w!se test

Commercial Bank

for-profit financial institution; offers a wide range of financial services including checking accounts, savings accounts, credit cards, loans, etc.

Credit Union

non-profit financial institution; member owned; offers a wide range of financial services including checking accounts, savings accounts, credit cards, loans, etc.

FDIC

protects depositors' money at commercial banks in case of the bank failure; protects up to $250,000

Service charge

fee a bank charges for handling a checking or savings account

Full/Special endorsement

allows you to transfer a check to another person

Financial intermediary

banks act as this because they safeguard, transfer, exchange, and lend money

Clearing (check)

paying of checks among different banks in different cities

Deposit slip

a form needed when depositing money into your account; lists all items you are depositing - currency, coins, or checks

Signature card

providing personal data and a sample of your signature to the bank when you first open an account; requires legal name, address, phone number, SSN, driver's licence, email address

Debit card

also known as cash card, used for ATM and point of sale transactions - money comes directly out of your account

Federal Reserve System

central bank of U.S. - ensures adequate coins and currency are in circulation; supervises and regulates member banks; acts as a bank for other banks

Endorsement

written evidence that you received payment or that you transferred your right to receive payment to someone else

Bank statement

a report on the status of your account

Credit card

card where you borrow from a bank or financial institution to purchase goods and services; pay the bank or financial institution back later

Electronic Funds Transfer (EFT)

transfer of money from one bank or account to another (can include direct deposit; ATM transactions; credit card transactions, etc.)

Regular/Basic Savings Account

type of savings account; pays the lowest amount of interest; restrictions to the number of monthly withdrawals; great place to keep emergency fund of $500

Money Market Account

type of savings account; pays higher interest; requires a higher minimum balance; checks can be written from this account; restrictions to the number of monthly withdrawals; great place to keep emergency fund of $1000

Payee

person or business a check is written to

Drawee

name of the bank a check is drawn on

Overdraft

created when a purchase is made (check/debit/EFT) that is more than the amount of money in your account

Floating a check

writing a check and hoping to deposit money to cover it before the check clears

Ways to deposit money in an account:

ATM, EFT, mobile device, mail, inside a bank

Principal

the initial amount of money deposited into a savings account

Interest

cost/price paid for the use of money; usually expressed as a rate or percentage; calculated over time

Simple interest

calculated only on the principal amount in an account or principal amount of a loan (P X R X T)

Compound interest

calculated on principal and interest previously earned

APR

a credit card's interest rate (annual percentage rate)

Deposit institutions

accept deposits from customers; use money to finance operations (commercial bank, credit unions)

Non-Deposit institutions

do not accept deposits; earn money by selling products/services (life insurance companies, investment companies, check-cashing outlets, pawnshops)

Stop-payment order

request that the bank not honor a specific check

Safe-deposit box

used to store valuable items (birth certificate, jewelry, mortgage papers)

Notary

verifies a person's identity, attests to the authenticity of the document

Check Cashing outlets

provides banking services for high fees; used by people outside of the traditional banking system

Checking account number

numbers at the bottom of a check assigned to the account holder

Collateralized loan

property or other asset that a borrower offers as a way for a lender to secure the loan

Credit

the ability of a customer to obtain goods or services before payment, based on the trust that payment will be made in the future

Direct deposit

the electronic transfer of a payment directly from the account of the payer to the recipient's account

Insufficient funds

when someone tries to purchase an item using a check or debit card without having enough money in his or her bank account

Promissory note

a written promise to pay someone

Check reconciliation

the process of matching your checkbook register with the bank statement

Check register

Used to record checking account transactions (income, debit card activity, ATM withdrawals, checks written)

Pin number

confidential number known only to an account holder that allows them to access their account information

Securities Investor Protection Corp (SIPC)

protects against the loss of cash and securities - such as stocks and bonds at brokerage firms

NCUA

protects depositors' money at credit unions in case of the bank failure; protects up to $250,000

Check Fraud

certain types of crime involving fake, forged or deceptive checks

Canceled check

check that has cleared an account; not returned to customers because it helps the bank save money

Check number

located at the top of the check; numbered for easy identification

Check Kiting

drawing checks against a bank account containing insufficient funds to cover them, with the expectation that the necessary funds will be deposited before such checks are presented for payment

Forgery

check signature is falsely made, impersonating an original owner, that is used for fraud payments. In check fraud, forgery is used to sign checks illegally that is used for illegal activities

