Questions and Answers
What is a direct deposit?
What does ATM stand for?
Automated Teller Machine
What is a debit card?
What is a point-of-sale transaction?
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What is a commercial bank?
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What is a savings and loan association (S&L)?
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What is a credit union?
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What is a certificate of deposit (CD)?
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What is a money market account?
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What is the rate of return?
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What is compounding?
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What does annual percentage yield (APY) represent?
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What is overdraft protection?
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What is a stop-payment order?
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What is an endorsement in banking?
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What is bank reconciliation?
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Study Notes
Key Financial Terms and Definitions
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Direct Deposit: Automatic transfer of net pay into an employee's designated bank account, improving convenience and efficiency in payroll processing.
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Automated Teller Machine (ATM): A computerized terminal enabling users to withdraw cash from their bank accounts, providing easy access to funds.
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Debit Card: A cash card linked to checking or savings accounts allowing users to withdraw funds or make purchases directly without incurring debt.
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Point-of-Sale Transaction: Purchases made via debit card at retail locations, restaurants, or service providers, facilitating instant payment for goods and services.
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Commercial Bank: A for-profit financial institution offering comprehensive services like checking, savings, and lending, aimed at generating profit for its shareholders.
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Savings and Loan Association (S&L): A financial institution specialized in offering savings accounts and mortgage loans, now providing services similar to those of commercial banks.
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Credit Union: A nonprofit financial institution owned by members, providing banking services with a focus on member benefits and lower fees.
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Certificate of Deposit (CD): A time deposit where funds are held for a fixed period at a specified interest rate, usually offering higher returns than regular savings accounts.
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Money Market Account: A type of savings account requiring a minimum balance and offering variable interest rates, providing limited check-writing privileges.
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Rate of Return: Represents the percentage increase in savings value due to earned interest, an essential measure for evaluating investment performance.
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Compounding: The process where interest is earned on both the initial principal and previous interest, maximizing growth of savings over time.
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Annual Percentage Yield (APY): Reflects the total interest earned on a $100 deposit over a year, including compounding, providing a clear view of earning potential.
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Overdraft Protection: An automatic loan facility that covers checks written when account balances are insufficient, preventing account holders from incurring overdraft fees.
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Stop-Payment Order: A formal request to a financial institution to prevent the cashing of a specific check, often used to avoid fraud or billing errors.
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Endorsement: The payee's signature on a check, authorizing funds to be transferred to another party or facilitating the deposit of the check.
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Bank Reconciliation: A document that identifies and reconciles discrepancies between a bank statement and a personal checkbook balance, ensuring accurate financial records.
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Description
Test your knowledge with flashcards covering Chapter 5 of Personal Finance. This chapter focuses on key terms such as direct deposit, ATMs, and debit cards. Perfect for students looking to reinforce their learning in personal finance.