Savings jargon explained

Annual Equivalent Rate (AER): shows how much you would make in interest over the course of a year if you deposited money in a savings account and left it there. This also helps you to compare rates from one financial product with another.

Annual Percentage Yield (APY): similar to AER, this shows the total amount of interest you would earn over a year, including compound interest. APY is often used by some financial providers to help compare savings rates.​

Base rate: the interest rate set by the Bank of England that determines savings and lending rates.

Bond: a promise made by customers to keep money in an account for a set period in return for a higher interest rate. Some providers allow access to bonds at the expense of an interest penalty.

Bonus interest rate: an extra, introductory rate added on top of the standard rate of the account. It normally lasts for a fixed period before dropping to the standard rate.​ Eligibility for a bonus rate may depend on meeting certain conditions such as limited withdrawals.

Cash ISA: a savings account that offers tax-free interest to customers. Only available to UK residents aged 16 and over.

Child Trust Fund (CTF): a tax-efficient savings fund that was available to individuals born between 1 September 2002 and 2 January 2011. Under-18s born before and after these dates can open a Junior ISA instead, but children with a CTF cannot open a Junior ISA.

Compound interest: when interest is added to your total savings and your next lot of interest is calculated based on the new, higher amount.

Deposit: a sum of money paid into a savings account.

Direct debit: a one-off or regular, automated payment that can be made monthly, quarterly or yearly from your current account into your savings account, so you don't need to remember to do it yourself.

Fixed rate: a rate of interest earning you a set amount of profit on your savings over a fixed period of time.

Flexible ISA: an ISA that allows you to withdraw and replace money within the same tax year, without it counting towards your annual ISA allowance. For example, our Instant Access Cash ISA is flexible. The tax year runs from 6 April to 5 April.

Gross rate: shows how much you would earn in interest on your savings account before tax is deducted – without taking into account compound interest.

Instant access account: with this type of account, you can make withdrawals and transfers at any time without having to pay a fee or give notice.

Interest rate: shows the gross, net and tax-free percentage return you will earn on your savings. This will depend on what kind of savings account you have opened.

Introductory rate: a temporary promotional interest rate that’s applied for a fixed period of time after account opening, after which it switches to the standard interest rate.

ISA allowance: the maximum amount you are able to deposit into your ISA over each tax year. You can save up to £20,000 for the current tax year. The current rules for ISAs are subject to change by HMRC.

ISA transfer: when you move money out of your current ISA into an ISA with another provider. In some cases this may incur a penalty – check with your existing provider.

Junior ISA (JISA): similar to the adult offering (ISA), but available to children aged under 18. Usually opened by a parent or guardian, but children aged 16 can open one themselves. You can save up to £9,000 for the current tax year.

Joint account: a savings account shared by two or more named holders, often partners or family members, where each person has equal access to deposit or withdraw money.

Maturity: when fixed-term savings account or bond ends. At maturity, you can withdraw money, reinvest or move it to another account.

Monthly interest: when the interest on your savings is paid monthly.

National Savings & Investments (NS&I): a government-owned savings bank offering a range of protected saving and investment options, including tax-free accounts and Premium Bonds.

Net interest: the interest you earn after tax has been taken off.​

Notice account: a savings account that requires you to give notice, such as 30, 60 or 90 days, before withdrawing money.​

Regular savings account: a type of savings account that requires you to make a deposit each month – if you guarantee a set amount, you could receive a higher interest rate.

Stocks and Shares ISA: for customers who want to put money in long-term stock market investments such as government and corporate bonds, open-ended investment companies and investment trusts. The value of your investment may fall or rise and you might not get back what you paid in.

Simple interest: interest calculated only on the money you originally deposited. This is separate to compound interest which grows faster because interest is calculated on both your deposit and any interest you’ve earned.

Tax-free interest: when applied to your savings account, this means the interest you earn on your savings is free from capital gains tax and income tax.

Tax year: runs from 6 April to 5 April. Many allowances, including the ISA allowance, reset at the start of each tax year.​

 Variable rate: an interest rate that could change over time due to the fact that it is based on an underlying, fluctuating benchmark interest rate or index.

Withdrawal: when you take money out of your savings account.