Bearer instrument

valuable to anyone who holds it

Bank Secrecy Act

requires financial institutions to assist U.S. government agencies in detecting and preventing money laundering (Ex. someone makes a deposit exceeding $10,000 at one time)

Formula for calculating: Regular wages

regular hourly wage X regular hours

Formula for calculating: Overtime

regular hourly wage X 1.5

Commission

percentage of the amount of a business transaction paid to a sales agent or broker

Straight commission

when the only compensation received by an employee is commission

Formula for calculating: Commission

rate of commission x sales

Salary

Fixed payment for a person's work, usually paid monthly or twice per month; typically stated as an annual amount (Ex. Lucy earns $70,000 per year)

Weekly payroll

refers to paydays that occur 52 times per year, such as every Friday

Bi-weekly payroll

refers to paydays that occur 26 times per year, such as every other Friday.

Monthly payroll

refers to paydays that occur 12 times per year, such as last day of the month.

Semi-monthly payroll

refers to paydays that occur 24 times per year, such as the 15th day and the 30th day of every month.

Gross pay

total amount earned before taxes and other deductions are subtracted

Net pay

amount of pay remaining after deductions have been taken from pay; referred to as 'take home pay', also referred to as discretionary income

Deductions

money subtracted from your gross to pay for various taxes, benefits, insurance, etc

Optional deductions

Insurance (health, dental, vision, life,); Retirement (401K, 401B); Childcare, Disability (long-term, short-term); Charity

Court mandated deductions

child support, wage garnishments

Federal, state, & city income tax

calculated on Form W-4

Social security tax

provides benefits for retirees, the disabled, and some minor children; calculated as 6.20% of gross income

Medicare

provides health insurance for people 65 years of age and people under 65 with certain disabilities; calculated as 1.45% of gross income

Federal Labor Standards Act

protects employees from being required to work more than 40 hours in a week without extra pay (*hourly wage earners); requires employers to pay overtime for the extra hours worked

Employment Benefits: Monetary

health insurance, cash bonuses, stock options, profit sharing

Employment Benefits:

Non-Monetary

vacation time, free lunches, tuition reimbursement, employee recognition & appreciation, flexible schedules

Form W-4

completed by the employee and used by the employer to determine the amount of income tax (federal, state, & city) to withhold

Types of income

hourly wage, salary, tips, bonuses, commission, overtime

Dependent

a person who lives with you and for whom you pay more than half of his or her living expenses (Ex. children, spouse, elderly parents, disabled relatives)

Factors that can influence earned income

Career choice, education, skills, economic condition

Documents needed to open a savings account

ID and social security card

Transit number

9-digit number that identifies the bank that holds the checking account and is responsible for payment; Created by the American Bankers Association; Also referred to as: Routing number, ABA number

Taxes

government fees on business and individual income, activities, products, or property that people are required to pay

FICA tax

consists of social security tax and medicare tax

Who pays FICA tax?

employees and employers

Form W-2

employers must provide to employees shortly after year-end to report annual income and withholding for the employee's tax return

401K

retirement savings plan offered by a corporation; funded by employee but employer can match; tax deferred until withdrawn at retirement

403B

retirement savings plan offered by a non-profit institution (church, hospital, school); funded by employee but employer can match; tax deferred until withdrawn at retirement

Order of Liquidity

cash, checking accounts, basic savings, money market, CD

Barter

exchange goods or services for other goods or services without using money; creates a double coincidence of wants

Denomination

proper description of currency, coins, or bank notes

Denomination of coins

$.01, $.05, $.10, $.25, $.50, $1.00

Denomination of dollars

$1.00, $2.00, $5.00, $10.00, $20.00, $50.00, $100.00 (old & new)

Earnings

money obtained in return for labor or services

Fiat money

Deemed legal tender by the government; backed by the full faith of the U.S. government

Greenback

Common name for U.S. currency

Money

Anything widely accepted for goods and services for final payment or for repayment of debts

United States Department of the Treasury

Responsible for promoting economic prosperity and ensuring the financial security of the United States (collects taxes, prints money, issues bonds); consists of departmental offices and operating bureaus

Purpose: United States Mint

Manufactures, distributes, and circulates U.S. coins, precious metals, and collectibles (coins and national medals)

Purpose: Bureau of Engraving & Printing (BEP)

Prints federal reserve notes

Medium of Exchange

Acts as a go-between to make it easier to buy things; sellers agree to accept it in exchange for a good or service

Unit of Account

Used to compare the market value of different goods and services

Store of Value

Makes it easier for people to save and defer consumption until the future