5.1 - Checking Accounts Flashcards
A written order to a bank to pay the states amount to the person/business named on the check from an account.
Check
A demand deposit account in a bank.
Checking Account
A federal government agency that helps promote public confidence in the US financial system.
Insures accounts for up to $250,000 per depositor per bank.
FDIC (Federal Deposit Insurance Corporation)
A card that provides an official signature that the bank can compare to the signature written on checks.
Signature Card.
A tool that can be used to track checking account transactions.
Checkbook Register
A check with error(s).
Voided Check
A check that has been cashed; Serves as proof of payment.
Cancelled Check
A card that allows the account holder to withdraw cash from an account at an ATM.
Debit Card
Money is deducted from your account t and transferred to another party.
Automatic Withdrawal
Like a debit card; Can be used to get cash/enter money into an account at an ATM - However, it cannot make purchases.
ATM Card
When someone signs another person’s name (on a check).
Forgery
A password that gives access to the account.
PIN (Personal Identification Number)
When making a deposit, these things must be included…
Current date, amount of cash, check numbers and amounts, total amount of cash and checks, cash amount received (if any) and your signature, and the net deposit amount.
Deposit not show on bank statement.
Record the deposit in the check register.
Deposit in Transit.
A signature on instructions written on the back of a check.
Endorsement.
A statement that lists checks, other withdrawals, and deposits made to the account.
Bank Statement
Comparing your checkbook register transactions to those on the bank statement.
Reconciling
Purpose is to accumulate money in a safe place for the future.
Typically pays interest (low rate).
Money is usually known as having liquidity (easy access).
Savings Account
Interest is computed on the principal (sum of money) in a certain time period. Interest (I) = Principal (P) x Rate (R) x Time (T)
Simple Interest
Interest is earned on principal plus interest that was earned in a certain time period.
Compound Interest
Secure container located in the bank vault (costs $35-$100)
-A bank service.
Safe Deposit Box
Bank Loans
Bank Service
A check issued against bank funds.
Money comes from your account to pay the bank.
More secure than a personal check (money has been set aside).
Cashier’s Checks
NSF (bounced) checks will be paid rather than be bounced.
Overdraft Protection
A type of check where money is guaranteed.
Money Order
The bank has instructed to not honor a check you wrote/lost (costs $25+).
Stop Payment
Bank Cards
Bank Service
Refers to actions of the Fed to influence money and credit conditions in the economy.
-Role of the Fed
Monetary Policy
Rate that banks have to pay to borrow money from the Fed.
-Type of interest rate
Discount Rate
Rate at which banks can borrow from the excess reserves at other banks.
-Type of interest rate
Federal Funds Rate
Rate banks charge to creditworthy customers (often 3% higher than discount rate).
-Type of interest rate
Prime Rate
The Fed plays a major role in operating the country’s payment systems.
•Print new bills as they get old and worn. •Reserve banks act as a clearinghouse for checks. •Checks may be deducted from your account in a single business day.
-Role of the Fed
Provides Financial Services
All banks are subject to the rules and regulations of the Fed.
-Role of the Fed
The Fed Regulates the Banking Industry
- Supervises banks to help ensure the banking is safe and sound.
- Promotes consumer confidence.
-Role of the Fed.
Maintains Stability
An endorsement check with your signature only.
Blank Endorsement
An endorsement check that says “For Deposit Only” and has your signature.
Restrictive Endorsement
An endorsement check that says “Pay to the Order of” with the person’s name, and your signature.
Special Endorsement
- Businesses that charge a fee to cash a check.
- They charge fees that vary by state and by the type of check being cashed.
- May also make payday loans.
Check Cashing Services
Money deposited in a savings account typically earns a set rate of interest.
Computing Interest
A time deposit meaning that the money you deposit is set aside for a fixed amount of time.
•Subject to early withdrawal penalties.
-Saving Option
Certificates of Deposits
Pays the market rate of interest on the money deposited.
•Minimum balance of $1,000-$5,000 may be required.
-Saving Option
Money Market Accounts
A discount bond issued by the federal government.
-Saving Option
US Saving Bonds
Allows individuals to deposit money into an account during their working years.
*See Rule of 72 transparency.
-Saving Option
IRA (Individual Retirement Account)
