Understanding how banks work and being able to talk about financial products in English is a skill that opens doors in both personal and professional settings. Whether you need to open an account, apply for a loan, or discuss investments, having the right vocabulary makes all the difference. Here is a practical breakdown of the most important banking terms and expressions you should know.
What types of bank accounts exist in English?
There are two fundamental types of bank accounts you need to distinguish. The first is the checking account [01:10], which is the account you use for everyday transactions — paying for groceries, petrol, and daily expenses. It has very few restrictions when it comes to withdrawing money, but the downside is that it earns almost no interest.
The second type is the savings account [01:38]. This is designed to hold money for the long term, perhaps for future plans or goals. Savings accounts have more restrictions on withdrawals because the idea is that you should not be taking money out unless absolutely necessary. In return, they provide higher interest, giving you an incentive to keep your money there.
The main difference between these two accounts comes down to interest [02:16] — the money the bank pays you regularly for keeping funds in that account. If your goal is to earn more from your deposits, a savings account is the way to go.
It is also worth noting that in British English, a checking account is called a current account [02:38].
What do deposit and withdraw mean?
Two essential banking activities are deposit and withdraw [02:52]. When you deposit money, you are putting money into your account. When you withdraw money, you are taking money out. Both actions apply to checking and savings accounts alike.
How do bank loans work in English?
A loan [03:22] is money you receive from a bank that you are expected to pay back with interest. The total sum of money you receive is called the capital [03:38]. The action of receiving that money is called borrowing [03:52], and you become the borrower, while the bank becomes the lender [04:50].
What kinds of loans are there?
Loans generally fall under four categories [04:02]:
- Personal loans: used for home renovations, household purchases, or personal matters.
- Business loans: specifically for business needs and operations.
- Short-term loans: have a shorter repayment period, suitable for smaller projects.
- Long-term loans: can extend from 5 to 25 years, like a mortgage [04:40], which is the loan you get to buy a house.
Every loan is unique because conditions are set depending on the purpose of the borrowing [04:52].
What is the difference between borrowing and lending?
These two words are commonly confused. Borrowing is the act of receiving money, while lending is the act of giving money [04:50]. You borrow from the bank; the bank lends to you. These terms are not exclusive to banking — you can lend your car to a friend, and your friend is borrowing your car [05:22].
What does it mean to invest and what types of banks exist?
To invest [06:08] means to put your money into financial products, shares, or property with the expectation of earning a profit. The person who invests is called the investor, and the return on the money is the profit.
When it comes to types of banks [06:38], each serves a different purpose:
- Retail or consumer banks: serve the general public with checking accounts, savings accounts, and credit cards.
- Commercial banks: serve the business sector exclusively.
- Sustainable banks: prioritize social and environmental causes in their operations [07:12].
- Investment banks: act as a middleman between a company and its investors, helping companies issue stocks and raise capital [07:28].
Now that you have this vocabulary in your toolkit, try using it in a real scenario. Think about the last time you visited a bank — what did you do, and how would you describe the experience in English? Share your answer and practice with other learners.
