BMAN 342 - Ch. 5 Managing Money & Savings Accounts

Monetary Asset Management

The task of maximizing interest earnings and minimizing fees on all of your funds kept readily available for day to day living expenses, emergencies, and savings and investment opportunities.

Liquidity

Ease with which an asset can be converted to cash

Safety

Funds being free from financial risk

Financial Services Industry

Companies that provide monetary asset management and other services

Depository Institutions

Financial institutions in the United States that rae legally allowed to offer checking and savings accounts to individuals and businesses as well as provide loans

Commercial Banks

A type of bank that accepts deposits in checking and savings accounts and provides transactional services such as accepting deposits, making business loans, and offering basic investment products.

Community Banks

A type of commercial bank that focuses on providing traditional banking services in their local communities, where they obtain most of their core deposits locally and make many of their loans to local businesses

Mutual Savings Banks

A type of thrift institution that also accept deposits and make housing and consumer loans

Savings Institutions (also thrift institutions)

Accept deposits and provide mortgage and personal loans to individuals

Online Banks

Regulated just like other banks, even when operated entirely over the internet, because they avoid brink-and-mortar costs of conventional institutions they often pay higher interest rates than other institutions

Savings & loan associations (S&Ls)

Thrift institutions that focus primarily on accepting savings and providing mortgage and consumer loans

Chat Bots

Online texting services offered by all financial institutions and other vendors who provide information and services, which can conduct human-like conversation formerly reserved for people

Credit Unions

Not-for-profit institutions that accept deposits and make loans, and the members/ owners all share some common bond, such as having the same employer, working for or attending the same school, or living in the same community

Federal Deposit Insurance Corporation (FDIC)

Mutual Funds

Investment companies that raise money by selling shares to the public and then invest that money in a diversified portfolio of investments

Stock Brokerage Firms

Licensed financial institutions that specialize in selling and buying stocks, bonds, and other investments and providing advice to investors

Insurance Companies

Provide property, liability, health, life, and other insurance products.

Checking Account (also transaction account)

A deposit account held at a financial institution that performs transactions that allow for withdrawals and deposits

Negotiable Order of Withdrawal (NOW) Account

An interest-earning checking account at a depository institution

Share Draft Account

The credit-union version of a NOW account

Tiered Interest

The combination of a base interest rate and a higher rate paid on interest-earning accounts

Student Checking Account

A checking account offered by credit unions and banks that is better for students than another type of bank account, with usual better benefits. low premium balance, minimized fees, and free online bill

Cashier’s Check

A check drawn on the account of the financial institution itself and, thus, backed by the institutions finances

Money Order

A checking instrument bought for a particular amount with a fee assessed based on the amount of the order

Stop-payment order

A notice made by a depositor to his or her bank directing the bank to refuse payment on a specific check drawn by the depositor

Certified Check

Personal check drawn on your checking account on which your financial institution imprints the word certified, signifying that the account has sufficient funds to cover its payments

Account Reconciliation

When comparing your records with your banks records, checking the accuracy of both sets of records and identifying any errors

Lifeline Banking Account

Streamlined checking designed for low-income customers that has low balance requirements, no monthly fees, and is offered by large financial institutions as away to offer basic banking services to the broad public.

Super NOW Accounts

Pay slightly higher interest rates than a regular checking account but place a limit on the number of checks that can be written each month

Endorsement

The process of writing on the back of a check to legally transfer its ownership, usually in return for the cash amount indicated on the face of the check

Blank Endorsement (bearer instrument)

Contains only the payee’s signature on the back, immediately becomes an instrument that will allow mostly anyone to cash it

Restrictive Endorsement

Uses the phrase “for deposit only” on the back with the signature, can only be deposited into an account

Special Endorsement

Used to limit who can cash a check, uses the phrase “pay to the order of”, considered a two-party check

Money Market Account (MMA)

Any variety of interest-earning accounts that pays slightly higher interest rates (compared with regular savings accounts), and they offer some check-writing privileges

Money Market Mutual Funds

Monet market accounts opened at mutual fund companies

Statement Savings Account

A deposit account held at a bank or other financial institution that provides principal security and a modest interest rate

Time Deposits

Funds on deposit in a savings account (rather than demand deposits), and technically these require that account holders give 30 to 60 days notice for withdrawals

Money Market Deposit account (MMDA)

A deposit account that requires a larger initial deposit (often $2,500), and it requires a minimum balance to be maintained, checks must be written for a minimum amount, and it only allows a limited number of checking transactions per month

Annual Percentage Yield (APY)

Return on total interest received on a $100 deposit for 365-day period, given the institutions simple annual interest rate and compounding frequency

Grace Period

Is the time in days during which deposits or withdrawals can be made and still earn interest from a given day of the interest period

Fixed-time Deposit

A certificate of deposit that has a specific time period that the savings must be left on deposit; otherwise, a penalty is assessed for early withdrawal

Certificate of Deposit

An interest-earning savings instrument purchased for a fixed period of time, such as 6 months or 1, 2, or even 5 years

Variable Rate (adjustable rate) Certificate of Deposit

Certificates of deposit that pay an interest rate that is adjusted (up or down) periodically

Interest-rate risk

The risk that an investment’s value will change due to a change in the absolute level of interest of interest rates

CD Laddering

A strategy in which an investor divides the amount of money to be invested into equal amounts to certificates of deposit (CDs) with different maturity dates; it decreases both interest rate and re-investment risks

Bump-up CD

A savings certificate entitling the bearer to take advantage of rising interest rates with a one-time option to “bump up” the interest rate received

Brokered Certificates of Deposit

Often pay the highest yields and are available through stockbrokerage firms, bought by brokerage firms in bulk to resell to brokerage customers

Investment Certificates

Not CDs, investment product offered by an investment company or brokerage firm designed to offer a competitive yield to an investor

Payable on Death (POD, Totten trust)

An arrangement between a bank or credit union and a client that designates beneficiaries to receive all clients assets, and the immediate transfer of assets is triggered by the death of the client

Joint Tenancy with Right of Survivorship

The most common form of joint ownership, especially for husbands and wives. In this case, each person owns the whole of the asset and can dispose of it without the approval of the other(s)

Tenancy in Common

A form of joint ownership in which two or more parties own the asset, but each retains control over a separate piece of the property rights

Tenancy by the Entirety

A type of shared ownership of property recognized in most states, available only to married couples, where spouses who own property as tenants by the entirety each own undivided property interest, each have full rights to occupy and use it and has a right of survivorship.

Electronic Money Management

occurs whenever transactions are conducted without using paper documents

Electronic Fund Transfers (EFTs)

When funds are shifted electronically (rather than by check or cash) among various accounts and to and from other people and institutions

Why use electronic money management?

Convenience, ease, low cost, legal protections

Automatic Billing (or auto-renewal billing)

A feature that allows a vendor to automatically charge a customers credit (or debit) card or bank account on a regular basis through a recurring profile set up on the account.

Bitcoin

A peer-to-peer experimental digital cash currency based on an open source cryptographic protocol that can be bought at an exchange and transferred through a computer or smartphone without an intermediate financial institution