ch 7 and 8 resource

Variations of checking accounts are Check Credit accounts/Open line of credit & Money Market Account. Explain these accounts and how they work.

Open line of credit -- loan, write checks for up to that loan amount, pay back with interestMoney market -- only 3 checks per month, min 250$

How does a check "clear"?

Processed through bank On bank statement

What is the purpose for Life Insurance?

Protect family financially

What is a safe deposit box?

Safely store belongings other than money

How does automatic bill pay work?

Setting account to pay bills on specific day Routing num, account num

What happens if you use an ATM of another financial institution other than your own?

There may be additional fees

How is APY different from APR? Which tells you the most about how much you will earn on a savings account?

--APR is annual percentage rate -- percentage of the amound borrowed. One time inetest rate, spread out over the time of the loan --APY is annual percentage yield -- the actual interest earned when compounding is added

What are the Pro's & Con's of Debit Cards?

--Pros: convenient, small, can be used like a credit card, allows a person to carry less cash, does not allow overspending --Cons: can lose track of balance if transactions are not written down, opens checking account up to credit fraud, others can gain access to the account if the card is lost and PIN is known

What is the difference between simple and compound interest? Which interest would benefit the consumer more? How often can compound interest be compounded?

--Simple Interest -- determined by multiplying the interest rate by the principal by the number of periods P x I x N --Compound Interest -- interest paid on interest previously earned. The more frequent interest is added to an accound, the faster compounding occur --Compound is more beneficial

What is a PIN and who do you give this out to?

-A personal identification number -Confirms the user is authorized to access the account -No one

What does it mean to reconcile your bank statement and how often do you do this?

-Balance the checkbook register each month to the balance shown on the statement -To ensure the correct balance in the checkbook -Knowing the correct balance can help to avoid bouncing checks

How much does the FDIC insure depositors for?

250,000

When a check or Debit is outstanding what does that mean?

Transactions that have not cleared the bank

List the 3 government agencies that insure and audit financial institutions and what is the amount for each?

credit unions commercial banks savings & loans --up to $250,000 per person per bank

What are the different types of services banks can offer?

debit card/ATM, automatic bill pay, online banking, direct deposit, phone transfers, overdraft protection, stop payment

Which types of banks offer the most services?

Commercial banks also offer safe deposit box, savings bonds, treasury notes, trust funds

At which financial institution are you considered a member? What is the advantage of this?

Credit Union; the money it makes is reinvested to company and memebrs

When looking at your check register, what does Debit stand for? What does Credit stand for? When do you enter a checkmark in your check register, and why do you put the checkmark there?

Debit -- anything coming out of accound Credit -- into account Check mark -- transaction has cleared

Name the three types of endorsements checks can have and when you might want to use them?

Endorsement -- signature on the back of a check to approve it to be deposited or cashed Blank -- name, sig, cashing or deposit check Restrictive -- for deposit only Special -- pay tot he order of, sign check over to someone else

What is the Rule of 72 & Explain how it works.

How long it will take for your money to double Divide 72 by the percentage of interest you earn on your savings

What does it mean to keep a running balance in your check register?

Keep adding and subtracting debit and credit to know accurately how much is in account

What is the difference between banks, credit unions and savings institutions? Which one is Non-Profit

-Bank -- community, regional or national for-profit business corporations owned by private investors and governed by a board of directors chosen by stockholders -Credit Union -- non-profit financial cooperatives owned by their members and governed by a board of directors. Usually a common bond among the members (belong to same organization). Accept deposits from their members and use them to make short-term loans. -Saving Instituion -- specialize in real estate financing. They can be either corporations or mutual's. Always have the letters SSB or FSB after the name to indicate whether they are a state savings bank or a federal savings bank. Both types are governed by an elected board of directors

What are the four different types of checks and when would you use them (example for each)?

-Cashier's Check -- purchased to make a payment to someone you don't know well -Certified Check -- to make a payment to someone who doesn't want to accept a personal check -Money order -- used when you don't have a checking account and need to make a payment by mail or a personal check is not accepted -Travelers Check -- used when you don't want to carry a lot of cash. If lost or stolen, can be replaced

What is a CD when it comes to savings?

-Certificate of deposit -you deposit a set amount of money for a set period of time -Longer periods=higher interest rate -Early withdrawals = lose interest or fee

Explain the difference between a Debit Card, Credit Card and an ATM card?

-Debit card -- pin, comes out as soon as you make purchase -Credit card -- buy something, pay later, not come directly out of account -ATM -- atm only, put in machine, choose how much cash you want

What is the purpose of the Verification Number on a Credit or Debit Card & where is it found?

-Found on the back in the signature area -Help ensure the card is in the cardholder's possession when making purchases -Prevents unauthorized use

Name 5 other financial institutions you might deal with at some point in your life? Which of these institutions we discussed are very financially dangerous to deal with?

-Life Insurance Company -Mutual Funds -Investment Companies -Finance or Loan Companies -- do not go to finance companies or pay day loan companies -Financial Supermarkets (FSI)

What is direct deposit? What are the advantages?

-Money from paycheck is directly deposited in account -No need to handle check -Always know when youll get money

If a credit union is Non-Profit, where does the profit go?

-Must be reinvested in the company to benefit members -Distrubuted to members

When opening a checking account, what feature should you ask for to help minimize the cost of accidentally bouncing a check?

-Overdraft protection -If you have 100, and you write a cehck for 150, it will pull from your savings

What services are available with on-line banking?

Automatic bill pay, check deposit online,

Describe NOW accounts.

Bank account earns interest Minimum balace Must notify 7 days in advance