Understanding Money in Everyday Life

Understanding money, bank accounts, credit cards, direct debits, etc.



Understanding money, bank accounts, credit cards, direct debits, etc.

Welcome to our series on understanding money. We hope this will help you make some headway into understanding, and getting a hold of your financial matters. This is written from the UK perspective, but we welcome comments, comparisons, and questions from any country! It’s always good to know how money works on an everyday basis for different people around the world.

Money in Everyday Life

Thank you to Weenie at Quietly Saving who helped us out with this article.

Money in everyday life is all about the way we handle our money, day in, day out. Every day, we might use several different types of payment to purchase our general goods and services. We might use cash to buy groceries at the market, debit cards in the post office, and credit cards at the supermarket. We might pay our electricity bill via a direct debit, and have a regular standing order set up to pay into a savings account. We see things like BACS, CHAPS, and FasterPayments in literature from banks, or in our online banking, but  do we actually know what each of these mean? What are the practical implications for using different types of payments? Is it easier or better to just use cash or cheques for everything? Or should we go with the flow and move as much as possible to a cashless society? If we went cashless in everyday life, what would the implications of that be on our everyday relationship to money?

Is it Better to Use Cash or Cheques?

The UK is indeed moving rapidly moving towards a cashless society. I personally do not carry cash very often, mostly because I feel like if it is in my purse, I will make excuses to spend it. I also find it a lot more difficult to keep track of cash payments, especially as you may often not get a receipt for them (e.g. you bought some carrots at the market). I am not against cash, and in terms of understanding money, the physical presence of cash in your hand is possibly the best way to learn as a child. But I know what I’m like, so I try not to carry it.

However, I do have huge reservations for a completely cashless society –  potential for greater fraud or hacking, and the disconnect of the physical material of cash might make it seem less ‘real’, which could potentially lead to the increase of debts. However, I do know a lot of people who still use cash for everyday goods and services, because (completely opposite to me) they find it easier to manage their money using cash. If they know they only have £30 in their purse, they want to try and hold onto it as much as possible, so they delay or avoid making purchases. I just think whatever helps you to not waste your money is a good thing.

Cheques. Um, does anyone in the UK still use cheques? I can’t remember the last time I used one, and I have no idea why people would try to use them nowadays. However, I decided to research this, as I do still see things where they could be useful, such as in paying for mail order items. It turns out that lots of people still use cheques:

“nearly £840 billion of cheques were processed in 2012 – accounting for 10% of all payments made by individuals”

I was quite surprised by this, but it came from official government figures, so I think it’s probably quite accurate. According to the same article, cheque recognition technology is coming to the UK, so perhaps cheques are here to stay for a while.

Bank Accounts

Bank accounts are not as simple as they once were, when all you had in the past was a current account and a maybe savings account. Bank accounts now come in a few different flavours:

  1. basic bank account – everyone in the UK is entitled to at least have this simple, everyday account, even if they’ve been made bankrupt, or they’ve recently immigrated. They are free to operate.
  2. current account – an everyday account that most people have. You will usually be credit-checked to get a regular current account. They are usually free to operate.
  3. special current account – like a current account, but often with a small, monthly fee. These special accounts have some kind of benefits such as free travel insurance, a higher rate of interest, or cashback. An example of this is the Santander 123 account, which costs £2 per month, but has tiered interest rates and cashback on everyday bills, meaning that you should more than cover the £2 fee just by doing your everyday spending.
  4. premier current account – these are usually for high net worth (HNW) individuals. They often have eligibility criteria such as needing to be earning £100k+ per year AND having £50k+ worth of savings with the same bank. You often get extras such as a concierge service or worldwide travel insurance. Some premier accounts have a dedicated relationship manager, someone who you can always talk to, instead of talking to different people every time you call the bank.

Bank Transfers – What’s the Difference Between BACS, CHAPS, and FasterPayments?

You may have seen these different terms in your statement, or when doing your banking online. Here they are in a nutshell:

  1. BACS – payments made between banks. They usually take 3-4 days and a re used for things like Direct Debits
  2. CHAPS – these payments arrive the same working day in the other bank account
  3. FasterPayments – these are supposed to be same day, although from personal experience it is almost instant between banks that support the system.

What About Standing Orders and Direct Debits?

