Chapter 5 Vocabulary

Trust

A legal agreement that provides for the management and control of assets by one party for the benefit of another.

Asset management account

An all-in-one account that includes savings, checking, borrowing, investing, and other financial services for a single fee; also called a cash management account.

Debit card

A plastic access card used for digital banking transactions and purchases; also called a cash card.

Commercial bank

A financial institution that offers a full range of financial services to individuals, businesses, and government agencies.

Credit union

A user-owned, nonprofit, cooperative financial institution that is organized for the benefit of its members.

Money market fund

A savings-investment plan offered by investment companies, with earnings based on investments in various short-term financial instruments.

Share account

A regular savings account at a credit union.

Certificate of deposit

A savings plan requiring that a certain amount be left on deposit for a stated time period to earn a specified interest rate.

Money market account

A savings account offered by banks and other financial institutions that requires a minimum balance and has earnings based on market interest rates.

Rate of return

The percentage of increase in the value of savings as a result of interest earned; also called yield.

Compounding

A process that calculates interest based on previously earned interest.

Annual percentage yield

The percentage rate expressing the total amount of interest that would be received on a $100 deposit based on the annual rate of frequency of compounding for a 365-day period.

Share draft account

An interest-bearing checking account at a credit union.

Overdraft protection

An automatic loan made to cover the amount of checks written and payments in excess of the available balance in the checking account.