Checking Accounts
What is the main purpose of a checking account?
The main purpose of a checking account is to manage day-to-day transactions, such as deposits, withdrawals, and bill payments.
How does a savings account differ from a checking account?
A savings account differs from a checking account as it is designed primarily for saving money rather than everyday spending and typically has limits on the number of transactions per month.
What is a loan?
A loan is an amount of money borrowed with the agreement that it will be paid back with interest over time.
What is online banking?
Online banking allows individuals to manage their bank accounts and conduct transactions over the internet without visiting a bank.
What are bank fees?
Bank fees are charges that banks apply for various services, such as account maintenance, overdrafts, or using an out-of-network ATM.
Name two features of a checking account.
Two features of a checking account are (1) easy access to funds via checks, debit cards, or ATMs, and (2) the ability to set up direct deposits and automatic bill pay.
What is the primary purpose of a savings account?
The primary purpose of a savings account is to help individuals set aside funds for future needs or emergencies.
Why might someone need to take out a loan?
Someone might take out a loan to purchase large items such as a car or home or to cover educational expenses.
Name one advantage of mobile banking over traditional banking.
One advantage of mobile banking is the convenience of accessing account information and performing transactions anytime, anywhere, directly from a mobile device.
How can you minimize bank fees?
You can minimize bank fees by using in-network ATMs, avoiding overdrafts, and selecting a bank account with no monthly fees or minimum balance requirements.
How does a debit card work in relation to a checking account?
A debit card allows a person to spend directly from their checking account, with the amount of the purchase being deducted immediately.
Why do savings accounts typically offer higher interest rates than checking accounts?
Savings accounts often have higher interest rates than checking accounts to incentivize saving and accumulate interest over time.
What makes a mortgage different from other types of loans?
A mortgage is a loan specifically used to buy property or real estate and usually involves longer terms and is secured by the property itself.
How does direct deposit work?
Direct deposit automatically transfers money, such as a paycheck, directly into a bank account electronically.
What is the FDIC and why is it important?
The FDIC (Federal Deposit Insurance Corporation) is important because it insures deposits up to a certain amount, protecting consumers’ money in case of a bank failure.
What happens if you overdraft your checking account?
If you overdraft your checking account, you will be charged an overdraft fee, and your balance will go negative until you deposit enough to cover the amount.
How can savings accounts teach the value of saving money?
Savings accounts help teach the value of saving by encouraging individuals to grow their savings gradually and earn interest, supporting longer-term financial goals.
Identify two types of loans and their primary purpose.
Two types of loans are (1) auto loans, for purchasing vehicles, and (2) student loans, for funding education.
What functions can you perform at an ATM besides withdrawing cash?
At an ATM, you can perform various functions, including checking your balance, depositing cash or checks, and transferring funds between accounts.
Describe a credit union and how it differs from a traditional bank.
A credit union is a not-for-profit financial cooperative offering similar services to a bank but typically with lower fees and interest rates on loans; credit unions are owned by their members.
Compare and contrast checking accounts and savings accounts.
Checking accounts are intended for frequent transactions and easy access to funds, while savings accounts focus on accumulating savings with limited transactions and typically offer higher interest rates.
Explain the importance of compound interest in a savings account.
Compound interest in a savings account allows your initial deposit to grow as interest is earned on both the principal and any previously earned interest, increasing savings over time.
Explain the term "principal" in the context of loans.
In the context of loans, the "principal" refers to the original amount borrowed before any interest is added.
Explain the importance of routing numbers in banking.
Explain the potential consequences of overdraft fees on your finances.
Overdraft fees can negatively impact finances by reducing the amount of available funds, and repeated overdrafts can lead to a cycle of debt and financial strain.