Managing Your Money (Unit 2 Review)

One key difference commercial banks and credit unions is that:

• Commercial banks are ‘for-profit’ and credit unions are ‘not-for-profit’

• Commercial banks typically pay higher interest rates than credit unions

• Credit unions are commonly located in rural areas while commercial banks are more commonly located in urban areas.

• Commercial banks offer services such as online banking that credit unions do not offer.

Which of the following is NOT a consideration when choosing a depository institution?

• Where the depository institution is located and the number of locations

• How long the depository institution has been in business

• The financial services provided by the depository institutions

• Interest rates percentages, different fees that you may have to pay and the amount of each fee.

Jeremy is planning on opening an account with a local credit union. Which of the following is NOT something he will likely have when doing so?

• He will have to meet a membership requirement

• He will have higher interest rates and lower fees

• He will have more financial services offered than a commercial bank

• He will have his money insured by the NCUA

Ariel is saving money to purchase a new computer before she leaves for college in two years. She wants to open a special account at a depository institution to keep her saved money safe. She has asked you for advice on which type of account would be best for her. What would be the best advice for Ariel?

• Check several depository institutions and choose one with a free, no-interest checking account. That way, when Ariel has saved enough for her computer, she can simply write a check to pay for it.

• Shop around for the depository institution with the highest interest rates for their savings accounts. She would be able to make regular savings deposits and earn interest while she is saving up for the computer.

• Look for a credit union that offers share draft accounts. These secure accounts are designed especially for savings for long term goals.

• Shop around for a depository institution that offers safe deposit boxes. These accounts offer extra security for deposits and can be set up to allow her to withdraw money when she needs it.

Since Taylor was a young child, she has kept her savings in a piggy bank. She likes this method of saving because she can have immediate access to the money if she needs it. Recently, in a class at school, discussion focused on why depository institutions are safer than her piggy bank. Some students’ comments were based on fact while others were based on myth. Which aspect of security at a depository institution is NOT TRUE?

• Depository institutions have insurance protection up to $250,000 per depositor per account type. If something happens to the money in the bank, you would get the value of your account back as long as the deposited amount was no more than the insurance limit.

• All money stored at a depository institution is kept safe at all times by numerous security measures

• Information about depositors and their accounts is kept in secure data storage

• Depository institutions have insurance protection. Depositors can have multiple accounts insured at the same depository institution as long as each account has no more than $100,000

Sanjay is concerned about the safety of the money in his savings account. Which type of depository institution should he choose?

• A commercial bank since his deposits would be insured by the Federal Deposit Insurance Corporation (FDIC)

• A credit union since his deposits would be insured by the National Credit Union Association (NCUA)

• He could safely choose either a commercial bank or a credit union as long as his savings account balance meets the insurance requirements.

• Neither a commercial bank nor a credit union. Money is most safely kept at home ins a personal safe or vault.

Samantha wants to be able to use funds in her checking account but finds going to the bank to withdraw cash to be inconvenient. She would like a more effective way to access her checking account funds. What would you suggest she do?

• Apply for mobile banking. That way she can access her money with her smartphone to pay for the things she needs. The amount she spends would automatically be deducted from her savings account.

• Apply for a debit card. That way she can use the card instead of cash to purchase the things she needs and the amount spent is immediately deducted from her account.

• Apply for a credit card. That way she can use the card to purchase the things she needs and pay for it from her checking account when the credit card statement comes.

• Request a cashier’s check from her depository institution. That way she can spend money from her checking account without risk of an overdraft fee.

Savings tools offered by depository institutions may earn interest. Which of the following statements is NOT TRUE about interest?

• Interest is the price paid for using someone else’s money

• When earning interest, look for low rates

• When paying interest, look for low rates

• The amount of interest earned or paid is determined by the interest rate

Common fees that may be charged by a depository institution include all EXCEPT:

• Overdraft fees

• Late fees

• ATM fees

• Minimum balance fees

David made a mistake in his checking account recordkeeping and spent $50 more than he had deposited in his account. As a result, he can expect to be charged:

• ATM fee

• Contact fee

• Safe Deposit fee

• Overdraft fee