Personal Finance-Chapter 5

Mutual savings banks

owned by depositers and specializes in savings accounts and mortgage loans

debit card

aka cash card activates ATM transactions/used for purches

ATM

aka cash machine automatic teller machine-provides various bank activities such as buying transit passes, post stamps or gift certificates as well as withdraw cash or deposit checks

asset management account

aka cash mngment acct, provides complete financial services for a single fee

types of problematic financial businesses (4)

pawnshops, check-cashing outlets, payday loans, rent to own centers

check-cashing outlets

people who don't have bank accounts can go here to cash paychecks and other financial services.

Finance companies

provide loans to consumers and small businesses

Rolling over a CD

purchasing new one at maturity

HH bonds

available to investors in face values from $500 to $10,000. They are not discounted and pay a fixed rate of interest

liquidity

being in cash or easily convertible to cash

Savings BOnds

bonds issued by the federal government; purchased at half of face value and go up in value

credit card

borrow money to pay

Savings and Loan associations

financial institution that traditionally specialized in savings accounts and mortgage loans

investment companies

mutual funds-offer money market fund. use money of investors to purchase a variety of short term financial instruments. NOT covered by federal deposit insurance

nondeposit institutions

offer various financial services, i.e. life insurance companies, investment companies (mutual funds/Money market funds), brokerage firms, credit card companies, finance companies

Commercial Banks

offers full range of financial services to individuals, businesses and govt agencies

mortgage companies

organized to provide loans for buying homes

Mistakes made frequently when managing current cash needs (4)

1.) Overspending as a result of impulse buying and using a credit card 2.) Having insufficient liquid assets to pay current bills 3.) Using savings or borrowing to pay for current expenses 4.) Failing to put unneeded funds into an interest-earning savings acct

Common Deposit institutions (4)

1.) commercial banks 2.) savings and loan associations (S&L's) 3.) Mutual savings banks 4.) Credit Unions

I bonds

A fixed rate of return and a variable semiannual inflation rate (based on CPI-U for March and September) are combined

Savings account

An account you have at a financial institution that helps you accumulate and save money and earn a small amount of interest at the same time, usually with a low or no minimum balance. withdraw freely

rent-to-own

An arrangement whereby consumers rent something (often furniture), making regular rental payments, and become owners of the rented object(s) after a specified period of time--sometimes automatically and sometimes with an additional payment. A legal business but very costly to consumers.

FDIC

Federal Deposit Insurance Corporation: A federal guarantee of savings bank deposits initially of up to $2500, raised to $5000 in 1934, and frequently thereafter; continues today with a limit of $100,000

pawnshops

Make loans based on tangible possessions

NCUA

National Credit Union Administration: the federal agency that charters and supervises federal credit unions and insures savings in federal and most state-chartered credit unions across the country through the National Credit Union Share Insurance Fund (NCUSIF), a federal fund backed by the full faith and credit of the US.

SAIF

Saving and loan accounts are insured by ____ from FDIC

Types of financial services (4)

Savings Payment services Borrowing Other financial services-insurance, investments, tax assistance, fin.planning, for example, a TRUST that manages and controls assets by one party for the benefit of another

Compounding

The accumulation of a sum of money in, say, a bank account, where the interest earned remains in the account to earn additional interest in the future

Rate of Return

The return on an investor's capital. Also called Yield. Expressed in a percentage

money market fund

a fund that pools money from small savers to purchase short-term government and corporate securities (financial instruments)

inflation

a general and progressive increase in prices

payday loans

a loan where a borrower gets a cash advances based on his paycheck

money market account

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

Certificate of Deposit

is a time deposit that requires you to leave your money in a financial institution for a set amount of time

EE bonds

issued in face amounts from $50 to $30,000 at a cost of 50% of their face amount. Therefore, these bonds are purchased at a discount, safe

life insurance companies

life and retirement insurance/investment purposes

Trust

manages and controls assets by one party for the benefit of another

Types of CDS

rising rate/bump up CDs-higher rates at various intervals stock indexed CDs-earnings based on stock market Callable CDs-higher rate and long term maturities, but the bank may 'call' the account after a stipulated period, such as one or two years, if rates drop Promotional CDs-attempt to attract savers with gifts or special rates. ex, watches, equiptment or inflatable boats in lieu of interest

Brokerage firms

serve as agent b/n seller and buyer for stocks, bonds and other investment securities. make earnings through fees and comissions

Deposit institutions

serves as intermediate b/n suppliers (savers) and users (borrowers)

Credit card companies

specialize in funding short term retail lending

annual percentage yield

tells you how much interest a financial institution would pay on a $100 deposit for one year

credit union

user-owned, nonprofit, cooperative financial institution that is organized for the benefit of its members