8 March 2015 / Money

Quiz: do you know your money jargon?

Harry Cheesman Which? Money

Comments 56

Getting to grips with financial jargon is no easy task, and that’s worrying when financial decisions are some of the most important we make. Test yourself in our quiz to see how much money jargon you know…

In January our Money team quizzed over 1,000 people on their knowledge of common financial terms. The results? Let’s just say perhaps some banks need to do more to improve their customers’ understanding of key financial terms.

For example, only a third of people understood the term ‘account buffer’, but this doubled when explained in jargon-free language. And to add to the confusion, one insurance company used the Latin term ‘terra firma’…

How much of the jargon do you understand?

Our test below consists of 10 questions on common financial jargon, so give it a go and see if you’re up to speed. Good luck! We’ll let you know the answers next week.

1. In banking, what is EAR?

(a) Interest earned over a year
(b) Representative interest rate describing interest paid for staying overdrawn for a year, excluding fixed fees
(c) Amount paid for staying overdrawn for a year

2. What is AER?

(a) The monthly interest rate on positive balances in your account
(b) Representative interest rate describing interest earned over a year, taking into account how often the interest is paid and the effect of compounding
(c) The amount you can spend once your authorised overdraft has been spent

3. What is a ‘fault claim’ in insurance?

(a) No one is at fault
(b) Either you’re at fault or your insurer can’t recover costs from anyone else
(c) You’re at fault

4. What is an ‘ex gratia payment’ in insurance?

(a) Optional upgrade payment by the policyholder
(b) Any optional payment made by the insurer
(c) Payment by an insurance firm on a successful claim

5. What’s an insurance ‘excess’?

(a) The difference between payout and claim
(b) The fee for a policy upgrade
(c) The first amount of a claim the customer has agreed to pay as a part of their policy

6. What is ‘no-claims bonus protection’?

(a) A bonus discount if you haven’t claimed
(b) It ensures you won’t pay an increased premium when you make claims
(c) It protects your no-claims bonus if you make fewer than a certain number of claims

7. What is AMC?

(a) The total amount of charges levied by fund managers
(b) The commission earned by fund managers
(c) The charge levied by fund managers to cover ongoing management only

8. What is an OEIC?

(a) Fund focusing solely on investing in government bonds
(b) Investment company or fund which may adjust investment criteria and fund size
(c) Fund focusing on emerging market investments

9. In investments, what are ‘equities’?

(a) A debt owned by an investor which can be traded as an asset
(b) An investment fund
(c) Shares in a company

10. Can you work out the effect of the terms in the following banking scenario?

Catherine has an interest-free and fee-free Formal Overdraft of £500. She has a daily Informal Overdraft Usage Fee of £5 and an Account Buffer of £10. On Monday her account balance is zero – she buys a new laptop for £500 and some food for £5. On Thursday her salary of £3,000 is paid into her account.

Which of the following statements is true?

(a) Catherine’s bank will charge her £15
(b) Catherine’s bank won’t charge her anything
(c) It’s impossible to know how much she will be charged

So write your answers below and we’ll let you know the answers next week. And try not to look at others’ answers until you’ve done yours!

Comments

dieseltaylor says:

8 March 2015

Given there is no surrounding context I think it is a little difficult to expect anyone to get a decent score. Even more so if one does not have bonds/funds, or an overdraft and have your interest off-set between you accounts.

I am not at all convinced this quiz will prove anything.

dieseltaylor says:

9 March 2015

Many of us will have a DMF in our car but unless there is a problem we will be happy ignorance of what the acronym means.

” Let’s just say it’s worth some people spending a little time brushing up on the jargon.”

My previous post was suggesting that not knowing some acronyms is not a sign of financial incompetence. Simply you have not the need to know at this point in time. Making readers feel inadequate about this “lack” is not helpful.

This is a helpful article:
http://www.which.co.uk/money/savings-and-investments/guides/different-types-of-investment/are-fund-charges-eating-into-your-returns/

Patrick Steen says:

9 March 2015

Hello Diesel, it’s just a bit of fun for the community 🙂 We weighed up whether to provide some useful links for revision on this quiz, but decided against to see whether people would like to do it blind.

I’ll go first! C, B, B, A, C, A, B, C, A.

