Banking Exam Flashcards
(23 cards)
What is the primary purpose of checking accounts?
Day to day expenses
Checking accounts are used for managing everyday financial transactions.
List the methods by which funds can be accessed from a checking account.
- Check
- Debit Card
- Electronic Funds Transfer
- Branch Withdrawals
These methods provide immediate access to funds.
What is the typical interest earned on checking accounts?
Little to no interest earned
Checking accounts are not designed for earning significant interest.
Why are checking accounts considered the most liquid savings tool?
Provides immediate access to funds
Liquidity refers to how quickly assets can be converted to cash.
What features should one look for in a checking account?
Free or designed for students
It is beneficial to choose an account that minimizes fees.
What government entities insure checking accounts?
FDIC or NCUA
These agencies provide security for depositors in case of bank failures.
What is the primary purpose of savings accounts?
For emergency or long-term savings goals
Savings accounts are often used to set aside funds for unexpected expenses or future financial objectives.
How can you access funds in a savings account?
By transferring them into your checking account
This allows for easier use of funds while keeping them in a savings account.
What type of interest rates do savings accounts typically earn?
Low interest rates earned
Savings accounts generally offer lower interest rates compared to other investment options.
Are savings accounts more or less liquid than checking accounts?
Less liquid than checking
Savings accounts may have withdrawal limits and are not as easily accessible as checking accounts.
What should you look for when choosing a savings account?
An account that is free, or designed for students
Many financial institutions offer accounts with no monthly fees or special features for students.
What makes savings accounts secure?
Insured by FDIC or NCUA
This insurance protects depositors in the event of a bank failure, ensuring their money is safe.
What are Money Market Accounts primarily used for?
For long-term savings goals
Money Market Accounts are designed for individuals looking to save over an extended period.
How can you access funds in a Money Market Account?
By transferring them into your checking account
This transfer allows for easy access to funds when needed.
How do the interest rates of Money Market Accounts compare to checking and savings accounts?
Higher interest rates compared to checking and savings accounts
This makes them an attractive option for savers seeking better returns.
What are tiered-interest rates in Money Market Accounts?
Higher balance=Higher interest rates
This structure incentivizes maintaining a larger balance for better earnings.
How does the liquidity of Money Market Accounts compare to checking and savings accounts?
Less liquid than checking and savings accounts
This means funds are not as readily accessible as in other accounts.
What is a limitation of Money Market Accounts regarding withdrawals?
Limited withdrawals per statement period
This restriction can affect access to funds in urgent situations.
Are Money Market Accounts secure?
Yes, insured by FDIC or NCUA
This insurance protects deposits up to certain limits, providing peace of mind.
What is a Certificate of Deposit Account?
An account used for a fixed period of time with restricted access to the funds.
CD accounts typically offer higher interest rates than regular savings accounts.
How does interest on a Certificate of Deposit Account vary?
Interest will vary depending on the dollar amount and time the money is deposited.
Longer terms and larger amounts generally yield higher interest rates.
What is the liquidity status of Certificate of Deposit Accounts?
They are the least liquid savings tool.
Accessing funds before the maturity date usually incurs a fee.
What happens if you need funds from a Certificate of Deposit Account before the maturity date?
You will have to pay a fee.
This penalty can vary based on the financial institution’s policies.
