chapter 15

Automated clearinghouses (ACHs)

a system that permits payments such as deposits or withdrawals to be made to and from a bank account by magnetic computer tape

Mutual fund

an investment company that pools individual investor dollars and invests them in large numbers of well-diversified securities

Electronic funds transfer (EFT)

any movement of funds by means of an electronic terminal, telephone, computer, or magnetic tape

Common forms of EFT

automated teller machines, automated clearinghouses, and home banking systems

Finance companies

businesses that offer short-term loans at substantially higher rates of interest than banks

Insurance companies

businesses that protect their clients against financial losses from certain specified risks in exchange for a fee

Premium

fee for insurance

Brokerage firms

firms that buy and sell stocks, bonds, and other securities for their customers and provide other financial services

Individual retirement account (IRA)

is established by individuals to provide for their personal retirement needs

Pension funds

managed investment pools set aside by individuals, corporations, unions, and some nonprofit organizations to provide retirement income for members

Online banking

most popular banking method in the United States

Nonbank financial institutions

offer some financial services but do not accept deposits

Shadow banking

refers to companies performing banking functions of some sort that are not regulated by banking regulators

Money market fund

special type of mutual fund that invests specifically in short-term debt securities issued by governments and large corporations

Automated teller machine (ATM)

the most familiar form of electronic banking, which dispenses cash, accepts deposits, and allows balance inquiries and cash transfers from one account to another

Investment banker

underwrites new issues of securities for corporations, states, and municipalities