Chapter 4

Cahier's check

A check payable to a third party that is drawn by a bank on itself in exchange for the amount plus (usually) service fee.

Traveler's check

A check sold (for fee of about 1.5%) by large institutions and used for making purchases and exchanging currencies in most parts of the world.

Asset management account(AMA)

A comprehensive deposit account, combines checking, investing, and borrowing activities. Automatically "sweeps" excess balances into MMMFs and automatically provides loans when shortages occur.

Certified check

A personal check that is guaranteed (for fee of abt. $10-15+) by bank on which it is drawn.

Series EE bond

A savings bond issued in various denomination by US Treasury.

Time deposit

A savings deposit so called because it is expected to remain on deposit for a longer period of time than a checking account

Deposit insurance

A type of insurance that protects funds on deposit against failure.

Demand deposit

An account held at a financial institution from which funds can be withdrawn on demand. (checking account)

Debit cards

Cards that transfer funds from an account to a recipient.

Savings and loan associates

Channels the savings of its depositors primarily into mortgage loans for purchasing and improving homes. Now offer range of services.

Overdraft protection

Institution automatically pays a check that overdraws an account.

Stop payment

Made by account holder instructing institution not to pay already issued check.

Automated teller machine

Makes basic transactions 24/7

Account reconciliation

Process of verifying the accuracy of one's checking account records in light of bank's records.

Overdraft

Result of writing a check for more than the current account balance.

Certificate of deposit

Savings instrument issued in exchange for a deposit. Typically requires minimum deposit. Maturity ranges from 7 days to 7 years.

Savings bank

Similar to S&L and located primarily in the new England states. Mutual org owned by depositors.

Electronic funds transfer system (EFTS)

Systems that electronically transfer funds between customer's accounts.

Effective rate of interest

The annual rate on return that is actually earned (or charged) during the period the funds are held.

Nominal (stated) rate of interest

The promised rate of interest paid on a savings deposit or charged on a loan.

Cash management

The routine-day to day management of cash and near cash resources.

Checkbook ledger

Used to maintain accurate records of all checking account transactions.

Compound interest

When interest is earned on interest earned in the preceding period.

Negotiable order of withdrawal (NOW)

achecking account on which the institution pays interest. (no legal minimum balance)

Money market deposit account (MMDA)

federally insured saving account offered by banks and other depository institutions tha is meant o be competititive with money market mutual fund.

Commercial bank

A financial institution that offers checking and savings accounts and a full range of financial products and services. The only institution that can offer non interest paying checking accounts (demand deposits)

Credit union

A member owned financial co-operative that offers different types of interest paying checking (share draft) accounts, savings, and loans to members.

Money market mutual fund (MMMF)

A mutual fund that pools the funds of many small investors and purchases high-return, short term marketable securities.

Share draft account

An account offered by credit unions that is similar to interest-paying checking accounts offered by other financial institutions.

Simple interest

Interest is earned on initial amount of deposit.

US Treasury bill (T-bill)

Short term (3-6 month) debt instrument issued by gov. to finance natl. debt.