Test Your Knowledge: Lesson 2 - In the Aftermath

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A DEPOSIT ACCOUNT THAT OFFERS EASY ACCESS TO YOUR MONEY,

OFFERS THE OPTION TO PAY BILLS ONLINE OR BY ELECTRONIC

TRANSFER, AND OFFERS THE OPTION TO MAKE PURCHASES WITH AN

ATM OR DEBIT CARD IS CALLED:

Lesson 2

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In the Aftermath

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Checking accounts are deposit accounts that are

intended to make payments easier. You can make

payments by writing a check, using an ATM or

debit card for purchases, or making payments

online.

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Lesson 2

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In the Aftermath

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A savings account is a deposit account, but its

purpose is to accumulate funds for short-term

goals or emergencies. Payments and purchases

from the account are not allowed.

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Lesson 2

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In the Aftermath

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A money market account is a deposit account,

but it its purpose is to accumulate funds that are

not going to be needed in the short term.

Payments, purchases, and ATM access are not

allowed.

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Lesson 2

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In the Aftermath

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A DEPOSIT ACCOUNT THAT PAYS INTEREST ON DEPOSITS, ALLOWS

WITHDRAWALS AND TRANSFERS WITH AN ATM CARD, DOES NOT OFFER

THE OPTION OF BILL PAYMENT OR PURCHASES, AND MAY HAVE A

MINIMUM DEPOSIT REQUIREMENT IS CALLED:

Lesson 2

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In the Aftermath

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A money market account is a deposit account,

and it may have a minimum balance

requirement. But its purpose is to accumulate

funds that are not going to be needed in the

short term. Withdrawals and transactions using

an ATM are not allowed.

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Lesson 2

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In the Aftermath

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A savings account is a deposit account, and its

purpose is to accumulate funds for short-term

goals or emergencies. Withdrawals and transfers

from an ATM are allowed.

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Lesson 2

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In the Aftermath

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A certificate of deposit is a deposit account but

funds in the account are promised to remain for

a fixed amount of time in order to earn higher

interest. ATM use is not allowed, and penalty

fees are charged for early withdrawals.

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Lesson 2

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In the Aftermath

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A DEPOSIT ACCOUNT THAT REQUIRES DEPOSITED FUNDS TO REMAIN IN

THE ACCOUNT FOR A FIXED AMOUNT OF TIME, IMPOSES PENALTY FEES

FOR EARLY WITHDRAWAL, AND GENERALLY PAYS HIGHER INTEREST RATES

THAN OTHER DEPOSIT ACCOUNTS IS CALLED:

Lesson 2

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A savings account is a deposit account and its

purpose is to accumulate funds for short-term

goals or emergencies. Withdrawals and transfers

from an ATM are allowed without penalty fees.

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Lesson 2

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In the Aftermath

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A certificate of deposit earns higher interest

because the depositor gives up immediate

access to his or her funds in order to earn that

higher rate of return.  If the depositor withdraws

the funds before the agreed-upon time, the bank

will charge a penalty fee.

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Lesson 2

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In the Aftermath

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A money market account is a deposit account

that usually pays higher interest than a typical

savings account, and it somewhat limits a

depositor’s access to the funds. There is no fixed

timeframe for the deposit, so it does not impose

penalties for withdrawal.

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Lesson 2

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A DEPOSIT ACCOUNT THAT PAYS HIGHER INTEREST ON DEPOSITS THAN

OTHER ACCOUNTS, GENERALLY HAS A MINIMUM BALANCE

REQUIREMENT, AND ALLOWS A VERY LIMITED NUMBER OF

TRANSACTIONS EACH MONTH IS CALLED:

Lesson 2

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Checking accounts are deposit accounts that are

intended for making payments. In most, cases

transactions are limited only by the balance of

funds in the account.

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Lesson 2

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In the Aftermath

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A money market account is a deposit account

that usually pays higher interest than a typical

savings account and is designed to accumulate

funds that will not be needed in the short term.

Because it somewhat limits a depositor’s access

to the funds, it is not intended as a tool for

frequent payments.

