makes it harder to clone a card. The signature strip for you to sign. All cards have small print here: this is often emergency contact numbers or helplines in case the card is lost and needs to be returned to the owner Citizens Advice Intermediate banking handouts/sep16/v2 Citizens Advice financial capability

5 Contactless cards Contactless is a banking feature that has been rising in popularity rapidly; in the month of March 2016, there was a total of 1.5 billion of spending on contactless cards in the UK. Factsheet You can tell if your card has contactless as a feature because it will have the contactless symbol on it (normally on the right-hand side of the front). The contactless symbol looks like this: The first time you try to use the contactless feature on a credit or debit card, you will normally have to input your PIN. This activates the contactless feature. After that point, the contactless facility will be accessible for general use: however, this does mean that if you don t wish to activate it, you don t have to. To use contactless, look for this symbol: Shops that accept contactless will show this symbol, and will often have it built into their Chip and PIN devices. It s easy to be worried about using contactless if you re not used to it. However, there are a lot of safety features built in and as long as you use it as carefully as any other use of your card, you re at no greater risk. It s worth remembering that using a contactless card: only cover purchases under 30 only allow a limited number of such uses each day requires the PIN to be re-entered occasionally, as a security measure. London - Contactless cards can now be used as Oyster cards within the London region: check the information on for up-to-date details on this.

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7 What is an overdraft? An overdraft is what happens when you spend more money from your current account than you actually have put in there. It s that simple. Factsheet How do I get one? You can request one from your bank, but many accounts automatically offer you one (student accounts especially do this). So what do I do with it? Overdrafts are very useful, and a lot of people use them. However, many people use them for day-to-day expenses, which isn t really what they re meant for. It s not a good idea to live in your overdraft. Instead, an overdraft is best kept back for emergencies, like a sudden house or car repair that you need urgently. Are they expensive? The important thing to be aware of is that there are two types of overdraft: authorised ones which have been agreed with your bank in advance or unauthorised ones, which haven t. With authorised overdrafts, you are allowed to borrow up to an overdraft limit you ve already agreed with the bank. There is a small charge for using the overdraft facility, but it is normally very low compared to other ways of borrowing, such as credit cards.

8 Unauthorised overdrafts Going over your agreed limit, or just spending more money than you have without setting up an agreed overdraft, is called an unauthorised overdraft. The way these are charged is complicated, but it is always very expensive. For example: Monthly fee can be anything from 5 to 35 or more. Daily fee can be 1 2 a day or more (usually up to a set limit per month). Transaction fees can be 10 to 25 for every cash withdrawal, Direct Debit or standing order, cheque or card payment you make whether or not your bank allows the payment. I don t want to get charged! It is important to read the terms and conditions of your account to understand how the overdraft works. Because they can be a bit complicated, it may be worth speaking to your local Citizens Advice about this. Handy tips when it comes to overdrafts If you need to increase your overdraft, your bank will normally be quite willing to do this, as long as you haven t got a history of going into an unauthorised one and as long as you do it in advance of the actual payment being taken. If you make a mistake and end up with an overdraft fee, it s always worth asking the bank to waive it. If it s not something that happens to you rarely, they might be willing to do so rather than risk an official complaint from you. Some banks have better overdrafts than others. Shop around!

9 BAC6 PIN Number Tips Rather than learn a PIN digit by digit, learn the pattern that you need to trace on the keypad with your fingers. To remember a new PIN, you could use an anniversary or friend s birthday. Use a combination of day and month, or month and year, whichever is easiest to remember but don t use numbers that are easily associated with you, like your own date of birth. Some people find it helps to break a four-digit PIN down into two lots of two numbers, for example 54 and 68. Visualise the number as an object or shape 0 a football, 1 a pencil or candle, 2 a swan or a snake. Turn your picture into a story, for example if your pin number is 2021; you could imagine a snake (2) playing football (0) with a swan (2) who was writing down the score with a pencil (1). The crazier the story the more chance you have of remembering it. When using chip and PIN in shops, bars and restaurants don t panic if you get the number wrong, you have three chances to enter the right PIN. If you enter it incorrectly three times, your PIN will be temporarily locked. This stops people who aren t you from using your card to make purchases. Unlocking the card is very simple; just contact your card issuer. When entering your PIN in a shop or restaurant, use your hand or body to shield it from prying eyes. Remember to keep your PIN a secret. Your bank and the police will never ask you to disclose your PIN. Do not keep a written record of you PIN next to your card. It is much safer to memorise your number. Don t forget that you can change your PIN at your bank or building society cash machine to something you find easier to remember such as the date of an historic event Citizens Advice Intermediate banking handouts/sep15/v1 Citizens Advice financial capability

