Checking
What is a reason to put your cash into a checking account?
keeps it safe, more options to pay, makes paying bills easier, paper trail, can use ATMS and check and debit card
What is APR?
interest rate!
What is the principal?
the original amount of the loan you are actually borrowing
Why would people need to use credit?
Because they do not have the cash to buy something fully at the moment or they want to use the cash they have in other things.
What type of debt is the largest in the US?
Housing debt!
Debit card and paper checks
What are 2 differences between a savings and checking account?
A savings account balance earns interest over time
A savings account may have more limits on how often you take out money
A bank uses your savings account to loan money out to other people (but your money is safe and available when you need it)
What is an installment loan and what is an example of one?
An installment loan is a loan with a monthly payment. One example is a car or home loan.
What is a grace period for a CC and how long is it typically?
A grace period is the amount of time you can pay the CC bill after receiving it. It is usually 20-28 days.
When you have an amortized installment loan, what is true about the total payment amount month to month?
It stays the same! Your monthly payment is consistent.
What are some methods to move money from your account to someone else's account? Think of technology.
ACH transfer, wire transfer, apps like Cashapp and Venmo
What is compound interest?
Compound interest is interest on interest! At regular intervals, your interest amount is added to the principal amount and that whole sum is multiplied by the interest rate.
What does it mean if a loan is secured?
It means that the lender is guaranteed collateral if the borrower cannot pay back the loan. Examples include car and house. Student loans are UNsecured loans.
What are penalty fees and rates?
Penalty fees are fees you pay for making a CC payment late. Penalty rates are increased interest rates when you make payments late. They may last for up to 6 months IF you make 6 consecutive payments.
What are the 2 parts of the amortized payment and how do they change each month?
Principal and interest
Payment towards interest will decrease while payment towards principal will increase
What is the FDIC? What does it do? For how much?
The FDIC is the Federal Deposit Insurance Corporation, and they are a government organization that insures money in banks. They insure up to $250,000 per person per account type per bank.
List three types of fees often associated with savings accounts
Maintenance fees/annual fees
minimum balance fees
withdrawal fees
ATM fees
What is net worth and how is it calculated?
Net worth is the amount someone is worth and shows their financial health. To find it, you subtract liabilities (debt) from assets (cash, checking, savings, retirement account, value of home and car)
What is a minimum payment and why is paying it not always the wisest choice?
A minimum payment is the least amount you can pay on CC debt to not incur penalty fees and rates. It is not always the wisest since most of the payment goes towards interest and only a little goes towards principal, so you would be stuck paying off that debt for a long time and pay a lot in interest.
What does "making extra payments" mean and what is the benefit for you?
Making extra payments means paying more than the monthly bill. It is beneficial because the extra payment all goes directly to principal, which means you can pay off the loan faster and pay less in interest.
What makes a credit union different from a traditional bank?
Credit Unions are not for profit organizations, have lower fees and higher saving interest rates, lower loan interest rates
Instead of FDIC, they have National Credit Union Administration
What is a CD? And what are the unique features of it?
A CD is a certificate of deposit. A CD is a low-risk, interest earning savings account that holds a fixed sum of money for a set amount of time.
What is a variable rate loan and why is it risky to the borrower?
A variable rate loan is a loan with an interest rate that may change over the life of the loan. This is risky to the borrower since the interest rate may increase quickly, and there is nothing that borrower can do.
Explain in detail how using a credit card works.
The credit card company extends you a revolving line of credit. You purchase "stuff" and then have the choice to pay the balance in full or a minimum payment each month.
What is "Buy Now, Pay Later: and what is one reason to support and oppose this arrangement?
Support: helps cash-strapped people out, gives people freedom to spend how they want to
Oppose: encourages people to overspend, may result in people paying interest fees and late fees, could hurt credit score