Chapter 5 PFP

Fixed-Time Deposit

A certificate of deposit that has a specific time period that the savings must be left on deposit; otherwise a penalty is assessed for early withdrawal.

Mutual Funds

A pool of money used by a company to purchase a variety of stocks, bonds or money market instruments. Provides diversification and professional management for investors.

Thrift Institutions

A savings and loan association, mutual savings bank, or credit union.

Money Market Account

A type of savings account that pays a higher interest rate because the financial institution invests the money you deposit.

EBT Cards Stands For

Electronic Banking Cards (SNAP)

ATM cardholders are liable for only the first $50 of unauthorized use if they notify the issuing company within five business days after the loss or theft of their card or PIN. T or F

False

ATM transaction fees can be assessed when you make a purchase via a point-of-sale terminal at a retail store. T or F

False

Because the focus is on building a relationship you can wait until after “popping the question†to discuss financial issues. T or F

False

Credit unions with federal charters have their accounts insured through the FDIC. T or F

False

Share draft accounts at credit unions are generally more expensive than NOW accounts at commercial banks. T or F

False

The term money market account describes a variety of high-interest earning accounts that normally have unlimited check-writing privileges. T or F

False

One should accumulate enough savings to cover living expenses for six to nine months. T or F

False (3-6 months)

FDIC

Federal Deposit Insurance Corporation

A stop-payment order works only if the check has not yet cleared your financial institution. T or F

True

Bump-up CDs allow savers to bump up the interest rate once to a higher market rate. T or F

True

Commercial banks typically offer the widest variety of financial services. T or F

True

Electronic funds transfers (EFTs) move money electronically between accounts rather than by check or cash. T or F

True

Fixed-time deposits specify a period of time that the savings must be left on deposit. T o F

True

Institutions usually have a rule requiring that savings account holders give 30 to 60 days notice for withdrawals, although this restriction is seldom enforced. T or F

True

Money withdrawn from a CD before the end of the specified time period is subject to interest penalties. T or F

True

The interest rate you earn on your checking and savings account can vary with the amount you have in the accounts. T or F

True

Unlike other providers of financial services, depository institutions can both take deposits and make loans to consumers. T or F

True

When you sign up for electronic banking services, the depository institution must inform you of your rights and responsibilities in a written disclosure statement. T or F

True

Your first line of defense against unauthorized use of your banking accounts is prompt examination of your periodic statement provided by your banking institution. T or F

True

Super NOW Account

a checking account offering a high rate of interest in return for a high minimum balance in the account

Stop Payment Order

a request that the bank not honor a specific check

Share Draft Account

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

NOW Account

an interest-bearing checking account

APY

annual percent yield describes interest paid to a saving account or certificate

Commercial Banks

depository institutions that historically make short-term loans primarily to businesses

Depository Institutions

financial institutions that are legally allowed to offer checking and savings accounts to individuals

Stock Brokerage Firms

licensed financial institutions that specialize in selling and buying stocks, bonds, and other investments and providing advice to investors

Investment Certificates

not insured - not CDs - can be recalled by the institution

Insurance Companies

provide property, liability, health, life, and other insurance

Community Banks

small banks with local roots

Liquidity

the ease with which an asset can be converted to cash

Mutual Savings Banks

thrift institution that also accepts deposits and makes housing and consumer loans

Grace Period (banking)

time in days during which deposits or withdrawals can be made and still earn interest from a given day of the interest period

Checking Account is also called a....

transaction account

Safety

your funds are free from financial risk