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Question 1 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: A checking account A A savings accountA money market account

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. Next

Try again! 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. Back

Try again! 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. Back

Question 2 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 A money market account A A savings account B A certificate of deposit C

Try again! 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. Back

Correct! 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. Next

Try again! 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. Back

Question 3 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: A savings account A A certificate of deposit B A money market account C

Try again! 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. Back

Correct! 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. Next

Try again! 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. Back

Question 4 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: A checking account A A money market account B A certificate of deposit C

Try again! 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. Back

Correct! 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. Next

Try again! 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. Back

Question 5 Examples of traditional financial institutions include: Commercial banks and credit unions A Commercial banks and finance companies B Payday lenders and check- cashing outlets C

Correct! 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. Next

Try again! 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. Back

Try again! Payday lenders and check-cashing outlets are nontraditional institutions that offer short-term loans and check-cashing services but at very high costs. Back

Question 6 Which of the following items is a potential negative consequence of placing money in a certificate of deposit? Earns lower interest than a savings account A Has a limited number of monthly transactions B Penalties are charged for early withdrawals of funds C

Try again! Certificates of deposit typically earn higher rates of interest than a typical savings account. Higher interest would not be a negative consequence. Back

Try again! 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. Back

Correct! 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. Next

Question 7 When choosing a financial institution, you should consider: Access to locations, ATMs, and services to meet your financial needs A Fees charged for overdrafts and other penalties B The likelihood of the bank failing C

Correct! Access to financial services that are appropriate for your financial situation is the major factor in selecting a financial institution. Next

Try again! While consideration of penalty fees is important, when an account is properly used, these fees should not be an issue. Back

Try again! 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. Back

Question 8 A check: Directs your financial institution to transfer money from your account to another person’s or business’s account. A Can be converted to an electronic debit by the recipient by using the digits in the MICR line. B Both of the above C

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. Back

Try again! 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. Back

Correct! 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. Next

Question 9 An overdraft occurs: When you write more than the allowed number of checks during a single month. A When your savings account balance falls below the minimum amount required by the rules of the account. B When a check is cashed or a debit is processed against an account that does not have sufficient funds to cover the transaction. C

Try again! 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. Back

Try again! The balance in your savings account has no relationship to an overdraft. Overdrafts occur on checking accounts. Back

Correct! 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. Next

Question 10 Direct deposit: Is available only to customers with checking accounts. A Can be accomplished by transferring funds from your savings to your checking account using an ATM. B Is a convenience that allows recipients of a direct deposit to have same-day access to deposited funds. C

Try again! 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. Back

Try again! 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

Correct! 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. Next

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