Checking Accounts
What is a checking account primarily used for?
A checking account is a bank account that's primarily used for everyday transactions, such as: paying bills, making purchases, withdrawing cash, and receiving wages.
What is the main purpose of a savings account?
The main purpose of a savings account is to encourage people to save money over time, and to provide a safe, accessible place to keep their funds.
What is an interest rate?
An interest rate is the cost of borrowing money or the reward for saving money, expressed as a percentage
What is a monthly maintenance fee?
A monthly maintenance fee, also known as a monthly service fee, is a fee that a bank charges for the service of maintaining a customer's account. The fee is typically automatically withdrawn from the account each month.
Name one advantage of having a checking account.
Safety, Convenience, Easy Tracking, Avoid Convenience Fees
Name one benefit of using a savings account.
Earning Interest, Compounding Interest, Automatic Savings
How does an interest rate impact a savings account?
Interest rates determine how much interest a savings account earns.
Name one type of fee that can be charged for a checking account.
Monthly service fee, overdraft fee, Non-sufficient funds, ATM fee, transfer fee.
What is debt card, and how is it connected to a checking account?
A debit card is a payment card that's linked to a checking account and allows the cardholder to access their funds. When a debit card is used, the funds are immediately deducted from the checking account, and there is no bill to pay later.
What is the typical interest rate range for a savings account?
The average interest rate for a savings account in the United States is 0.46% as of September 2024, according to the FDIC.
What is the difference between simple interest and compound interest?
Simple interest is calculated only on the principal amount of a loan or investment, while compound interest is calculated on the principal amount plus any accumulated interest from previous periods, essentially earning interest on interest.
What is an ATM fee?
A fee charged by the ATM owner to users of other banks' cards. This fee is usually between $2 and $3.50, and is often displayed on the ATM screen
How can you avoid overdraft fees in a checking account?
Monitoring your account, Keeping a cushion balance, Opting out of overdraft coverage, Linking to a savings account, Activating debit card controls.
How does compound interest affect savings over time?
Compound interest can exponentially increase the value of your savings over time. This is because interest earned on your savings is added to your principal balance, and then interest is calculated on the total amount. This process can create a snowball effect, where your original investment and the interest it earns grow together.
How can interest rates affect loan payments?
When interest rates rise, the cost of borrowing increases, which results in higher monthly loan payments. When interest rates fall, the cost of borrowing decreases, which results in lower monthly loan payments.
How can you avoid bank fees?
Maintaining a minimum balance, use direct deposit, Switching to a no-fee checking account, Using in-network ATMs
Explain what a check is and how it works in transactions.
A check is a written document that instructs a bank to transfer a specific amount of money from the account of the person writing the check (the "payer") to the account of the intended recipient (the "payee") - essentially acting as a written order to the bank to pay a certain sum of money on demand; when someone writes a check, they are essentially authorizing their bank to withdraw funds from their account and deposit them into the payee's account.
What is the difference between a traditional savings account and a high-yield savings account?
The biggest difference between these accounts is that high-yield savings accounts offer rates that are 10 to 20 times the average savings rate. You'll usually find these high-yield accounts at online institutions rather than more traditional brick-and-mortar banks
Explain how inflation can impact interest rates over time.
Why is it important to read the banks's fee schedule ?
Reading a bank's fee schedule is crucial because it allows you to understand exactly what charges you may incur for different banking activities, enabling you to make informed decisions about your account and avoid unexpected fees, potentially saving you money by choosing the account that best suits your needs and usage patterns.