A fair few of those were guesses. Let’s see how I do…

dieseltaylor says:

9 March 2015

I am glad it is a light-hearted quiz. Perhaps the comment on people who were tested in January needing to brush up on their jargon needed a smiley. : )

Patrick Steen says:

9 March 2015

Fair point, it does sound a little mean 😉

Alex Toplis says:

9 March 2015

Hi Diesel, you’re right it does come across a bit harsh – I’ve given it a little tweak 🙂

terfar says:

9 March 2015

Badly. Wear the dunces’ hat Patrick.

Patrick Steen says:

9 March 2015

Holds head in shame 🙁 Somebody had to get you guys going! It’d be no fun if I got them all right 😉

wavechange says:

9 March 2015

We know your strategy by now. 🙂 Now how about a quiz about something more interesting than financial jargon.

Patrick Steen says:

9 March 2015

Haha, maybe we can do a quiz about me. You all seem to know too much about me… my disgust of mayo, my love of phone battery life…

Patrick Steen says:

9 March 2015

Back to money jargon – should we have to know all of these terms to understand what’s being done with our money? Shouldn’t it be more common sense?

wavechange says:

9 March 2015

I think the best we can hope for is a clear explanation of financial jargon and some organisations do this much better than others.

It’s like instruction manuals, which we are discussing in another Convo. Some are clear and others leave a lot to be desired.

malcolm r says:

9 March 2015

I’ve had a blind go at this:b,b,b,b,c,c,c,b,c,b.
However, if you don’t understand something then look it up or ask. No point in guessing if it is important.

wavechange says:

9 March 2015

My entry is B, B, B, B, C, C, C, B, C, B.

The answer to Q10 is a bit of a guess. Catherine is a silly girl spending £500 on a laptop rather than waiting until she was paid four days later.

malcolm r says:

9 March 2015

Might have been on special offer, wavechange. At least she had an “authorised overdraft”. Hope she isn’t economising on food – £5 doesn’t buy much and she presumably had no cash. A bit precarious.

wavechange says:

9 March 2015

I see we have the same answers, Malcolm. I wrote mine on the back of an envelope yesterday, so I’m not cheating.

My approach with financial matters is to assume the worst, though as you say it’s best to check anything you are unsure of.

I guess Catherine did her food shopping in Aldi or Lidl.

terfar says:

9 March 2015

I agree with you, though as you say, 10 probably should be B, but knowing some banks…

Castle says:

9 March 2015

I think 10 is “C”, as she might have paid cash for the items!

dieseltaylor says:

9 March 2015

Mine was as below and done without research before I posted.
a,a,c,b,c,c,b*,c*,c,c

As for 10. there is nothing to say that she did not use cash, a cheque, or a credit card, which she clears monthly by DD from her current account. Paying by credit card makes the most sense for the computer. Cash for the food due to speed of transaction.

Those with the asterisk are really big guesses.

Andrew Collins says:

10 March 2015

Woah, this quiz is tough… I really need to brush up on my financial jargon!

wavechange says:

10 March 2015

Just start off by eliminating the answers that are not correct or don’t look probable and you will find it a lot easier, Andrew. Put yourself in the place of Harry, who has set the test. He has had to come up with some plausible but incorrect answers. Sometimes it is quite difficult to produce plausible ‘distractors’ when setting a multiple choice test.

Andrew Collins says:

10 March 2015

I’ll give it a shot later on today, wavechange – thanks for the advice! The ankle must be nearly mended now?

wavechange says:

10 March 2015

Thanks Andrew. I am indeed just about mended. I’ve still got to try on some Which? recommended walking boots.

Andrew Collins says:

10 March 2015

I used to find walking into somewhere like Millets and trying them on before buying…however, we’re lacking a local branch in Hertford these days.

John Ward says:

10 March 2015

Here’s my stab at the quiz : a., b., c., b., c., c., a., b., c., c.. Some are guesses. I am expecting to invoke the Eric Morecambe defence.

clint kirk says:

10 March 2015

How can we possibly answer number 10 without knowing how she paid?

wavechange says:

10 March 2015

Maybe why that’s why there is answer C.

clint kirk says:

12 March 2015

My answers: abbbc cabcc

John Ward says:

11 March 2015

If there are any bits of jargon that none of us get right, I suggest the relevant regulator bans that term from all marketing and customer correspondence.

