Unit 3 Test Flashcards
Define bank
A for-profit business that invests money deposited by customers, provides loans and exchanges currency
Define credit-union
A non-profit cooperative owned by its members. Like banks, credit unions accept deposits, make loans and provide a wide array of other financial services
What’s a savings account
A savings account is an account where money is kept for future use.
What’s a chequing account
A chequing account is an account that allows checks to be written and deposited by the account holder.
What’s a credit card
A credit card is a card that allows consumers to purchase goods or services on credit (borrow the money now and pay later).
What’s a loan
Lump amounts of money with fixed payments that must be paid each month
Examples include mortgages, student loans, car loans
Things to consider when picking a financial institution
Products and services offered
Fees (some financial institutions offer products without fees)
Interest rates
When you are depositing money, you want to look for the highest possible interest rate.
What you are borrowing money, you want to look for the lowest possible interest rate.
Location and convenience
Define transaction
A record of money that has been deposited or withdrawn from your bank account.
Define deposit
Adding a sum of money to your account to increase your account balance.
Define withdrawal
When you take money out of your account, reducing the amount of money in your account.
Define interest
The amount a financial institution charges a borrower or gives a lender for use of their money.
Define balance
The amount of money in a financial institution, such as a savings or chequing account, at a given moment.
Define minimum balance
A specific amount of money that a bank or credit union requires in order for you to open or maintain a particular account without paying fees.
Define monthly/annual fee
The once-a-month or once-a-year cost of owning a credit card, saving, or chequing account.
Define ATM
An automated teller machine. A computer terminal for user initiated banking transactions.
Define transfer
When you move money from one account to another, say from a chequing account to a savings account.
Define E-transfer
A transfer done entirely online.
What’s good debt
Debt that helps you earn more in the long term with proper planning, such as school loans, business loans, or real estate mortgages
What’s bad debt
Debt that has no potential of making you money is considered bad debt
What’s you debt load
The sum total of all the money you owe
Debt-to-Income Ratio =
monthly debt payments ÷ monthly income
What are some warning signs that your debt is getting out-of-hand
not being able to pay bills
owing late fees
a debt-to-income ratio (DTI) of 43% or more.
How to prevent debt problems
Keep track of what you owe and monitor your credit report for accuracy
Avoid borrowing more money than you can afford to repay
Not everyone receives a steady paycheck. If your income varies, it is of particular importance to minimize your debt burden
Create a plan for repayment when considering loan options
Pay bills on time
What’s a credit score
A credit score is a 3-digit number that represents how likely a credit bureau thinks you are to pay your bills on time.