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Lesson 2

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In the Aftermath

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A certificate of deposit usually has a larger

minimum balance and earns a higher rate of

interest, but access to deposited funds is

restricted for a fixed time period. Therefore,

using the account to make transactions is not

allowed.

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Lesson 2

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In the Aftermath

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EXAMPLES OF TRADITIONAL FINANCIAL INSTITUTIONS INCLUDE:

Lesson 2

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Commercial  banks and credit unions are

examples of traditional financial institutions that

offer customers checking and savings accounts,

certificates of deposits, credit cards, personal

loans, and sometimes mortgages.

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Lesson 2

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Although commercial banks offer customers

checking and savings accounts, certificates of

deposits, credit cards, personal loans, and

sometimes mortgages, finance companies

typically offer only lending services and not the

traditional deposit account options.

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Lesson 2

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In the Aftermath

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Payday lenders and check-cashing outlets are

nontraditional institutions that offer short-term

loans and check-cashing services but at very high

costs.

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Lesson 2

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In the Aftermath

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WHICH OF THE FOLLOWING ITEMS IS A POTENTIAL NEGATIVE

CONSEQUENCE OF PLACING MONEY IN A CERTIFICATE OF DEPOSIT?

Lesson 2

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Certificates of deposit typically earn higher rates

of interest than a typical savings account. Higher

interest would not be a negative consequence.

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Transactions from a certificate of deposit are not

allowed. Therefore, the statement “limited

number of monthly transactions” does not apply

to a certificate of deposit.

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Penalties for early withdrawal would be a

negative consequence for using a certificate of

deposit. If you need ready access to your funds,

this is not the tool to use.

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Lesson 2

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In the Aftermath

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WHEN CHOOSING A FINANCIAL INSTITUTION, YOU SHOULD

CONSIDER:

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Access to financial services that are appropriate

for your financial situation is the major factor in

selecting a financial institution.

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Lesson 2

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While consideration of penalty fees is important,

when an account is properly used, these fees

should not be an issue.

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Lesson 2

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In the Aftermath

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Bank failures are not commonplace, and there are regulations in

place to protect most depositors. Traditional types of bank

accounts—checking, savings, certificates of deposit (CDs), and

money market accounts—are insured by the FDIC up to the legal

limit of $250,000.

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Lesson 2

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In the Aftermath

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A CHECK:

Lesson 2

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Yes, a check directs your financial institution to

transfer money from your account to another

person’s or business’s account, but there’s more

to it.

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Lesson 2

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In the Aftermath

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Yes, a check can be converted to an electronic

debit by the recipient by using the digits in the

MICR line, but there’s more to it.

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Lesson 2

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In the Aftermath

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Writing a check directs your financial institution to

transfer money from your account to another

person’s or business’s account. The check tells the

bank who to pay, when to pay the recipient, and the

amount to pay. A check can also be converted to an

electronic debit by the recipient by using the digits in

the MICR line, which identify the bank, the account,

and the amount written on the check.

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Lesson 2

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In the Aftermath

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AN OVERDRAFT OCCURS:

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While some checking accounts may have limits

on the number of transactions allowed during a

given month, the number of transactions alone

does not determine an overdraft.

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Lesson 2

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In the Aftermath

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The balance in your savings account has no

relationship to an overdraft. Overdrafts occur on

checking accounts.

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Overdrafts can be prevented by carefully

monitoring the transactions posting to your

account. You should maintain an accurate

account balance by recording in the check

register each check written, each debit purchase,

each ATM withdrawal, and each deposit.

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Lesson 2

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In the Aftermath

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DIRECT DEPOSIT:

Lesson 2

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You can set up direct deposit to go into your

checking account or savings account. In addition,

you can split the deposit among multiple

accounts.

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Lesson 2

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Direct deposit is a transaction initiated by a

payer to a payee using the bank’s routing

number and payee account number, and is not a

function of an ATM. Typically, you see direct

deposit options for items like paychecks and tax

refunds.

Back

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Not only is direct deposit a convenience that

allows recipients of a direct deposit to have

same-day access to deposited funds, but it also

promotes savings and eliminates the need for

someone to physically cash or deposit a payroll

check.

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Lesson 2

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In the Aftermath

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Lesson 2

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In the Aftermath

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