personal finance 5
five characteristics of annual percentage yield
1) compare rate of return with rate of inflation 2) taxes reduce interest earned on savings 3) is there a penalty or lower rate of interest if you withdraw your funds early 4) be ware of restrictions on savings plan such as a delay between the time when interest is earned and when it is actually paid into your account 5) are there any service charges if your account balance drops below certain amount
tips to follow when endorsing a check
1) don't endorse a check until you're ready to cash it 2) write sig on the left end and back 3) only use pen 4) if depositing by mail write for deposit only directly above your dig 5) sign name exact same
tips for investing in CDs 4
1) find out where you can get the best rate 2) consider the economy as you decide what maturity date to choose 3) never let a financial institution "roll over" a CD unless you have checked current interest rates 4) consider when you will need the money
4 characteristic of certificates of deposit
1) fixed period of time called term 2) date when none becomes available is called the maturity date 3) low risk way to invest your money 4) offers a higher interest rate than a regular savings account
selecting financial services and institutions
1) how to manage your cash 2) types of financial services 3) electronic banking services 4) types of financial institutions
5 characteristics of regular savings accounts
1) ideal if making frequent deposits and withdrawals 2) require little or no minimum balance 3) able to withdraw money quickly 4) trade off is low interest earnings 5) called share accounts at credit unions
interest-earning account
A bank account that earns you interest on your balance in the bank.
also administers the savings ssociayion insurance fund (SAIF) for savings and loan associations
FDIC
regular checking account
a checking account for which the monthly fee is usually based on the average balance maintained and the number of transactions recorded.
2 interest earning accounts
a cross between checking and savings accounts usually pays interest if a minimum balance is maintained
U.S. Savings Bond
a discount bond issued by the federal government that pays a guaranteed minimum rate of interest
The amount of interest that a $100 deposit would earn after compounding for one year
annual percentage yield
Debit card disadvantages
atm fees & lost debit cards , responsibille for $50
computer terminals that let you withdraw cash from or deposit cash to your account. you can also transfer money
automated teller machines ATMS
check clearing rules
bank holds funds two days for local check k hold funds 5 days for non local checks
a report that accounts for the differences between the bank statement and a checkbook balance
bank reconciliation
a time deposit that requires you to leave your money in a financial institution for a set amount of time
certificates of deposit
A for-profit institution that offers a full range of financial services ( savings checking lending )
commercial bank
Types of Financial Institutions
commercial banks, savings and loan associations, savings banks, credit unions, finance companies
the percentage in which interest is earned on both the principal the amount you deposited and on any previously earned interest
compounding
a nonprofit financial institutions that is owned by its members and organized for their benefit usually members have some common bond fees and loan rates are generally lower than a commercial bank
credit union
2 ways how to manage your cash
daily cash needs & sources of quick cash
allows you to withdraw money or pay for purchases from your checking or savings account
debit card
electronic banking services
direct deposit, automatic payments, ATMs, plastic payments
non-depository institutions
do not handle deposits, but they do act as an intermediary between savers and borrowers
the signature of the payee that party to whom the check has been written
endorsement
created by the federal gov in 1993
federal deposit insurance corporation
insures each account in a federally chartered bank up to $100,000 per account . increased in 2008 to $250,000 due to expire on december 31,2013
federal deposit insurance corporation
What does FDIC stand for and what does it do?
federal deposit insurance corporation it insured your money in the bank
4 characteristic of MMA
interest rate is usually higher than a regular savings account requires a higher minimum balance typically 1,000 allows you to write checks to make large payments or to transfer money to other accounts insured by FDIC
Examples of non depository institutions
life insurance companies , investment , finance , mortgage
check clearing
method by which a check that has been deposited in one institution is transferred to the issuer's depository institution
a savings account in which the interest rate varies from month to month
money malarkey accounts
specialize in savings accounts and mortgage loans. interest rates on loans from a mutual savings bank may be lower than commercial banks and interest paid on savings accounts may be higher
mutual savings banks
you use a debit card to purchase an item or a service at a retail store in a restaurant or elsewhere
point of sale transaction
formula compounding monthly
principal • annual interest rate / 12 = interest for 1st month
formula for rage of return
rate of return = total interest earned / amount deposited
also called passbook accounts
regular savings account
types of savings plans
regular savings account certificates of deposit money market accounts us savings bonds
Types of checking accounts
regular, activity, and interest-earning
4 ways for evaluating checking accounts
restrictions, fees and charges , interest , special services
types of financial services 4
saving payment services borrowing other finincaial services
traditionally specialized in savings accounts and mortgage loans. today offer many banks the same services as commercial banks
savings and loan associations
is a request that an institution not cash a particular check
stop payment order
reloadable or rechargeable
stored value cards
financial situations have to inform you of the terms and conditions of all savings accounts including fees interest rates in annual percentage yield
truth in savings act
regular checking account 2
usually no required minimum balance if there is a required minimum balance and balance and your account drops below that amount you will have a monthly service charge
three key limitations of certificates of deposit
you have to leave your money on deposit anywhere from a month to five or more years 2) you will pay a penalty if you take the money out before the maturity date 3) financial institutions require that you deposit a certain minimum to buy a CD