Untitled Flashcards Set

FDIC & Types of Banks: 

• FDIC (Federal Deposit Insurance Corporation)

  • Insures deposits 

  • Examines and supervises financial institutions for safety, soundness, and consumer protection 

• Types of banks: 

  • Traditional banks: offers in person visits during designated office hours (e.g. Chase, Citibank, PNC) 

  • Credit unions: member-owned financial cooperatives that share profits with owners (e.g. Corporate America Family Credit Union) 

  • Online-Only banks: all banking tasks are handled online via a website or app (e.g. Discover, SoFi) 

Bank Services (Checking, Savings, Loans): 

• Checking account: used for everyday spending

  • Keeps a record of account activity 

  • Provides services like: 

    • Zelle (person-to-person payments)

    • Writing checks 

    • Automatic bill payments 

    • Direct deposits (employer send paycheck electronically)

• Savings account: used for emergency funds and earning interest

  • High-yield savings account: found in online-only banks or credit unions, with rates between 3.5%-4.5% 

  • Regular savings account: found in traditional banks, with rates between .01%-.5% 

  • Choose regular savings for in-person banking or easy ATM access

• Loans & mortgages: 

  • Borrowing money from a bank with an agreement to pay it back over time plus interest 

  • Includes credit cards, debit cards, checks, Zelle, money orders

Banking Terms (Interest, APY, Principal, etc.) 

• Interest: cost of borrowing OR the money earned on a savings account 

  • Earned = money you receive (savings account) 

  • Accrued = money you owe (loan)

  • APR (Annual Percentage Rate): interest earned or accrued per year 

• APY (Annual Percentage Yield): reflects interest earned per year, including compounding interest

  • APY > APR 

• Periodic rate = r/n (interest rate divided by number of periods) 

• Principal: the original amount borrowed (loan) or deposited (savings)

• Simple interest: calculated only on the principal amount with a fixed rate 

• Compound interest: interest on the principal + previously earned interest 

• Deposits: putting money into an account 

• Withdrawal: taking money out of an account 

• Bank statement: record of transactions, issued periodically 

• ATM (Automated Teller Machine): allows transactions without needing a bank representative 

• Fee schedule: required by law (FDIC) to outline all fees 

Fees & Forms of Payment: 

• Common Bank Fees: 

  • Monthly maintenance fee: $12-$15/month 

  • Out-of-network ATM fee: $4-$5/transaction 

  • Overdraft fee: ~$30 (bank covers transaction, but you owe them back) 

  • NSF (Non-Sufficient Funds) Fee: ~$30 (charged when a payment bounces due to insufficient funds) 

• Forms of payment: 

  • Debit cards: directly linked to checking account 

  • Cash: physical bills and coins 

  • P2P (Person-to-Person Payments): Zelle, Venmo, PayPal

  • E-Payments: mobile wallets (Apple Pay, Google Pay) 

  • Credit cards: bank pays for the transaction, you repay them later

  • Money orders: prepaid paper payments 

  • Checks: paper orders for bank withdrawals

• Bank safety tips: 

  • Use strong passwords, change them regularly 

  • Check statements for unauthorized transactions 

  • Avoid entering bank info on unsecured website

Checks: 

• Types of checks: 

  • Personal checks: paper payments from a bank account 

  • Cashier’s checks: guaranteed checks issued by a bank 

  • Certified checks: personal checks verified by a bank 

  • eChecks: digital version of personal checks

  • Traveler’s checks: prepaid checks used while traveling 

• Parts of a check: 

  • Personal info, payee line, dollar box, memo line, date, signature, bank details, routing number, account number, check number

• Check cycle: 

  • Outstanding check: a check not yet chased 

  • Stop payment order: request to cancel a check 

  • Stale check: not cashed within 6 months (banks may still process it)

  • Endorsement: payee signs the back to authorize cashing/deposit 

• Types of endorsement: 

  • Blank endorsement: anyone can cash it 

  • Special endorsement: allows payee to transfer check 

  • Restrictive endorsement: more secure, limits use 

• Mobile deposits: 

  • Follow app instructions, take clear photos of the check 

Economic Concepts (Supply & Demand, Monetary & Fiscal Policy)

• Economy: study of resource allocation to satisfy unlimited needs and wants 

• The Science of Choice: scarcity forces people to make choices 

• Economic systems: 

  • Traditional economy: based on customs/beliefs (e.g. tribal societies) 

  • Command economy: government-controlled (e.g. Cuba, North Korea)

  • Free-market economy: private ownership, business freedom (e.g. Singapore) 

  • Mixed economy: private ownership with government intervention (e.g. U.S., Germany, France) 

• Supply & Demand: 

  • Demand: willingness to buy at various prices

    • Law of demand: higher price = lower demand 

• Factors that affect demand: 

  • Prices substitutes/complements, income, preferences, expectations 

• Supply: willingness to sell at various prices 

  • Law of supply: higher price = higher supply

  • Factors that affect supply: production cost, resources, weather, government policies

• Surplus: supply > demand → prices decrease 

• Shortage: supply > demand → prices increase 

• Types of Goods: 

  • Normal goods: demand increases with income (e.g. luxury cars, dining out) 

  • Inferior goods: demand decreases with income (e.g. generic brands, used cars) 

• Monetary policy: managed by the Fed 

  • Expansionary: lowers interest rates, increases borrowing, raises inflation, lowers unemployment 

  • Contractionary: raises interest rates, reduces borrowing, lowers inflation, raises unemployment

• Fiscal policy: managed by President, Congress, Secretary of Treasury 

  • Government spending and tax policies

• Economic indicators: 

  • Consumer Price Index (CPI): measures price changes over time

  • Inflation: general rise in prices (measured by CPI) 

  • Recession: persistent economic decline

  • Depression: severe, prolonged economic downturn

  • GDP (Gross Domestic Product): market value of goods/services produced in a country 

  • Real Rate of Interest = (interest rate - inflation rate)

    • If savings interest = 2% but inflation = 4%, real rate = -2% (losing value over time)