Savings glossary

The world of savings and its terminology may be a little confusing, so we want to help you understand some of the most common words, allowing you to make more informed choices.

AER: This is an abbreviation of Annual Equivalent Rate. You’ll see this next to the interest rate on saving accounts, showing how much interest (included compounded interest) you’ll earn over a year, allowing you to compare it with other savings accounts.

Annual interest: This is the interest you'll earn on your savings account annually. At The Cambridge we pay your annual interest on 31st December. We also pay interest on maturity and closure.

Bank of England Base Rate: Base rate is the interest rate the Bank of England charges banks and building societies to borrow money from them, including us. Visit the Bank of England to see the current rate and to find more detail.

Bonds: These are saving accounts for a fixed period, usually with a fixed rate so you have a better insight into how much your money will grow over time. Access to your money is not normally permitted during the term of the account, but check the individual terms and conditions for full details.

Cash ISA: Cash Individual Savings Account (ISAs) are tax free saving accounts, meaning you won’t pay tax on the interest earnt. You get a new ISA allowance every tax year.

CHAPs: Clearing House Automated Payment System (CHAPS) is an electronic payment system used in the UK. It enables guaranteed same-day payments to be made, provided it’s done by a certain time and not at weekends or on bank holidays. There is usually a fee for this service.

Compound interest: this is the interest you earn on interest. When the interest you earn on the initial deposit amount into your savings account is added to the account balance it will also earn interest (interest on interest).

Confirmation of Payee (CoP): CoP is a service that checks the account and reference details of the your intended recipient, when sending an electronic payment (CHAPs, faster payment and standing order), so you can check the money is going to the right place before sending it, which helps to tackle fraud.

Deposit: This is any money that you pay into your savings account, with cash, cheque or electronic payments.

Easy Access: Savings accounts that offer more flexibility, with access to withdraw your savings, without giving notice or paying an interest penalty fee. 

Electronic payment: This is a non-cash payment, such as debit card, faster payments, standing order and CHAPs.

Faster payment: These are electronic payments made within the UK at any time and usually arrive in the recipients bank account by 5pm the following day. These can be sent via bank websites, apps, telephone and in branch.

Fixed interest: The interest rate won’t change during the term of that account, giving you certainty of the interest, you’ll earn over that period.

FSCS: The Financial Services Compensation Scheme protects your money and compensates you if your bank, building society or credit union goes out of business. Find their compensation limits.

Gross interest rate: The gross rate is the rate of interest you’ll earn before tax is deducted. It’s your responsibility to pay any tax due to HMRC.

Interest penalty fee: This is a penalty fee on the amount withdrawn (not the entire balance), if you take out money before the notice period. For example, on a 100 Day Notice account the penalty is equivalent to 100 days’ interest on the amount withdrawn at the gross rate payable, at the time of withdrawal or closure. 

ISA transfer: This is where you transfer your existing ISA from one provider to another. When transferring money you’ve invested in an ISA this current tax year, you must transfer all of it. For previous years, you can choose to transfer all or part of your savings. You’ll need to fill in an ISA transfer form from the new provider, who will complete the transfer. This is the best way to move your ISA to ensure the interest remains in an account that doesn't require you to pay tax on it.    

Maturity: When your savings account matures, it means the time period you initially agreed to hold your savings for has come to an end. You can then choose whether you want spend your savings or reinvest them into another savings account.

Nominated account – When you open a savings account, you attach a bank account (usually your current account) to it, which allows you to move your savings to this current account easily and securely.

Notice accounts: You’ll need to give notice to withdraw your funds or pay an interest penalty fee to withdraw your funds immediately.

Personal savings allowance (PSA): Everyone gets a savings allowance each year, which is the total amount of interest you can earn across all of your saving accounts without paying tax on it.  Any interest earnt over this amount may be subject to tax according to the tax band that is applicable. Interest earnt on an ISA does not count towards your PSA. Visit gov.uk to find out more and to check your allowance.

Regular savings account: Here you make regular payments into your savings account, usually monthly, to help build your savings pot. You should check out how much you are able to save each month, if you can make any withdrawals and how long the account lasts, as these vary between providers.

Standing order: When you set up a regular payment from one account to another. They are often used when you want to transfer money to your savings account regularly, maybe to a Regular Savings Account. You have control over the standing order and it's your responsibility to make any amendments, such as the date and payment amount. 

User ID: This is unique to each member with us and allows you, along with a password to log into your account online or via our money app, so you can view or manage your accounts online. You find out more here.

Variable Interest: The interest rate you get when you open the account can change, meaning it could go up or down.

Withdrawal: This is when you take money out of your savings account. This can be by cash, cheque or electronic payment.