These are electronic payments from your bank account to someone else’s. The basic difference is that although you can set up a Standing Order or a Direct Debit yourself, with a Standing Order – you send the money to the other bank, whereas with a Direct Debit, the other bank takes the money from your bank. This is an important difference, especially with regard to bills and suchlike; due to this difference, Direct Debits are also covered by a kind of guarantee, so if they’re taken incorrectly, your bank can get the money back for you. Yippee!

Credit Cards and Debit Cards

In our society, we have grown used to using cards instead of cash, even at the pub! But if we want to be good at understanding money, we need to know  how to answer the following question: ‘what are the differences between various cards’?

  1. cash card – this is a card you can use to take cash out of a cashpoint (ATM)
  2. debit card – this card lets you pay for transactions and takes the money out of your current account in 1 to 3 days
  3. credit card – this is a like a debt or a loan. if you spend on this card, you will owe the money to the credit card company and you will have to pay it back, usually within 56 days. A credit card may also offer cashback or airmiles as a reward for using it.
  4. store card – this is a credit card branded by a particular shop, e.g. Tesco Credit Card. They may offer some special features such as vouchers for the shop once per month.

We often hear about people getting into trouble with credit cards, racking up £1000s owed to the credit card companies. I find this really sad, but I totally understand how it happens. I had balances left on my credit cards when I first got them, because I didn’t really understand how they worked. I think they lulled me into a false sense of security, because it felt like I had ‘extra’ money to spend, whereas of course, I didn’t. I soon learnt that I did NOT have lots of extra free money to spend, so I quickly paid off everything as soon as I could. I then had only 0% or reward credit cards, so in effect I was paid to use them.

Credit cards can be pretty dangerous if you are undisciplined with money. If you’re not very disciplined, then it’s best to not use them. If you’re not too bad with money, you could just keep a credit card in a drawer at home for an emergency, such as your fridge breaking down. You can then buy a replacement fridge on the credit card, and pay it back from your emergency fund savings.

Apart from keeping a credit card for large emergencies, there are two other great reasons to have a credit card:

  1. Payment protection if you spend over £100 – If you spend £100 or more on a single item (or you put a deposit of £100+ on something expensive), you are protected under Section 75 of the Consumer Credit Act. Even if you paid cash but put just £100 of it on a credit card towards a £20k new kitchen and the company went bust, the credit card company would have to pay you back the full amount.
  2. Rewards/Airmiles – many cards offer significant rewards, often airmiles. You can get cashback, Tesco vouchers, Nectar points, and all sorts of things. Again, it’s only worth it if you are disciplined with money.

What do you love/hate about everyday money? Is there something else that puzzles you, that we haven’t mentioned? Let us know! Leave a comment below, we welcome your feedback!

photo credit: blplanet/freedigitalphotos.net


    1. Tawcan, nice to see you. I like using my cards too, but I sometimes feel like it’s easy to go overboard, because you know you’ve got 6 weeks to pay it back!

    1. Thanks so much for visiting.

      I like those cards too, I’ve earnt quite a bit back from the latest one I got. I do feel that sometimes it’s hard to keep track of budgeting though.


  1. Hi There

    I’m visiting your site for the first time after a link from the other blogs.

    Greetings from Singapore.

    With regard to your article, I think the world is quickly evolving to a place with cashless system. Not that cash isn’t important, but it brings about less convenience when you have to bring that much cash with you. It’ll be interesting to see the less developed nation evolving into some of these as well, so we are in pretty good shape all around.
    B recently posted…Is 2nd Chance at $0.38 an opportunistic buy at this time?My Profile

    1. Hi, thanks for visiting. I love Singapore!

      I agree with you, the world is really moving fast in terms of the cashless society. Living close to London, the centre of the FinTech industry, I’m seeing so many new technologies arriving, pretty much on a weekly basis.

      In terms of the less developed countries, some age going straight to these new technologies and completely bypassing some of what we use now.

      How do you feel Singapore is going in these regards?

      Thanks so much for visiting, I really appreciate it

  2. Hi M,
    I always seem to find the one person still using checks/cheques in the US right in front of me at the supermarket checkout…

    Many banks here in the US offer smartphone apps to deposit checks – you take a photo of the check front and back via the app and the money typically shows up in the account the next day. There’s a limit to the size of the check – about $2,000 a day or something I think.

