Chapter 5 packet Personal Finance Ehlers

What is a certificate of deposit?

A certificate of deposit is a savings alternative in which money is left on deposit for a stated period of time to earn a specific rate of return.

What is a commercial bank?

A commercial bank is a for-profit institution that offers a full range of financial services, including checking, savings, and lending.

What is a credit union?

A credit union is a non profit financial institution that is owned by its members and organized for their benefit.

What is demand deposit?

A demand deposit is the money that you have in a checking account

What is a money market account?

A savings account that requires a minimum balance and earns interest that varies from month to month.

What is a stop-payment order?

A stop-payment order is a request that a bank or other financial institution not cash a particular check.

What is time deposit?

A time deposit is money that is going to be left in a financial institution for months or years.

What is an ATM? What two things do you need to use an ATM?

An ATM is an automated teller machine. Its purpose is to serve as a cash machine, a computer terminal that allows a withdrawal of cash from an account.

What is direct deposit?

An automatic deposit of net pay to an employee's designated bank account.

What is a check register?

Anytime the funds in your checking account are changed.

How do banks make money?

Banks make money by making loans. The amount of money that banks can held is affected by the reserve requirement set by the Federal Reserve.

In regards to your check register, what do you do for checks written, ATM usage, withdraw of money, banking fees, etc.?

Being responsible with your checking account transactions and behaviors will help eliminate any fees for overdrafting or insufficient funds.

Summarize check clearing and what it means?

Check clearing is a system in place that protects banks from losing out on money from a fake check or check that has insufficient funds. By law, institutions are limited to holding funds from checks drawn on local banks to no more than two business days, and from check drawn on non-local banks to no more than 5 business days

What does compounding mean?

Compounding is the process in which interest is earned on both the principal and on any previously earned interest.

How would your daily cash needs affect where you choose to bank?

Depending on the amount of income and the amount of cash you have to blow, this is when daily cash needs would affect where you would choose to bank.

What are four examples of items included on your bank statement?

Deposits Checks Written ATM Usage

What is FDIC? How much does protection does it offer depositors?

FDIC: The Federal Deposit Insurance Corporation. The FDIC insures individual depositors $250,000 per person, per account.

What should you do if you lose your debit card?

If your debit card is lost or stolen and you don't notice right away, your issuer may make you pay for the expenses.

What is bank reconciliation?

Reconciliation is the process of matching your bank statement to your checkbook register to check for bank errors and to find the difference between the bank statement and your checkbook register.

What are the three main categories of checking accounts?

Regular Activity Interest-earning accounts.

What is the annual percentage yield?

The amount of interest that a $100 deposit would earn, after compounding, for one year.

What is the maturity date?

The date on which an investment becomes due for payment.

What is the term?

The period of time given to earn a specific rate of return

What is the rate of return?

The rate of return is the percentage of increase in the value of your savings from earned interest. To calculate the rate of return, divide the total interest by the amount of initial deposit.

What is a U.S savings bond?

When you buy a bond, you buy it for a certain dollar amount, but the bond will have a face value, which is the actual amount it is worth when it matures.

In regards to you checkbook register, what do you do for deposits made? (math)

You add it to the previous amount.

Do you have to pay taxes on savings bonds?

You do not pay federal taxes on the interest earnings until after you cash the bond.

What is overdraft protection?

(Usually a fee service) which is an automatic loan made to an account if the balance will not cover checks written.

What are the three types of endorsements?

1) Blank- Simplest endorsement 2) Special- Starts with 'For Deposit Only'; most secure 3) Restrictive- Starts with 'Pay to the Order Of'; least secure, some banks do not allow

What are three things to consider when selecting a financial institution?

1)Where can you get the highest rate of interest on your savings? 2)Where can you obtain a checking account with low or no fees? 3)Will you be able to borrow money from the institution-with a credit card or another type of loan- when you need it?

What are three things you can get/do/accomplish at an ATM?

1. Check your balances on your bank account 2. Withdraw money from your account 3. Deposit money into your account

What are three examples of borrowing money?

1. Credit Cards 2. Short-term loans 3. Auto loans

What are two examples of financial services?

1. Insurance Protection 2. Stock Bond

What items should you consider when selecting a savings plan?

1. Rate of Return 2. Inflation 3. Tax considerations 4. Liquidity 5. Restrictions 6. Fees

What items should you consider when selecting a checking account?

1. Restrictions 2. Fees and Charges 3. Interest 4. Special Services

What are the three main categories of financial services?

1. Savings 2. Payment Services 3. Borrowing

What are two characteristics of an interest-earning checking account?

1. These accounts pay interest if you maintain a minimum balance. 2. Most banks will waive any fee for you because you are not yet a legal adult.

What are two characteristics of a regular checking account?

1. These accounts usually require a minimum balance. 2. You will have to pay a monthly service charge or fee.

What are two characteristics of a savings account?

1. They require little or no minimum balance and allow you to withdraw your funds on demand. 2. Commercial banks, savings and loan associations, and other financial institutions offer regular savings accounts.

What is a cashier's check?

A Cashier's Check is a check written by the bank, again guaranteeing payment.

What is a certified check?

A Certified Check is a personal check with a guaranteed payment.