John Ward says:

11 March 2015

I can understand why it is mandatory for the advertising of certain financial products to carry explanations, or warnings, or illustrations of potential outcomes. However, the financial services sector seems to be allowed to meet these obligations in a very unsatisfactory manner, almost to the point of denial in some cases. While advertisements in print media may include the necessary text, it is usually printed in a deliberately hard-to-read form with minimsed, compressed or feint lettering and with unfamiliar abbreviations. At least one can study the printed document, with a magnifying glass if necessary, and take time to decipher it. With adverts appearing on television, the companies seem irked that they have to include essential customer information on the screen at all [I suppose it spoils the aspirational images they have created at great expense]; with a 20 second commercial the text is usually on-screen for too short a time to read, is in white on a pale background, and is in a compressed typeface containing strange words and abbreviations. I find it surprising that the regulators consider these techniques to be acceptable, and I question whether we should trust the companies that do it. Even the banks that claim to give us “Xtra”, or want to showcase their “helpful banking”, or are “there for the journey”, have had a communication by-pass when it comes to clear presentation.

I still don’t know what “7% representative” means when I hear it in radio adverts.

Andrew Collins says:

11 March 2015

I finally got round to answering this quiz…. Here’s my answers: B, B, B, B, A, C, C, C, A, C (some guessed, of course…).

Beryl says:

12 March 2015

I am unable to take part in the quiz as I have already done so in the Which? Magazine so you will have to take my word for it that there were just a couple of jargons I was not familiar with. Question 10 took quite a while to fathom and I eventually came up with the following explanation. However, I stand corrected if wrong.

As Catherine already had a £500 formal interest free and fee free overdraft arrangement she could quite happily go ahead with her laptop purchase without incurring penalty. However, her daily overdraft usage fee of £5 per day paid in on Monday Tuesday and Wednesday amounted to £15 but as she already had a fee free overdraft arrangement this amount would be held in her account and tide her over until Thursday. Her £10 Account Buffer to prevent unauthorised overdraft would however be held back by the bank leaving her £5 in credit to spend on lunch. The £3000 credited to her account on Thursday would amply cover the agreed £500 overdraft so her bank would not charge her anything.

Quite a savvy lady I would say and probably a bank employee, but not something I could embark upon being of a more cautious nature. It is hoped her bank does not deduct two monthly DD payments, one at the beginning and another at the end of the same month as my bank has been known to do on occasion as the £10 Account Buffer would be far from adequate for someone of Catherine’s buy now pay later spending habits I would think.

Patrick Steen says:

12 March 2015

We’ll announce a winner tomorrow… fingers crossed it’s me! 😉

Beryl says:

12 March 2015

Sorry, couldn’t resist the pun “don’t bank on it Patrick!”

John Ward says:

12 March 2015

Do you usually have good luck on Friday the thirteenth, Patrick?

Alex Toplis says:

13 March 2015

Hello everyone, I come with what you’ve all been waiting for – the answers! So without further ado, the answers are as follows:

1. B
2. B
3. B
4. B
5. C
6. C
7. C
8. B
9. C
10. B

And the winner? Well, luckily it wasn’t Patrick. It was Malcolm R, who just got the answers in 26 minutes before Wavechange. Malcolm, your prize is comment of the week!

Well done everyone and thanks for taking part. Oh, and just to check, are you fans of doing these quizzes every now and again?

Andrew Collins says:

13 March 2015

8/10 for me :-O Now that’s a shock!

Beryl says:

13 March 2015

I would certainly welcome more quizzes occasionally provided they appear in Which? Convo before they are published in the magazine!

malcolm r says:

13 March 2015

I’m overwhelmed Alex. Not sure now I’ve passed the exam whether to be a financial advisor or join a bank. Anyone want to send me their pension pot? 😀 😀

wavechange says:

13 March 2015

Well done Malcolm. I think you are the first to feature in two successive Comments of the Week.

John Ward says:

14 March 2015

I think Patrick was disqualified because he didn’t answer all the questions.

Andrew Collins says:

16 March 2015

Glad you all enjoyed the quiz, and well done Malcolm 🙂

Thanks Beryl – I’ll share your comments to the others in the team.

Patrick Steen says:

16 March 2015

Yes, I’m surprised you didn’t notice until now. I’m so good with financials and numbers that I only answered 9.

