Banking Basics
What type of account is used for everyday spending?
What is a checking account?
What does ATM stand for?
What is Automated Teller Machine?
Which type of interest is earned only on the principal?
What is simple interest?
Which account usually earns interest?
What is a savings account?
Which card removes money directly from your checking account?
What is a debit card?
What is the process of adding money to a bank account called?
What is a deposit?
What is the amount of money borrowed or invested called?
What is the principal?
What formula is used to calculate simple interest?
What is I = PRT?
Which financial institution is usually nonprofit: a bank or a credit union?
What is a credit union?
What is the maximum amount you can borrow on a credit card called?
What is the credit limit?
Name two ways to withdraw money from a checking account.
What are using a debit card, writing a check, withdrawing cash, or using auto-pay?
What legal document lists the terms of a loan?
What is the Master Promissory Note (MPN)?
What formula is used to calculate accrued value with simple interest?
What is A = P + I?
Why can online banks often offer higher interest rates and lower fees?
They have lower operating costs because they don't maintain traditional branches.
What happens if you only make the minimum payment on a credit card balance?
The balance grows because interest continues to accumulate, making it take much longer to pay off.
What form is filled out to add money to an account at a bank teller?
What is a deposit slip?
What is the difference between APR and APY?
APR includes loan interest and fees; APY measures savings growth including compounding.
In the compound interest formula, what does the variable N represent?
The number of compounding periods per year.
Which is better for earning more on your savings: monthly or daily compounding?
Daily compounding.
What is amortization?
The process of spreading loan payments over time, showing how much goes to principal and interest.
Why do banks often limit the number of transfers from a savings account each month?
To encourage saving and protect the purpose of the savings account.
What is the difference between a fixed interest rate and a variable interest rate?
A fixed rate stays the same; a variable rate can change over time.
Which earns more over time: simple interest or compound interest? Why?
Compound interest, because it earns interest on both the principal and previously earned interest.
Name two things you should understand before signing a loan agreement.
Examples: interest rate, APR, fees, principal, loan length, compounding frequency, whether the rate is fixed or variable.
Why is carrying a balance on a credit card expensive?
Because credit cards usually compound interest daily, causing interest to build quickly, especially when only minimum payments are made.