Checking Accounts
Do checking accounts pay interest
Do savings accounts pay interest?
Yes
Do money market accounts pay more or less interest than regular savings accounts?
More, because they are less liquid.
What happens if you withdraw money from a CD before the term is up?
You pay a fee
What does liquidity mean?
The ease of turning an asset into cash.
The result of spending more than what is in your account.
Overdraft fee
Do savings accounts charge fees?
No
Can you use MMA for purchases?
Yes, they come with checks.
Do CDs pay interest and how does it compare to regular savings accounts and MMAs?
Yes, and the interest paid tends to be higher on average than savings accounts and MMAs.
What is interest?
Is the payment to use someone else's money. Banks pay you interest for your savings.
A simple signature on the back of a check.
Blank endorsement
Can you use a savings account to pay directly for something?
No.
Are there fees?
Yes, if you go below the minimum balance or withdrawal more than the maximum allowed.
Are CDs liquid or illiquid?
Illiquid until the term of the CD is up
What is an endorsement?
A signature on the back of a check. Required to cash the check.
A signature and a restriction for who or how a check can be cashed.
Restricted endorsement
Are savings accounts liquid?
Yes.
Would this be a good account for your emergency fund?
Yes. Pays higher interest but you can withdrawal as long as you are above the minimum balance.
In general, would you expect the interest rate on a 5 year CD to be higher or lower than a 3 month CD?
Higher. You must be compensated for a longer period of illiquidity
What is the FDIC?
Federal Deposit Insurance Corporation: insures deposits in bank accounts
$250,000, FDIC, NCUA
What is the purpose of a savings account?
To put aside money for future spending
How is a MMA different from a savings account?
Can CDs be used for purchases?
No. The money cannot be touched until the CD term is up.
What is the NCUA?
The National Credit Union Administration insures deposits in credit unions.