More than a quarter of Brits can’t tell the difference between a credit and debit card, according to shocking new research.
Current and savings accounts also confuse UK adults with one in five admitting they don’t know the difference between the two.
The study by MoneySuperMarket found that two thirds (70 per cent) are unclear of the rules for switching current accounts, with 16 per cent incorrectly believing it’s impossible to switch if they are using an overdraft.
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The research uncovers widespread misunderstanding among the public over basic financial terms, which is likely to be costing them money.
Around a quarter (27 per cent) of the 2,000 Brits polled don’t know what the term ‘APR’ stands for, and more than a third (39 per cent) cannot explain what an insurance premium is.
When it comes to mortgages, nearly half of Brits (47 per cents) do not correctly understand the term ‘loan to value’, while 27 per cent have the same challenge with the term ‘fixed rate mortgage’.
Claudia Nicholls, commercial director for money at MoneySuperMarket said: “Our research reveals that a lot of people struggle with key terms in personal finance, but not knowing personal finance terms doesn’t need to be a source of anxiety.
“If you’re at home under lockdown and with a little time to spend on learning new skills, maybe consider setting aside some time to fill in your personal finance knowledge gaps.”
With many Brits seeing their personal finances negatively impacted by the coronavirus pandemic, MoneySuperMarket offers its top tops for understanding financial phrases to help get you and your money back on track.
1. Take simple steps to spend less
If you’re worried about the impact that the coronavirus is having on your finances, start by reducing the cost of your household bills, including switching your energy supplier to finding a cheaper travel, home, car or pet insurance deal.
For those considering a mortgage payment holiday, use a Mortgage Payment Holiday Calculator to work out how much this would affect your payments once it has finished.
2. Improve your personal finance knowledge
Not knowing key personal finance terms can hold you and your money back. Use lockdown to build your understanding in these areas:
3. Speak to your provider
If you are struggling to understand aspects of your financial product, speak directly to your provider about any questions you might have. If you have a personal loan, credit card debt or mortgage debt, you may qualify for a payment holiday. But don’t just cancel your direct debit, speak to your bank first.
4. Review your outgoings
You might find you are spending more on certain items than you need to at the moment, including old direct debits that you’re still paying but shouldn’t be. Use this time under lockdown to review your outgoings and to create a budget to help you feel in control.
5. Remember you’re not alone
Millions of people will have concerns about their financial situation in this unprecedented crisis so it is important to remember that you are not alone and there is no cause for embarrassment if you need to ask for help.