In today’s world, where information is just a click away, navigating the complex jargon used by banks can still feel overwhelming when trying to make the best financial decisions. In this article, we’ll break down some common banking terms you encounter in daily transactions and help you understand how to use them to your advantage, so you can save money and make smarter financial choices.

Buy Cash vs Buy Cheque Rates

There are usually three rates that most people see quoted when they go to a bank or any cambio. These three rates are usually the buy cash rate, the buy cheque/demand/draft rate and the sell rate. The buy cash rate is the rate you will receive if you exchange the physical bank notes with the bank. So, if you exchange US$100 (USD) in physical cash with the bank at the buy cash rate of $137.59, you will receive 13,759 Jamaican dollars (JMD).

If this seems low, it is.

Bank of Jamaica (BOJ) Deputy Governor Natalie Haynes explained at a recently held quarterly press briefing that while Jamaica has 10 correspondent banks, only Bank of America is willing to accept physical USD cash which carries a cost of US$0.10 – US$0.20 on every dollar remitted up north. Thus, most local banks will offer 10-20 JMD spreads between their buy cash vs sell rate, meaning they charge $10 to $20 more when selling USD than they pay when buying it, allowing them to cover costs and make a profit on the exchange.

If you’re looking to get a better conversion rate, consider opening a USD or foreign currency account with your bank. By doing so, you can take advantage of the bank’s buy cheque or demand draft rate, which is significantly better than the buy cash rate. For example, if you deposit US$100 into your bank account, you could convert it online or through a mobile app at a rate of US$1 = J$152.52, giving you J$15,252. That’s an extra J$1,493 in your pocket compared to the buy cash rate.

Alternatively, if you need to convert foreign currency quickly, you might visit a licensed cambio. They typically offer a buy cash rate of around J$148, which would get you J$14,800 for $100 USD. While cambios are often associated with remittances, some stockbrokers also have cambio services that can offer even better rates, such as J$154.90.

ACH vs RTGS

Oftentimes, people may see these two terms when doing transfers to other banks and don’t understand what they mean. So, let’s simplify them. ACH means automated clearing house and is a transfer method that’s operated by JETS Limited. It’s a slower transfer method that is done in batches with two windows each day which are usually around 9:00 am and 2:00 pm. When you do a transfer before each period, the money reaches the other bank a couple hours later. ACH is free at some banks and costs around $20 to the sender in most instances, but there is no cost to the receiver. ACH transactions have a $1 million limit with any higher transfer amounts having to be done through RTGS.

RTGS is short for real time gross settlement and is a transfer method controlled by the BOJ. It’s usually very fast for inter-bank transfers with funds sometimes reaching as quickly as 15 minutes or within an hour. The only caveat for RTGS is that both the sender and receiver’s bank will charge a fee to both send and receive an RTGS transfer. Thus, the sender might pay $155 to initiate the transfer while the receiver might have $197.42 deducted from the funds they just received.

So, ACH is perfect for transfers under $1 million that don’t need to reach immediately while RTGS transfers are done when the recipient needs the funds urgently. ACH carries no fees to the receiver while RTGS carries fees for both parties.

Savings vs chequing account

While many are aware that a savings account is to save money, most people use it for their daily transactions since some chequing accounts carry maintenance fees. Over the last few years, banks have begun to develop transactional accounts that carry less fees when doing transactions at automated teller machines (ATM) and point of sale (POS) devices. Therefore, you can open a new account online and contact customer care to switch the account attached to your card to that new transactional account. This way, you can pay a reduced fee or no fee when withdrawing cash. Also, some banks have no ACH fees for certain accounts and no withdrawal fees for some savings accounts.

As it relates to a saving account, while interest rates aren’t always great with the banks, JMMB Bank (Jamaica) Limited, CIBC Caribbean (Jamaica), and National Commercial Bank Jamaica Limited (NCBJ) have the best weighted average savings rates in the market as per BOJ publications. It’s better to use a savings account for its intended function since some banks tend to add higher transaction fees on these accounts over chequing/transactional accounts.

Travel reward vs cash back

When assessing the value of a credit card reward, understand how the points to receive those rewards are calculated to ensure you’re getting the best deal. In the case of a cash back card, if the credit card calculates cash back based on every US$1 you spend, you will likely rack up less points than another credit card that offers a cash back feature which is calculated as a percentage of each transaction. NCBJ and the Bank of Nova Scotia Jamaica Limited (BNSJ) are two banks in the market which offer cash back reward cards based on the percentage of each transaction done. Thus, a $10,000 transaction with a 1 per cent cash back feature will equal 100 points vs another credit card that will give 63 points due to the current foreign exchange rate.

When it comes to travel reward cards, it’s important to do your research carefully. Some of these cards come with valuable protection features for international travel, such as trip cancellation coverage, lost luggage insurance, and auto rental protection. Other branded travel credit cards with an airline tend to give additional points if you spend with that card; but check to see how many points you will need to get a ticket or the conversion rate for your points to be used to purchase a ticket. Therefore, while some travel credit cards might seem great, are you getting the best value if you only earn points for every US$1 you spend when you might not travel as much and can benefit way better from a regular cash back credit card.