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Chap 5 Study Guide
Money Matters Chap 5 The Banking System
| Term | Definition |
|---|---|
| Checking Account | A demand deposit account at a bank on which checks are drawn |
| Check | A written order to a bank to pay a stated amount to a person or business |
| Check Register | A tool used to track checking account transactions |
| Deposit | Money added to a checking or savings account |
| Withdrawal | Taking money from your account |
| Postdated Check | A check written with a date that will occur in the future |
| Debit Card | A bank card used to withdraw or deduct money from your checking account |
| Endorsement | A signature, with or without instructions, written on the back of a check |
| Electronic Funds transfer (EFT) | The use of a computer-based system to move money from the drawer’s account to the payee’s account |
| Bank Reconciliation | The process of adjusting the check register and bank statement balances so they agree |
| Savings account | A demand deposit account designed for the accumulation of money in a safe place for future use |
| Liquid | The capability to withdraw money at any time without penalty |
| Principal | A sum of money set aside on which interest is paid |
| Simple interest | Interest computed on principal once in a certain period of time Interest (I) = Principal (P) X Rate (R) X Time (T) |
| Compound interest | Interest earned on both principal and previously earned interest |
| Annuity | A fixed amount set aside on a regular basis over time |
| Rule of 72 | A quick formula for computing how long it will take to double money invested at a given interest rate |
| Money Market Account | A type of savings account that earns the market rate of interest on the money deposited |
| Certificate of Deposit (CD) | A time deposit that pays a fixed rate of interest for a specified length of time |
| U.S. Savings Bond | A bond issued by the federal government that pays a guaranteed minimum rate of interest |
| Cashier’s check | A check issued against the bank’s funds |
| Certified check | A personal check that the bank guarantees |
| Stop payment | An instruction to the bank not to honor a check that has been issued or lost |
| Smart card | A card that contains a computer chip that stores electronic money |
| Overdraft protection | A bank service that covers a shortage in your account |
| Internet banking | Accessing and managing your account online |
| Safe Deposit Box | A secure container located in a bank vault |
| Bounced check | A check that is not honored by a bank and is returned to the payee’s bank due to nonsufficient funds |
| Inactive account | A checking or savings account that does not meet minimum usage requirement |
| Floating a check | Writing a check and planning to make a deposit later to cover it before the check is processed |
Created by:
mrstephens
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