Checking and Savings Accounts Overview
27 Questions
0 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

Why get an account with FDIC insurance?

This insures up to $250,000 in your bank account.

How can you access your checking account?

Debit card, check, ATM, online transfer, physical bank location.

What is direct deposit and why is it used?

So your employer can pay you directly into your bank account.

How often do you get a bank statement?

<p>Monthly.</p> Signup and view all the answers

Why should you check your bank statement?

<p>Fraud, check your balance, extra expenses.</p> Signup and view all the answers

How can you make your savings account secure?

<p>Strong password, secure wifi.</p> Signup and view all the answers

Can you pay bills with a savings account?

<p>False</p> Signup and view all the answers

What are savings accounts used to save for?

<p>House, car, college, vacation.</p> Signup and view all the answers

What is an interest rate?

<p>Incentive for a person to lend money.</p> Signup and view all the answers

Which has a higher interest rate?

<p>Savings accounts</p> Signup and view all the answers

Why use a checking account if savings accounts have higher interest rates?

<p>Checking accounts are easier to access.</p> Signup and view all the answers

List 3 banking fees.

<p>Maintenance, out-of-network ATM, overdraft protection.</p> Signup and view all the answers

Should you get an account with a maintenance fee?

<p>False</p> Signup and view all the answers

How can you avoid an out-of-network ATM fee?

<p>Use an ATM from your own bank.</p> Signup and view all the answers

What is the typical fee for an out-of-network ATM transaction?

<p>$3 per transaction.</p> Signup and view all the answers

What happens if you have overdraft protection and you overdraw from your account?

<p>The transaction will be accepted; your account will go in the negative; you will be fined a fee (typically $35 each time).</p> Signup and view all the answers

What happens if you have overdraft coverage and you overdraw your account?

<p>The transaction will be accepted; money will be drawn from a linked account in increments of $50-$100; you will be fined each time money is drawn from the linked account.</p> Signup and view all the answers

What happens if you have no overdraft protection and you overdraw from your account?

<p>Your transaction will not go through; your card will be declined; you may receive a fine for NSF (insufficient funds).</p> Signup and view all the answers

When might it be a good idea to have overdraft protection?

<p>When you have a steady income and need to ensure all transactions go through.</p> Signup and view all the answers

When might it be a bad idea to have overdraft protection?

<p>When you do not have a steady income and fees can quickly draw you into debt.</p> Signup and view all the answers

Why might someone opt for overdraft protection if it is not in their best interest?

<p>The box could already be checked when opening the account; bankers may mislead about the protections.</p> Signup and view all the answers

What are 3 saving strategies we talked about in class?

<p>50/30/20, emergency fund, multiple savings accounts, pay yourself first, set short, medium, and long-term goals.</p> Signup and view all the answers

Why save early?

<p>More time for compounding interest to take effect.</p> Signup and view all the answers

Describe the 50/30/20 saving method.

<p>50% goes to needs; 30% goes to wants; 20% goes to savings.</p> Signup and view all the answers

Why put 30% (50/30/20 saving method) to wants?

<p>Could lead to impulse spending; provides perceived choice.</p> Signup and view all the answers

Describe the Pay-Yourself-First saving method.

<p>Set aside a certain percentage of your pay to your savings account before paying bills.</p> Signup and view all the answers

What is an emergency fund used for?

<p>M...</p> Signup and view all the answers

Study Notes

Checking and Savings Accounts

  • FDIC Insurance: Insures up to $250,000 per depositor, per insured bank. Most large banks are FDIC insured.
  • Accessing Checking Accounts: Debit card, check, ATM, online transfer, physical bank location.
  • Direct Deposit: Employer directly deposits your paycheck into your bank account. Avoids paper checks.
  • Bank Statements: Issued monthly. Check for fraud, balance, and extra expenses.
  • Savings Account Security: Use a strong password and access accounts over secure Wi-Fi.
  • Savings Account Usage: Typically not used to pay bills. Savings are accumulated for long-term financial goals like a house, car, college education, vacations, etc.
  • Interest Rates: Higher in savings accounts compared to checking accounts. Savings accounts generally have fewer transactions and larger deposits.
  • Checking Account Benefits: Easier to access compared to limited withdrawals for savings accounts (typically 6 per month).

Beware of Banking Fees

  • Maintenance Fees: Can be waived with a linked savings account or by maintaining a minimum balance, depending on the bank.
  • Out-of-Network ATM Fees: Avoid by using your own bank's ATMs, prepaid debit cards while traveling, or paying with debit/credit card. Typical fee is $3 per transaction.
  • Overdraft Protection: Transactions are approved even with insufficient funds, but a fee is applied. Money can be drawn from a linked account (usually savings) in increments.

Savings Strategies

  • 50/30/20 Saving Method:
    • 50% for needs (housing, transportation, groceries)
    • 30% for wants (entertainment, dining out, hobbies)
    • 20% for savings (college, retirement, emergency fund)
  • Pay-Yourself-First Method: Set aside a percentage of your income for savings before paying bills or spending money.
  • Emergency Fund: For unexpected expenses like medical bills, car repairs, job loss, etc.
  • Multiple Savings Accounts: Categorize savings for different goals.
  • Set Short, Medium, and Long-Term Goals: Visualize savings targets and monitor progress.

Why Save Early?

  • Compound Interest: Money earns interest on itself. The earlier you save, the more time for exponential growth.

Additional Notes

  • Perceived Choice: Giving yourself spending limits can help avoid impulse purchases. It's similar to how offering a young child two options still limits their choices and influences their decisions.
  • Beware of Overdraft Protection: It can lead to debt if you don't have a consistent income. Bankers' statements about overdraft protection can be misleading.

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Quiz Team

Related Documents

Unit 2 Banking Grudge Match Questions PDF

Description

This quiz covers key concepts about checking and savings accounts, including the benefits and features of each type. Learn about FDIC insurance, direct deposits, and the security measures necessary for maintaining a savings account. Understand how checking accounts can provide easier access for daily transactions compared to savings accounts.

More Like This

Economics Quiz
10 questions

Economics Quiz

SucceedingSavanna avatar
SucceedingSavanna
Checking Accounts vs Savings Accounts
18 questions

Checking Accounts vs Savings Accounts

FormidableOpossum avatar
FormidableOpossum
Types of Financial Accounts Quiz
8 questions

Types of Financial Accounts Quiz

TougherVision avatar
TougherVision
Managing Checking and Savings Accounts
42 questions

Managing Checking and Savings Accounts

WorthyLake3654 avatar
WorthyLake3654
Use Quizgecko on...
Browser
Open
Browser
Browser