unit 4 financing Flashcards
verifying the accuracy of your checking account balance in relation to the bank’s records as reflected in the bank statement, which is an itemized listing of all transactions in the checking account
account reconciliation
a remote computer terminal that customers of depository institutions can use to make basic transactiona 24/7
automated teller machine (ATM)
A comprehensive deposit account, offered primarily by brokerage houses and mutual funds
Asset management account (AMA)
the routine, day to day administration of cash and near-cash resources (liquid assets) by an individual/family
cash management
a check payable to a third party that is drawn by a bank on itself in exchange for the amount specified plus (often) a service fee of 5-10 dollars
cashier’s check
a type of savings instrument issued by certain financial institutions in exchange for a deposit, which typically requires a minimum deposit and has a maturity ranging from 7 days-7+ years
certificate of deposit
a personal check that is guaranteed (for a fee of $10-15 or more) by the bank on which it is drawn
certified check
a booklet, provided with a supply of checks, used to maintain accurate records of all checking account transactions
checkbook ledger
when interest earned in each subsequent period is determinde by applying the nominal (stated) rate of interest to the sum of the initial deposit and the interest earned in each prior period
compound interest
specially coded plastic cards used to transfer funds from a customer’s bank account to the recipient’s account to pay for goods/services
debit cards
an account held at a financial institution from which funds can be withdrawn on demand by the account holder, same as a checking account
demand deposit
a type of insurane that protects funds on deposit against failure of the institution; can be insured by the FDIC & NCUA
deposit insurance
the annual rate of return that is actually earned (or charged) durin the period the funds are held/borrowed
effective rate of interest
systems used the latest telecommunications and computer technology to electronically transfer funds into and out of customers’ accounts
electronic funds transfer system (EFTSs)
savings bond issued at face value by the US treasury, whose partially fixed rate provides some inflation protection
I Savings Bond
online commercial bank
internet bank
A federally insured savings account, offered by banks and other depository institutions that competes with money market mutual funds
money market deposit account (MMDA)
a mutual fund that pools the funds of many small investors and purchases high-return, short-term marketable securities
money market mutual fund (MMMF)
a checking account on which the financial institution pays interest; no legal minimum balance
negotiable order of withdrawal (NOW) account
the promised rate of interest paid on a savings deposit or charged on a loan
nominal (stated) rate of interest
the result of writing a check for an amount greater than the current account balance
overdraft
an arrangement between the account holder and the depositoryinstitution whererein the institution automatically pays a check that overdraws the account
overdraft protection
a savings bond issued in various denominnations by the US treasury
series EE bond
an account ofered by credit unions that is similar to interest-paying checking accounts offered by other financial institutions
share draft account
Share-draft accounts do not have minimum balance requirements or charge account maintenance fees. They also earn interest, compounded on a quarterly basis.
interest that is paid only on the initial amount of the deposit
simple interest
an order made by an account holder instructing the depository institution to refuse payment on an already-issued check
stop payment
a savings deposit at a financial institution, remains on deposit for a longer time than a demand deposit
time deposit
a short-term (3-6 month maturity) debt instrument issued at a discount by the US treasury in the ongoing process of funding the national debt
US treasury bill (t-bill)
a check sold (for a fee of 1-2%) by many large financial instituions, typically in denominations ranging from $20-100, that can be used for making purchases and exchanged for local currencies in most parts of the world
traveler’s check
either held in cash or can be readily convereted tinto cash with little-no loss in value
liquid assets
- reduced costs of financing the massive federal budget deficit
- help support the “too big to fail” banks
benefits of lower interest rates
- reduce income to retirees and pension funds
costs of lower interest rates
a substitute for cash, offered by commercial banks and other financial instituions such as savings, loans, and credit unions
interest checking account
savings accounts are available at any time, but funds cannot be withdrawn by check, MMDAs require a fairly large minimum deposit ($1000+) and offer check writing privileges
savings account/money market deposit
a savings instrument where funs are left on deposit for a stipulated period (one week-a year+,) imposes a penalty for withdrawing funds early, they vary by size and maturity and have no check-writing privileges
certificate of deposit
short-term, highly marketable security issued by the US treasury (originally issued with maturies of 13-26 weeks)
US treasury bill
the face value of a banknote, coin, or postage stamp
denominations
long term security issued by the US treasury
US treasury note (T-bond)
issued at a discount from face value by the US treasury, rate of interest is tied to US treasury securities, long a popular savings vehicle and matures to face value in approximately 5 years, sold in denominations of $25 or more
US Savings bond EE
comprises all institutions that market various kinds of financial products (such as checking and savings accounts, credit cards, loans and mortgages, insurance, and mutual funds) and financial services (such as financial planning, securities brokerage, tax filing and planning,, estate planning, real estate, trusts, and retirement)
financial services industry
- vast majority of financial transactions take place at depositorry financial institutions- - commercial banks (both physical and online), savings and loans associations, savings banks, and credit unions
depository financial institutions
financial institutions that don’t accept deposits like traditional banks
nondepository financial institutions
provided to the depositor per insured bank rather than a deposit account, so the checking and savings accounts are insured as long as the maximum insurable amount per bank is not exceeded
deposit insurance
as a depositor, it’s possible to increase traditional $250,000 of traditional deposit insurance by opening accounts in different insurance by opening accounts in different depositor names at the same institution ex. a married couple can over on emillion by setting up several accounts:
- one in the name of each spouse
- joint account
- separate trust or self directed retirement
channels the savings of depositors primarily into mortgage loans for purchasing and improving homes, also offers many of the same checking, saving, and lending products as commercial banks & often pays slightly higher interest on savings as do commercial banks
savings and loan association
offers checking and savings accounts and a full range of financial products and services; the only institution that can offer noninterest-paying checking accounts (demand deposits) and is also the most popular of the depository financial institutions
commercial bank
most are mutual associations (their depositors are their owners and thus recieve a portion of the profits in the form of interest on their savings)
savings bank
a nonprofit, member-owned financial cooperative that procides a full range of financial prodcuts and services to its members, who must belong to a common occupation, religious, or fraternal order/residential area, they are generally small institutions when compared to saving & loan assocations and commercial banks, they also offer interest-paying checking accounrs ( draft accounts) and a variety of saving and lending programs, because they are tun to benefit their members, they paay higher interest on savings and charge lower rates on loands than other depository financial institutions
credit union
national credit union administration = ncua
fdic= federal deposit insurance cooperation
allow you to recieve automatic deposits or make payments that occur regularly
preauthoritized deposits and payments from EFTS (electronic funds transfer systems)
- watch out for scammers
- don’t use public wi-fi for private banking
- keep computer and mobile anti-virus software up to date
- use a bank that supports multifactir autheticaton
financial planning tips
- rented drawer in bank’s vault so bank gets one key and you get one key and it can only be opened with both kets, often used for jewwelery, contracts, stock certificates, etc.
safe deposit box
provide investment and estate planning afvice, managing and administering investments in a trust account or from an estate
trust services
common requirement to maintain a min. baance of $500-$1000or more to avoid service charges in checking accounts
- monthly fees
- limitations on the number or type of transactions
- atm access fees
- not having mobile and online access
- overdraft protection prices
red flags in bank accounts
- no federal deposit insurance
- no liquidity
- fees
savings accounts red flags
always write checks in ink, include the name of the person being paid, date, and amount on the check, sign the check the same way as the signature card as you filled out when opening the account, and note the check’s purpose on it
check guidelines
bounced check= not enough in the bank for the check (rip)
itemized listing of all transactions in checking account checks written
monthly statements include
