Personal Finance Chapter 9 Flashcards

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Questions and Answers

What are the three main categories of services offered by financial institutions?

savings, payment services, and borrowing

What are the three aspects that are under savings services?

savings accounts, certificates of deposit, and money market accounts

What are three aspects under the payment services?

checking accounts, online bill pay, and payment of real estate taxes

What are five aspects under the borrowing services?

car loans, mortgages, student loans, personal loans, and credit cards Signup and view all the answers

What are a few other financial services?

retirement investing, IRA, funds, and currency conversion Signup and view all the answers

What types of electronic banking services are available?

direct deposit, ATM, Debit Cards, and automatic payment Signup and view all the answers

What are four types of financial institutions?

commercial banks, savings and loan associations, mutual savings banks, and credit unions Signup and view all the answers

What is a commercial bank?

an institution which accepts deposits, makes business loans, and offers related services Signup and view all the answers

What is a savings and loan association?

a privately or locally managed financial institution which uses individual's deposits to make long-term loans Signup and view all the answers

What is a mutual savings bank?

a financial institution chartered by a government, without capital stock, owned by members Signup and view all the answers

What is a credit union?

a member-owned financial cooperative that provides services to its members Signup and view all the answers

What are non-deposit type institutions?

life insurance companies, investment companies, finance companies, and mortgage companies Signup and view all the answers

What is a life insurance company?

a company that provides money in case of a person's unexpected passing Signup and view all the answers

What is an investment company?

a financial institution that sells shares and invests in securities issued by other companies Signup and view all the answers

What is a finance company?

a company primarily concerned with providing money for loans Signup and view all the answers

What is a mortgage company?

a company that lends money to buy homes and sells the loans to investors Signup and view all the answers

What are the positives of using cash?

the most liquid form of money, impossible to go into debt using it, no reliance on banks Signup and view all the answers

What are the negatives of using cash?

easily stolen, hardly earns interest, not recommended for large purchases Signup and view all the answers

What are the positives of using checks?

great for tracking finances, allows large payments, provides proof of payment Signup and view all the answers

What are the negatives of using checks?

provides personal information, can be bounced or canceled, must be filled out properly Signup and view all the answers

What are the positives of using store-valued cards?

like cash, can be spent anywhere, not linked to personal accounts Signup and view all the answers

What are the negatives of using store-valued cards?

high fees, high interest rates, company cannot replace lost funds Signup and view all the answers

What are the positives of using a debit card?

like cash, harder to go into debt, no payment interest on purchases Signup and view all the answers

What are the negatives of using a debit card?

overdraft charges, not accepted by all retailers, directly linked to a checking account Signup and view all the answers

What are the positives of using a credit card?

safer than cash, easy to obtain a replacement if lost or stolen Signup and view all the answers

Study Notes

Financial Institutions Services

Three main categories: savings, payment services, and borrowing.

Savings Services

Key aspects include savings accounts, certificates of deposit (CDs), and money market accounts.

Payment Services

Primary components consist of checking accounts, online bill pay, and real estate tax payments.

Borrowing Services

Major aspects encompass car loans, mortgages, student loans, personal loans, and credit cards.

Other Financial Services

Include retirement investing, Individual Retirement Accounts (IRAs), mutual funds, and currency conversion.

Electronic Banking Services

Consist of direct deposit, ATMs, debit cards, and automatic payments.

Types of Financial Institutions

Four primary types: commercial banks, savings and loan associations, mutual savings banks, and credit unions.

Commercial Bank

An institution that accepts deposits, offers business loans, and provides related financial services.

Savings and Loan Association

A locally managed institution that utilizes individual deposits to provide long-term home loans or personal loans.

Mutual Savings Bank

A chartered financial institution owned by members contributing to a common fund, without capital stock.

Credit Union

A member-owned financial cooperative operated for the purpose of offering financial services to its members.

Non-Deposit Institutions

Include life insurance companies, investment companies, finance companies, and mortgage companies.

Life Insurance Company

Provides financial support or money to beneficiaries in the event of an individual's unexpected death.

Investment Company

Sells shares to individuals and invests primarily in the securities of other companies.

Finance Company

Focuses on providing loans and credit to consumers and businesses.

Mortgage Company

Loans money to customers for buying homes, borrowing from banks, and sells the loans to investors.

Positives of Cash

Most liquid form of money, prevents debt accumulation, and does not require a bank.

Negatives of Cash

Vulnerable to theft, minimal interest earnings, and not suitable for large purchases.

Positives of Checks

Helps track finances, facilitates large payments, and provides payment proof.

Negatives of Checks

May expose personal information, can be bounced, and requires proper completion for transfer.

Positives of Store-Valued Cards

Usable like cash anywhere, unlinkable to personal accounts, reducing theft risk.

Negatives of Store-Valued Cards

High fees, elevated interest rates, and funds cannot be replaced if lost.

Positives of Debit Cards

Functions like cash, reduces chances of debt, and incurs no interest charges on purchases.

Negatives of Debit Cards

Subject to overdraft fees, may not be accepted by all retailers, and tied to checking account balances.

Positives of Credit Cards

Safer alternative to cash, offers easy replacement if lost or stolen.

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Description

Test your knowledge with these flashcards on Chapter 9 of Personal Finance. This chapter covers the important categories and aspects of services provided by financial institutions, including savings, payment services, and borrowing. Perfect for students looking to reinforce their understanding of personal finance concepts.