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The Battle of the Banks Suggested answers: shop for the best product for my needs; Read the Account Disclosures; Avoid unaffiliated ATMs; Set account alerts; stay above the minimum balance; link savings and checking or a credit card to the account; Raise personal low balance threshold ; ask for a fee waiver. Chart answers on the next page.
unique set of skills and discipline; building wealth can take a long time. 10 F 11. (job) hourly wage, (job) salary, government assistance, earnings from investments, tips, gifts, inheritance, winnings, bonus pay. 12.. B 13. understanding the economy, understanding socioeconomic trends, determining need for federal assistance programs, determining how income is distributed geographically or by gender, race, age or professions. 14. A 15. Income and wealth are not the same. To build wealth (net worth) income must be transformed into things that hold or increase value. It appears that Regina has better money management skills. 16. Household income? $76,000; Value of assets owned? $235,000; Total Debt? $61,500; Net worth? $173,500 17. D 18. D 19. F 20. student’s discretion; get a part time job, make and sell items on the internet, collect recycling, do freelance writing for online publications, ask parents for an allowance (in exchange for doing chores!) etc. The strongest determinant of income and class is education. More education equates to higher socio-economic status and a higher probability of building wealth assuming the person is disciplined and saves and invests. Eloise and Gunnar’s Banking Blunders 1. Picture identification such as a passport or a driver’s license – and a social security card. Generally a savings account ATM card can only be used at automated teller machines, not as a debit card to buy things at stores. Savings accounts are for saving, not spending. Limits apply to the number of withdrawals and/or transfers. She needs a checking account. Checking accounts are transactional accounts for day to day expenses. Banks expect savings accounts to maintain a steady balance and not be drawn on. Checking accounts charge fees. Savings accounts pay interest. Checking accounts come with checks and a debit card allowing purchases. 2. 3.
4. Eloise is overdrawn. That means she has spent more money than was available in her account. There is a substantial penalty for that. She used her card twice when she didn’t have the funds to cover the purchase incurring 2 overdraft fees. Use the account management tools! Download the bank app to her mobile device and keep an eye on her balance! Set account alerts above the minimum balance requirement (raise her personal low balance threshold.) Link checking account to a savings account or credit card; spend less when funds are low. She can go to the business bank division and open a merchant account. Yes, he should be able to open a bank account. He needs some official form of id with a photo such as a passport or drivers license and tax payer ID number issued by the U.S. Internal Revenue Service. 10. Most commercial banks provide currency exchange services for a small fee. He can also buy Bitcoin. 11. Their bank account automatically is insured by the FDIC up to $250,000 per account owner. Even if the combined balances of their joint account were over $250,000 they 5. 6. Certificate of deposit (CD) Money Market account; MMA 12. Yes, the money is gone. 13. Online-only banks have no physical presence for customers - no branches, so if she is more comfortable with being able to meet face to face with a bank representative, that is a disadvantage. Advantages include slightly higher rates on savings and the convenience of 24/7 banking from her computer or mobile device. Online-only banks are mainstream and accounts are FDIC insured. 14. Banks pool depositor’s funds with the money of other depositors and lends the money out to people who want to borrow to buy all sorts of things like improving their business or buying a home, or using a credit card. overdraft and ATM); the difference between what it pays in interest on deposits vs what it collects from borrowers on loans and other types of credit is bank profit. Credit cards; currency exchange services; safe deposit account rental charges. 15. Account fees (service, maintenance,
Are You Financially Literate? Chapter 2 Quiz
1. 2.
Investment bank
$95 (one $25 minimum balance fee/penalty + $70 in two overdraft charges.) The funds come from the card holder’s checking account. Acceptable answers: Advantages – personalized service, lower credit card fees, lower bank fees, easier access to loans. Disadvantages: limited ATM coverage, only open to people in certain professions or communities, do not offer some services that commercial banks offer. Acceptable answers: shop around and choose a bank with less/lower fees, download a bank app and check account balance often, maintain a minimum balance, set a low balance alert threshold, link checking and savings accounts, ask for a fee waiver, close accounts you don’t use; ask for a waiver if you are charged a fee; avoid unaffiliated ATMs; read and understand the account disclosure documents. account for the prior month. It tells the account holder where they paid with their debit card and how much they spent. It also shows where they used the ATM, how much they withdrew, and what fees were paid, who they wrote a check to and for how much. 10. The funds are committed for a period of time to the bank. Funds cannot be withdrawn from CDs before the maturity date without a penalty. 11. F 12. C 13. Marina was charged an overdraft fee. 6. 7. 8. 9. B B A A bank statement issues every month and shows all of the transactions in a checking
7. 8. 9. PRODUCT PREVIEW would not lose money because deposit insurance applies per account owner. 3. 4. 5.
Answer Key 370
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