10 BAC7 Sample statement Ms T Mint City Bank 26 Main Street City CC1 2DA Sheet 005 Account Number Date Details Paid out Paid in Balance 01-Jun-11 Balance brought forward Jun-11 DD Swift electricity Jun-11 CR DWP Jun-11 ATM CityBank, Main St Jun-11 SWT Co-op Main St Jun-11 ATM CityBank, High Rd Jun-11 DD Natural Gas Jun-11 Balance carried forward Citizens Advice Intermediate banking handouts/sep15/v1 Citizens Advice financial capability

11 Travelling abroad When you travel overseas on holiday, how you pay for it and how you spend money whilst you re away will have a big impact on your finances. Factsheet Where to buy foreign currency Lots of places sell foreign currency, but some are better than others. You can get foreign money from: Banks Bureaux de change The Post Office Travel agents Specialist websites It s quite straightforward, whether it s online or in person. You just hand over UK money and receive foreign money in return. In essence, you are buying money. It s important to keep in mind that, like stock and shares, exchange rates vary a lot. 100 one week might buy twice as much foreign currency as 100 the week after. Like all consumer purchases, you should shop around and find the best rate. Think about it like shopping for petrol or diesel for your car, a difference of a few pence quickly adds up to a big difference to the total cost.

12 Follow these tips to make the most out of your money whilst overseas. Buy it before you go, places at airports will charge you much more because you have no alternative. You may not be asked which notes you want, you should always try to get more of the smaller notes than larger ones. Always pay for things on a debit card, using a credit card overseas is much more likely to charge you. Remember your card company s 24-hour number, make a note of this (or just save it in your phone) before you go so you can get in touch with them if something goes wrong. Let your bank know where you re going. If you don t tell them you re going away, they may think your card details have been stolen and are being used overseas. As a result, they can temporarily block your account. It s a good idea to make sure the contact number they have for you is up to date, just in case they need to get in contact with you.

13 Credit Unions Credit unions are small non-profit financial organisations set up by members with something in common to benefit their community. Factsheet Credit unions aim to help people take control of their money by encouraging them to save what they can and borrow only what they can afford to repay. In essence, they are a savings and loan co-operative, where the members pool their savings to lend to one another and help to run the credit union. How does it work? Loan applicants must be 18 years of age or over. Membership is also available to people living in the same household who are related to an existing member. It s easy and free to have an account. The key benefits are: Flexible savings and loans. Free life insurance on savings and loans. Payroll deduction facility if you work for a sponsoring employer. Deposits can be paid into the Credit Union account by standing order mandate. Deposits can be made at various outlets using a membership card. Annual Dividend (interest) paid on savings. Competitive Interest rates on loans. No penalty for early repayment of loans. No administration or setup fees. The account can be checked online. Members are local. Savings and loans are spent locally benefitting business in the area. How is the loan repaid? Often this is the same way as a deposit into a savings account. This can be through payroll deduction, by standing order, through any Post Office or PayZone outlet using your membership card, or at their office.

14 What about repayment periods? Unsecured loans can be repaid over a period up to 5 years depending on circumstances and the amount borrowed. What about the savings? They ask members to continue to save whilst repaying their loans, even just a small amount. They may request savings remain intact as collateral while you have an outstanding loan. Why is a Credit Union loan better? Very competitive rates of interest. Repayments calculated on the reducing balance of the loan. Repayment terms to suit your particular circumstances. No other charges or fees. Additional lump sum payments accepted with no penalty. Flexibility to make larger repayments than agreed without penalty. Free life insurance (subject to conditions).