Chapter 4 personal Finance
Debit card (page 110)
A plastic access card used in computerized banking transactions; also called a cash card
Deposit Institutions
Commercial bank, credit union, Savings and loan association, mutual savings bank
Other financial services
Pawnshop, check-cashing outlet, Payday loan company, Rent- to- to own center, car title loan company
Annual percentage yield (APY)
The percentage rate expressing the total amount of interest that would be received on a $100 deposit based on the annual rate and frequency of compounding for a 365- day period. APY= 100( Interest/ principle)
Liquidity (pg 120)
ease with which savings can be withdrawn
Types of financial services chart
page 108
Credit union
A user-owned nonprofit, cooperative financial institution that is organized for the benefit of its members.
Non-deposit Institutions
Life insurance company, investment company, Brokerage firm, credit card company, Finance company, Mortgage company
Taxes (pg 120)
Taxable interest reduces amount of earnings
Rate of return (page 120)
The percentage of increase in the value of savings as a result of interest earned; also called yield. (calculated by dividing the interest earned by the amount in savings).
When interest rates are rising
Use long term loans to take advantage of current low rates. Select short savings instrument to take advantage of higher rates when they mature
substitute check (pg 126)
which is a digital reproduction of the original paper check, and is considered a legal equivalent of the original check
Mutual savings bank
a financial institution that is owned by depositors and specializes in savings accounts and mortgage loans.
Compounding
A process that calculates interest based on previously earned interest. The more frequent the compounding the higher your rate of return will be.
Money Market fund
A savings- investment plan offered by investment companies, with earnings based on investments in various short-term financial instruments.
Safety (pg 120)
Availability of deposits insurance, risk
Inflation (pg 120)
Higher consumer prices result in lower buying power of interest earned on savings
Non- bank financial services provider
Retailer stores (prepaid debit cards, other services), Online banking server provider (Etrade Bank), Online payment services (paypal) P2P(peer to peer) lending intermediaries
deposit institutions
serve as intermediaries between suppliers (savers) and user (borrowers) of funds.
when interest rates are falling
use short term loans to take advantage of lower rates when you refinance the loans. select short terms savings instruments to lock in earnings at current high rates.
Checking accounts (pg 125-126)
1.) Regular checking accounts: 2.) Activity Accounts: charge a fee for each check written and fees for deposits and monthly 3.) Interest Earning checking: require a minimum balance. if below wont earn interest and will cause a service fee
Other payment methods (pg 127)
1.) certified check: is a personal check with guaranteed payment. 2.) Cashiers check: is a check issued by a financial institution 3.)Money orders 4.)travelers check: allows you to make payments when you are away from home
Overdraft protection (pg 127)
An automatic loan made to checking account customers to cover the amount of checks written in excess of the available balance in the checking account.
Bank Reconciliation (page 128, example on page 130)
1.) Compare the checks written with those reported as paid on the statement. Use the canceled checks, or compare your check register with the check numbers reported on the bank statement. Subtract from the bank statement balance the total of the checks written but not cleared. 2.) Determine whether any deposits made are not on the statement; add the amount of the outstanding deposits to the bank statement balance. 3.) subtract fees or charges on the bank statement and ATM withdrawals from your checkbook balance 4.) Add any interest earned to your checkbook balance
Writing a Check: -the procedure for writing a proper check is: (page 128)
1.) record the date 2.) Write the name of the person or organization receiving the payment 3.) record the amount of the check in numerals 4.) Write the amount of the check in words 5.) sign the check 6.) note the reason of payment
Automatic teller Machine (ATM)
A computer terminal used to conduct banking transactions; also called a cash machine
Commercial bank
A financial institution that offers a full range of financial services to individuals, businesses, and government agencies.
trust
A legal agreement that provides for the management and control of assets by one party for the benefit of another
Money Market Account
A savings account offered by banks, savings and loan associations, and credit unions that requires a minimum balance and has earnings based on market interest rates. Major difference between money market fund and account is safety. Account is safer.
Certificate of deposits (CD)
A savings plan requiring that a certain amount be left on deposit for a stated time period to earn a specific interest rate (ranging from 30 days to five or more years)
Types of financial institutions
Commercial banks, savings and loans associates (S&Ls), Mutual savings banks, Credit unions.
Use Credit Card
Delay the payment for a purchase, build a credit history with wise buying, buy online or for major purchases, earn more generous rewards points for spending.
U.S. Savings bonds (page 118)
EE bonds, HH bonds, I bonds
Use debit Card
Limit your spending to available money, avoid bills that will be paid in the future, avoid interest payment or annual fee, obtain better protection if you process a transaction as a credit card.
Restriction Fees (pg 123)
Minimum balance limitations. Fee for additional transactions.
Truth in savings act
Must disclose information: 1.) fees on deposit accounts 2.) The interest rate 3.) The annual percentage yield (APY) 4.) other terms and conditions of the savings plan
Asset Management account (page 109)
an all in one account that includes savings, checking, borrowing, investing, and other financial services for a single fee; also called a cash management statement
selecting a financial institution chart
page 112
savings and loan associates (S&L)
A financial institution that traditionally specialized in savings accounts and mortgage loans.
mobile banking services
(page 109)
Types of CD's (page 116-117)
Rising rate/bump CD's, Liquid CD's, Zero Coupon CD, Indexed CD's, Callable CD's
Types of financial Services (pg 108-109)
Savings (time deposits), Payment services, Borrowing, Other financial services (insurance, investments, tax assistance, and financial planning)
