Banking Unit Review

1. To avoid frequent trips to the bank, many people use a(n) ATM to withdraw cash or check their account balance.

2. A(n) bank statement shows all the transactions in your account and is typically sent to you once a month.

3. Your savings grow by earning interest, which is paid out as a percentage of your savings balance.

4. A(n) debit card is linked directly to your checking account and can be used to withdraw money or make purchases.

5. Many employers offer direct deposit, which electronically transfers your paycheck directly into your bank account.

6. FDIC insurance protects your deposits in the bank up to $250,000 in case the bank fails.

7. Some banks charge a(n) maintenance fee each month just to keep your checking or savings account open.

8. Some financial institutions require you to maintain a(n) minimum balance in your account to avoid being charged fees.

9. Using mobile deposit on your banking app allows you to deposit checks without visiting a branch.

10. To avoid a(n) overdraft fee, ensure you have enough funds in your account to cover all transactions.

11. Ways to deposit and withdraw money from a checking account:

DEPOSIT $ INTO ACCOUNT WITHDRAW $ FROM ACCOUNT

Direct deposit

ATM withdrawal

Mobile deposit

Debit card purchase

In-person bank deposit

Writing a check

12. One advantage of opening a checking account at a credit union is that they often offer lower fees and better interest rates compared to traditional banks.

13. A checking account is used for everyday transactions, while a savings account is designed for storing money and earning interest. It's important to have both to manage daily expenses and save for future goals.

14. Matching budgeting strategies:

a. Traditional Savings Account: III
b. Online Savings Account: I
c. Money Market Account: IV
d. Certificate of Deposit: II

**15. Compound interest works by earning interest on both the initial deposit and any accumulated interest over time, leading to exponential growth of savings.
16. Three strategies to avoid bank fees:

  • Maintain the required minimum balance.

  • Use in-network ATMs to avoid withdrawal fees.

  • Opt for online banking to reduce maintenance fees.

17. Naomi's checking account scenario:
a. Does the final transaction go through? No
b. Is Naomi charged a fee? No (since she opted out of overdraft protection, the transaction would be declined without a fee).

18. One reason someone might be unbanked:

  • They may lack trust in financial institutions.

19. Disadvantages of being unbanked:

  • Limited access to financial services such as loans or credit.

  • Higher fees for alternative financial services like check cashing.

20. Prepaid card statements (True or False):
a. False
b. False
c. True
d. False
e. True

21. "Pay Yourself First" strategy explanation:
It means setting aside a portion of income for savings before spending on anything else. An advantage is that it helps build savings consistently.

22. Time required to meet emergency fund goal:
$2750 × 20% = $550 saved per month.
$11,000 ÷ $550 = 20 months.

23. Recommended savings guidelines:
a. Try to save at least 20% of your income.
b. Have at least 3 to 6 months of expenses in an emergency fund.

24. The majority of Americans do not have $400 to cover an emergency expense and do live paycheck to paycheck.

25. Two challenges that make saving money difficult:

  • Low income and high living expenses.

  • Impulse spending and lack of financial literacy.

26. Inflation means prices tend to increase over time. Because of this, you want your savings to earn a higher interest rate than inflation.

27. Pros and cons of using P2P payment apps:

PROS CONS

Convenient

Potential fraud risks

Fast transactions

Possible transaction fees

28. Definition of a digital wallet and example:
A digital wallet is an electronic system that stores payment information for making transactions. Example: Using Apple Pay to buy coffee.

29. Online banking statements (True or False):
a. True
b. True
c. False
d. True

30. Bank services (✓ for offered, ✕ for not offered):
a. ✓
b. ✓
c. ✕
d. ✓
e. ✓
f. ✓
g. ✓
h. ✕
i. ✓

31. How banks make a profit:
Banks earn profits by charging fees and interest on loans while paying lower interest rates on deposits.

32. Matching checking terms:
a. Endorsing a check: I
b. Recording deposits and withdrawals: IV
c. Canceling a check: II
d. Depositing a check via mobile app: III

33. Topics to review:

  • Bank fees and how to avoid them

  • Differences between checking and savings accounts

  • Compound interest benefits