I’m not even sure which answer refers to which question now, so I will presume that they are all correct, but not necessarily in the right order. 😉

John Ward says:

16 March 2015

Sorry Patrick – like me you can’t even employ the Eric Morecambe defence. You had some A’s in your answers and not a single question had A for an answer. Join me in Revision.

Patrick Steen says:

16 March 2015

You’ve caught me!

malcolm r says:

13 March 2015

Thanks wavechange. Perhaps we should go into partnership – banking or pensions?

wavechange says:

14 March 2015

My father was interested in financial matters and was a good teacher. Unfortunately I find the subject boring, though I can cope if I put my mind to it. Let’s carry on in partnership to push for better quality goods and better consumer protection. 🙂

John Ward says:

14 March 2015

6/10 for me – must do some revision.

Since this is all about financial jargon, could we now be told what the acronyms EAR, AER, AMC, and OEIC actually stand for please?

I think this sort of quiz is a quick and easy way of finding out what ordinary people are likely to know and should help with campaigning and consumer representation.

malcolm r says:

14 March 2015

wavechange – agreed! 🙂
John – acronyms are like any other symbols, more easily assimilated (once you know what they mean) when repeated in documents than the full text. What I hate is when you have got to search for the expanded text of the acronym, and worse still when it is not defined so you struggle to invent what it might mean. I had a pension circular the other day with an acronym UFPLS. It was “Uncrystallised Funds Pension Lump Sums” and at least it was defined. not that I fully understood it.

There is a danger of identical acronyms having totally different meanings, as you seem to be able to invent them willy nilly. Perhaps there should be an ISO (International Standards Organisation) standard where you must apply for registration and a crystal clear definition of your proposed acronym.
LOL. SWALK. TTFN

John Ward says:

14 March 2015

Thanks Malcolm. I am fairly unfamiliar with a lot of the current financial acronyms because, thankfully, I have not had to worry about loans or overdrafts or life assurance and I stick to simple things in the world of insurance and money. Once I know what the acronym stands for I can usually work out what it means. There are various acronym-finder websites that often have multiple extrapolations for each combination of letters [especially if it is not UK content only] so one has to have a very good idea of the context. Most acronyms acquire authority through repetition and entering common parlance [like BBC, BMW, HSBC, Plc] and many people would struggle to recite the long form. There are others that we see every day [like http, url, LED] that no amount of repetition makes familiar in extension, because we probably don’t need to know, and financial jargon seems to be generally in that bracket, except we do need to know: “AER” – is that like “a.e.t.” in football?

BTW : You might have noticed that I had a little dig at the intro to the Conversation on the CMA’s action in respect of universities’ compliance with consumer law which at no point in around 500 words said what the initials CMA stood for. The editor subsequently put it in the footnote but still managed to get the name wrong [it’s Markets, not Market]. Dum spiro spero.

Alex Toplis says:

18 March 2015

Hi John, for the questions that had acronyms, I’ve put their meanings below for you:

1. B (stands for ‘Equivalent Annual Rate’ or ‘Effective Annual Rate’)
2. B (stands for ‘Annual Equivalent Rate’)
7. C (stands for ‘Annual Management Charge’)
8. B (stands for ‘Open Ended Investment Company’)

Beryl says:

18 March 2015

As well as EAR’s there is also ARM’s in the banking industry, translated (Adjustable Rate Mortgage,) more commonly known as a VRM (Variable Rate Mortgage) or FRM (Floating Rate Mortgage). Whether banking terminology is veering towards SOC (Sensorimotor OCD) is questionable, the treatment for which is ERP (Exposure and Response Therapy). This must be the answer to some of the big four banking problems!

dieseltaylor says:

18 March 2015

Gosh thats handy – I will never forget the difference between Equivalent Annual Rate and Annual Equivalent Rate. And it still leaves room for acronyms ERA and ARE to be generated.!

wavechange says:

18 March 2015

If you can avoid debt you don’t need to worry about APR and EAR, unless they turn up in a quiz.

Beryl says:

18 March 2015

Oops! ……… For all those who are gifted with the abilty to think “outside of the box” you will no doubt be aware of the missing link. ERP should read “Exposure and Response Prevention Therapy.” Apologies.