    Do banks offer bill payment services in the UK too? For the odd times that I do actually pay with checks to avoid transaction charges, I log on to the bank website, tell them who to pay & where to send the check and they even pay the postage.

    Is there any difference between traditional “high street” banks such as Barclays, Natwest etc and online-only banks in the UK? Barclays US online savings actually has one of the higher interest rates here come to think of it.

    Final question – do banks there offer any services to send money to people with their email or phone number? The bank withdraws the money from your account, holds it for up to 30 days until the other person enters their verification codes / transfer information at which point they get paid.

    Best wishes,
    Dividend Life recently posted…Consumer cyclical dividend stocks – January purchase #1My Profile

    1. Hey DL, thanks for popping over again.

      We have nothing similar for cheques in the UK, only the deposit machines that scan your cheque, but not apps that do the same as far as I am aware. However, that may change with this coming optical cheque technology.

      Banks do have bill payment, but it’s usually automatic and electronic. Not many people use the service in branch anymore, although I did see an older lady doing that in a bank last week. The Post Office handles more of these types of payments though.

      With regards to online vs. high st banks, there are only four online only banks (and they’re all subdivisions of high st banks): cahoot (Santander); Smile (the Co-op); Intelligent Finance (Halifax/Bank of Scotland); and First Direct (HSBC). They tend to offer miniscule discounts on mortgages or perhaps a slightly higher rate on regular savings accounts, but in my opinion, they’re not worth it. I do occasionally need to go into a branch, so even though I think we’re rapidly moving towards a cashless society, there are still times when you physically need to be in branch. First Direct does have a very high reputation for customer service though, but I guess they have to, since they can’t see you face-to-face they’d better make up for it over the phone.

      There is, however, a new bank coming to the online market, which is a genuine online only bank i.e. not a subsidiary of a tradtional bank – it’s called “IPAGOO”, although you cannot open an account with them yet. The weirdest part about this new bank, is that they say they don’t lend or invest out the clients’ money, neither do they mix it with their own, so they don’t need to be part of the Financial Services Compensation Scheme (FSCS) which would otherwise protect deposits up to £85,000. So in theory, all your money should be safe. But would you trust them on this?n That’s another matter…

      We do have a mobile payment service called payM as well as some other services from individual banks, such as Pingit by Barclays, and even one by O2 Mobile phone network – the O2 Wallet. I have not tried any of these things though, so I don’t know if they’re any good.

      As always, lovely to have you visiting with us at There’s Value,


  3. Glad I was able to help a bit! 🙂

    Me, I still use cheques! Obviously not half as many as I used to, probably just a few each year to pay institutions who still insist on charging for card payments (yes, there are still some), yet forget the inconvenience of receiving and banking cheques! Also, some small businesses don’t/can’t accept payments or paypal and still rely on cheques.

    I believe at some point, banks will be able to accept photos of signed cheques sent via smartphones? In this day and age of cyber-crime, perhaps criminals may have lost the art of forging signatures?!

    Anyway, good write up, I look forward to reading more!
    weenie recently posted…Home Brew Beer #2My Profile

    1. In a strange turn of events, I actually found my cheque book yesterday! I think that’s what prompted me to just get the edited post out there and then.

      You’re right, visual cheque recognition technology is coming to the UK. They’ve had it in America for years, but we never bothered keeping up with that, due to the declining use of cheques. However, given that so many millions are still being processed, especially by certain sectors such as SMEs or charitable institutions, nans, and you, then the UK government are now giving the go-ahead for the tech to be implemented here. It’s in some banks already – if you pay in a cheque to a machine, it scans it and asks you to confirm if it got the numbers right.

      And yes, I think criminals have lost the art of forging signatures, but to be honest, they probably didn’t bother that hard, since most people never bothered to check them anyway…

      Thanks for stopping by, as always,


  4. Hey TV!

    Nice article, I think a lot of us don’t really understand the difference between things we use everyday, like CHAPS/BACS or DD/SO, so helpful stuff 🙂

    Who uses cheques? Haha, I think only my nan. That 10% must just be nans firing birthday money around the country.

    I hate penny coins.
    Mr Zombie recently posted…First Day BackMy Profile

    1. Thanks man, and yeah, you’re totally right about those 10% being nans! Or in my case, aunties. It’s a bit like christmas fruit cakes, you know there are only about twelve of them around, people just send them to each other and they never get eaten.

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