Chapter 4: Savings and Payment Services - Vocabulary (copy)

Vocabulary flashcards covering key terms from Savings and Payment Services (Chapter 4).

Liquid assets

Cash or assets that can be quickly converted into cash to meet daily money needs.

Savings account

A deposit account that earns interest and is used to set aside funds for future use.

Certificate of deposit (CD)

A time deposit with a fixed term and fixed interest rate; penalties for early withdrawal.

Mutual fund

An investment vehicle that pools money from many investors to buy a diversified portfolio.

Credit card cash advance

A cash loan obtained against a credit card balance, often with fees and higher interest.

Personal loan

A loan borrowed from a bank or lender for personal use.

Checking account (demand deposits)

A deposit account used for frequent withdrawals and payments on demand.

Automatic payments

Scheduled electronic payments set to recur from your account.

Asset management account (cash management account)

An account offered by investment firms that combines checking, debit/ATM access, online banking, and investment access.

Direct deposit

Automatic credit of income (e.g., paychecks) directly into a bank account.

ATM access

Ability to withdraw cash, check balances, and transfer funds via an ATM.

Debit card

A card that deducts money directly and immediately from a checking or savings account.

Lost card liability

The liability limits customers face if a card is lost (often $50–$500 depending on policy).

Prime rate

The interest rate banks charge their most creditworthy corporate borrowers; a benchmark for other rates.

Consumer interest rates

Rates charged for loans and paid on deposits to consumers.

Online banking

Banking services accessed over the internet, offering convenience but potential privacy/security concerns.

Phishing

Fraudulent attempts to obtain personal information via deceptive electronic communications.

Long-term loan

A loan with repayment extending over a longer period.

Short-term savings instrument

Savings tools that mature quickly to take advantage of changing rates.

Refinance

Replacing an existing loan with a new one on better terms.

Deposit institutions

Institutions that accept deposits (e.g., banks, credit unions).

Non-deposit institutions

Institutions that do not primarily take deposits (e.g., insurers, mutual funds, brokerages).

Commercial banks

For-profit banks offering a full range of services, including checking and lending.

Savings and loan associations

Institutions focusing on savings accounts and mortgage lending.

Mutual savings banks

Depository institutions owned by depositors, often paying higher savings rates.

Credit unions

Member-owned, nonprofit financial cooperatives with lower fees and loan rates.

Life insurance companies

Companies offering life insurance plus savings/investment products.

Investment companies

Firms offering mutual funds, money market funds, and related investments.

Mutual funds

Pooled investment funds managed to hold a diversified portfolio.

Money market funds

Funds investing in short-term, high-quality securities; not guaranteed by FDIC.

Brokerage firms

Firms that act as intermediaries for buying and selling securities.

Credit card companies

Firms specializing in providing short-term credit and related services.

Finance companies

Lenders offering short- to medium-term consumer loans at higher rates.

Mortgage companies

Lenders specializing in home mortgage loans.

Pawnshops

Lenders offering quick cash loans secured by personal items; often high fees.

Check-cashing outlets

Businesses that cash checks for a fee, sometimes without an account.

Payday loan companies

Lenders offering cash advances with very high interest rates and fees.

Rent-to-own centers

Stores offering goods on rental terms at a high total cost.

Regular savings accounts

Savings accounts with easy withdrawals and typically low minimum balances.

Passbook savings

Savings account where transactions are recorded in a passbook.

Statement accounts

Accounts that provide periodic statements detailing deposits and withdrawals.

Certificates of deposit (CDs)

Time deposits with fixed terms and fixed interest, penalties for early withdrawal.

Rising-rate (bump) CDs

CDs with rates that may increase if rates rise in the market.

Stock-indexed CDs

CDs whose return is linked to a stock index rather than a fixed rate.

Callable CDs

CDs that can be redeemed by the issuer before maturity.

Promotional CDs

CDs offered with promotional or special rates.

Interest-earning checking accounts

Checking accounts that pay interest on balances.

Money market accounts and funds

Accounts/funds with higher yields and limited check-writing ability; often higher minimums.

U.S. Savings Bonds Series EE

Patriot Bonds; sold at half the face value; fixed rate; penalties for early redemption; potential education tax advantages.

U.S. Savings Bonds Series HH

Current-income bonds that pay interest semiannually and are taxed as ordinary income.

I bonds

Savings bonds with a fixed rate plus inflation-based adjustment.

APY (Annual Percentage Yield)

The total rate of return considering interest and compounding; used to compare savings options.

Truth in Savings Act

Law requiring disclosure of fees, interest rates, and APY by financial institutions.

FDIC

Federal Deposit Insurance Corporation; insures deposits up to $100,000 per depositor per bank.

NCUA

National Credit Union Administration; insures deposits at credit unions.

Overdraft protection

A service to cover transactions when funds are insufficient, often with fees.

Overdraft protection packages

Bundled services that may include unnecessary overdraft options.

Certified check

A personal check guaranteed by the bank; funds are reserved for payment.

Cashier’s check

A check drawn on the bank’s own funds and guaranteed by the bank.

Money order

Prepaid instrument purchased at a bank, post office, or store.

Traveler’s checks

Pre-signed checks that can be replaced if lost or stolen; increasingly replaced by electronic options.

Smart cards

Plastic cards with an embedded chip used as electronic wallets or payment devices.

Stored-value cards

Prepaid cards that hold a set amount of money for payments.

Endorsements (blank, restrictive, special)

Ways to sign a negotiable instrument: blank (signature only), restrictive (deposit only), or special (pay to the order of).

Bank reconciliation

Process of matching checks written, deposits, and withdrawals with bank statements to identify outstanding items or errors.

Outstanding checks

Checks that have been written but have not yet cleared the bank.