Personal Finance 5-3 Chapter Test

Bank cards

A card issued by your bank that allows you to withdrawal money from ATMs.

Five types of fees banks charge:

Monthly Account Fee, Nonsufficient Fund Fee, Special Service Fee, ATM fee, Special Charges.

Internet banking

This is when banks allow their account holders to access and manage their accounts on the Internet. Typically, a PIN number or access code are needed for the user to use. With this, customers can view their accounts at any time of the day. It can be as safe as writing paper checks because nothing can be lost in the mail.

stop payment

This is when the bank is instructed not to honor a check you issued or lost. It is generally good for six months. After that period, the check will no longer be honored because it is six months old are not valid for cashing or depositing.

Endorsement

a signature, with or without instructions, written on the back of a check. It authorizes the bank to cash or deposit the check

Certificate of Deposit (CD)

a time deposit that pays a fixed rate of interest for a specified length of time

Checkbook register

is a tool that can be used to track checking account transactions. The register can also provide a record of payments made for bills or purchases.

Consumer responsibilities

1)Monitor your account- Reconcile with your bank account, be responsible with your pay check, and be careful of whom you give checks to. 2)Know your rights- keep track of new laws being passed by Congress because the number of laws have been growing since the 60s. Congress has assigned the Federal Reserve System with the duty of implementing these laws so if you feel that you have been mistreated then you can contact them and they will represent you.

bounced check

A check that is not honored by a bank and is returned to the payee's bank because of no sufficient funds. This means the bank returned the check without paying it. When you write a check but there isn't enough money to cover it, it will "bounce" unless you have overdraft protection. When a check bounces, the person or business that deposited it will also be charged a fee. You will be expected to cover that fee as well.If you have overdraft protection, NSF checks will be paid rather than bounced. In this case, you would have to pay the amount of the check plus an overdraft fee. However, the fee would be less than the fees associated with a bounced check.

Special Service Fee

A fee that banks or credit unions give for special services they provide. For example, a stop payment may charge $25 or more for each check. If you obtain a cashier's check, traveler's check and money;s order, you must pay a fee for this as well.

Annuity

A fixed amount set aside on a regular basis over time; a contract purchased from an insurance company that guarantees a series of regular monthly payments for a set time

safe deposit box

A secure container that is located in a bank vault. People use to keep important documents, stock certificates, jewelry, and other valuables. They protect these items from theft or fires.

money order

A type of check used to pay bills or make payments for which the money is guaranteed. It is a safe way to send money through the mail. It does not contain any personal information including your bank account number that would be found on a check. To buy this, you have to use cash.

ATM

Automated teller machines or ATMs is an electronic banking outlet. You can check balances, withdraw cash, deposit cash and checks, and transfer money between your accounts.

canceled checks, or cleared checks

Checks that a bank has processed are called

ATM Fee

If you use an ATM from another bank, those banks will charge you for using it. The fee of this will be $2 or more for the transaction. Some special accounts can waive most or all these fees

Nonsufficient Fund (NSF) Fee

If you write a check, but your bank account does not have the sufficient amount of money written on the check, you are charged a fee as a consequence. This is also known as a bounced check. You must pay between $30-40 per check, unless you have overdraft protection. The person who deposits the check will also be charged for the check bounce. They can be charged $80 or more. With overdraft protection, the NSF will be paid instead of bounced. As a result, you must pay the amount written on the check and bounce fee.

cashier's check

It is a check that is issued against bank funds. When you buy a cashier's check, the money comes from your account to pay the bank. The money for the payee of the cashier's check comes from the bank's account. Some people prefer to receive a cashier's check rather than a personal check because a cashier's check is more secure.

Eight types of financial institutions:

Safe deposit boxes, overdraft protection, ATM, Special services (cashier's check, stop payment, money order), financial advising, loans, internet banking, and bank cards.

smart card

Similar to ATM cards and debit cards, these are stored value cards that contains a computer chip that stores electronic money and the balance. You deposit money to the smart card electronically when you purchase or renew the card. When the money is spent, you can add more money to the card and continue using it. The advantage of a smart card is that it is not linked to your checking account, and if it is lost or stolen, the thief cannot access your account. They are usually acceptable for many kinds of transactions.

Duties carried out by the Fed to help consumers know and understand their rights with respect to banking.

Specific duties carried out by FED: Consumer Education- The Fed provides consumer information and free educational materials at its website Consumer Protection Laws-The Fed regularly examines financial institutions to ensure compliance with consumer protection laws and regulations. Consumer Complaint Program- The Fed responds to inquiries and complaints from the public involving consumer protection issues.

inactive account

This account is one that does not meet minimum account usage requirements. If your account does not have transactions (such as deposits, debits, checks, or other uses), the financial institution is not making money from those transactions. Thus, they impose fees to cover their costs of maintaining the account. Inactive account fees typically range from $5 to $15 a month. Clearly, if you have an inactive checking or savings account, the balance can be eaten up because of these charges.

floating a check

This is when you write a check and planning to deposit money later to cover the check before it is processed.

overdraft protection

This is when you write a check or make a withdrawal from your bank account but lack the amount of money to cover the transaction so the bank will cover that cost.

Checking account

a demand deposit account on which checks are drawn. It provides a safe place to keep money and allows users easy access to the money in the account. It is a demand deposit account because the account holder may withdraw money on demand or write checks on the account at any time. Most people have a checking account for the convenience of paying bills by mail. It is not a safe practice to send cash, and it is inconvenient to buy a money order each time.

Credit unions

are nonprofit financial organizations, and members may be offered free checking accounts with no minimum deposit.

third-party check

is a check issued by the check writer (drawer) to the payee, who then endorses and transfers it to a third party. Many banks will not deposit or cash the check from the third party unless he or she has an account with the bank. If the check is bad, the amount of the check will come out of the third party's account. If a bank refuses to cash a third-party check, you may have to use a check-cashing service. A check-cashing business charges a high fee, often a percentage of the check amount.

savings account

is a demand deposit account designed for the accumulation of money in a safe place for future use. The funds are not as easily accessed as with a checking account. The funds, however, are still highly liquid, meaning you can generally withdraw your money at any time without penalty. Savings accounts at banks generally are insured by the FDIC up to the legal limit of $250,000 ($100,000 starting in 2014) per depositor per bank.

Check

is a written order to a bank to pay a stated amount to the person or business named on the face of the check. Checks are an accepted form of payment for most bills. Checks may also be used to purchase items in stores. Writing a check for a major purchase is safer than carrying a large amount of cash. A canceled check (one that has been processed) also serves as proof of payment for bills or purchases.

Bank Reconciliation

the process of adjusting the checkbook register and bank statement balances so that they agree

Monthly Account Fee

this is when financial institutions charge a monthly fee for preserving a checking account. The cost range between $10 - 20. You must pay this fee unless you meet a minimum balance requirement or have a special "free" account.

EFT

uses a computer-based system to move money from the drawer's account to the payee's account. EFTs are used for automatic withdrawals and deposits. Many people receive social security payments in this manner. Many businesses electronically deposit their employees' net pay. This usually makes it available to employees on the same day it is deposited. The main advantage for account holders is that they have instant access to their money. This method is also safer and more convenient than carrying checks to the bank for deposit.

Loans

when a bank uses the money you have on deposit, combined with the deposits of other customers, to make loans.

truncated

when a paper check is transformed into a digital image, it is said to be truncated. Truncated checks are also known as substitute checks.

Financial advising

when banks look at your financial situation and recommend financial products, such as mutual funds, that correspond to your goals and resources.