6. Money management
What accounts are offered by depository institution? The accounts offered by depository institutions generally fall within one of these types: Checking account or demand deposits, savings accounts, time deposits, certificates of Deposit (CDs), money market accounts, money market funds accounts.
What are advantages and disadvantages of credit and debits cards?credit cards - Advantages: some financial institutions offer all-purpose credit cards like VISA, MasterCard and American Express. They can be used to extend payment for the purchase of goods and services over time. Disadvantages:If you make full payment each month, there are no interest charges. However, if you take a cash advance on your credit card, you are charged interest from the moment you make a withdrawal until the money is paid back. Debit cards – Advantages: debit cards allow you to shop in stores that accept these cards, as well as pay for things online or over the phone without paying cash. Debit cards also let you withdraw cash from an Automatic Teller Machine*.Disadvantages: not all stores can pay debit card.
What are the benefit and drawbacks of time deposits? Time deposits are money deposits that cannot be withdrawn for a certain time period. The longer the term, the better the yield on the money. Money placed on a time deposit enables you to maximize the interest generated.
What are the best known types of consumer loan? Consumer loans refer to installment loans. They include automobile loans, home repair loans, mortgage loans, educational loans, loans for other consumer goods, and credit card purchases.
What benefit does this account provide? Charge accounts allow you to charge purchases to your accounts for payment at a later date. These accounts are usually offered by retailers in several forms such as the 30-day account which requires payment within 30 days, the installment plan (equal payments including interest are made for a specified number of months) and all-purpose accounts (payments made in full or over a period of time).
What characteristics do checking accounts have? Checking account or demand deposits are accounts the main function of which is to provide check-writing privileges therefore most lenders either pay no interest or pay a low interest rate on credit balances. Money placed in these accounts doesn’t generate interest.
What do the certificates of deposit require from the depositors? Certificates of Deposit (CDs) are funds deposited with the bank for a specific period of time in return for a guaranteed, pre-determined interest rate. They are insured by government agencies and thus risk-free. Deposit Certificates have different maturities, from three months to five years, and converting them into cash before maturity will result in a penalty, so they are not quite as liquid as the other investments mentioned. Financial institutions usually charge the highest interest rates, since money may not be withdrawn on demand.
What does consumer credit provide? What is the difference between loan credit and sales credit? The difference between a loan credit and a sales credit is that a loan credit enables to borrow money to finance a purchase while a sales credit enables consumers to buy goods and services and to pay for them later.
What does safety mean? Safety means protecting your money against fire, theft and other disasters.
What does the yield depend on? The yield, the actual amount of interest earned, goes up as interest is paid more frequently.
What drawbacks do they have? If you make full payment each month, there are no interest charges. However, if you take a cash advance on your credit card, you are charged interest from the moment you make a withdrawal until the money is paid back.
What factor should be considered before starting any kind of saving program? The lender charges depends on many factors, including the cost of money, the risk involved and other costs of doing business.
What is a charge account? Charge account: an arrangement between a supplier and a customer, by which the customer is allowed to pay at the end of an agreed period for all goods he has bought during that period.
What is a credit card? Credit cards - can be used to extend payment for the purchase of goods and services over time. What do credit cards provide?
What is a rate of interest? The rate of interest is a percentage that an account will earn if funds are kept for a full year.
What is a rate of return? Rate of return: the amount of interest or dividends stated as a percentage of the principal of an investment.
What is consumer credit? Consumer credit: money lent by financial institutions to enable individuals to buy consumer goods or services with regular installment payments.
What is consumer loan? Consumer loan: the lending of money to the public by banks and other financial institutions for the purpose of buying consumer goods.
What is difference between credit and debit cards? Credit cards - can be used to extend payment for the purchase of goods and services over time. Debit cards allow you to shop in stores that accept these cards, as well as pay for things online or over the phone without paying cash.
What is liquidity? Liquidity refers to how quickly your savings can be converted into cash.
What is principal? Before buying something on credit you should bear in view that credit requires the necessary monthly installments. You pay for the credit costs through interest charged on the principal, the original amount borrowed.
What is the difference between money market account and money market funds account? Money market accounts are accounts insured by government. They pay a little higher interest than both checking or savings accounts but limit the number of transactions you can make without a fee. Don’t confuse them with money market funds accounts. Money market funds accounts offered by mutual fund companies pay a higher rate of return than savings and checking accounts but are not insured like money market accounts.
What should people bear in view before buying on credit?
What spending options do individuals have today? We have more spending options than in the past, we now have more choices of how to pay – by cash, check, debit card, pre-authorized withdrawals and through the Internet.
What steps should be taken to reach financial goals?If you're interested in reaching your financial goals, you have to do more than simply store your money. You have to manage it actively, using the following money-management tools:Saving. Deposit your money in a government-insured account for security and convenience. Investing. Help your money grow by purchasing bonds, shares of stock* and other interest-bearing securities. Borrowing wisely. Manage your debt so that you borrow what you need, but don't overestimate your ability to repay.
What the main advantage of credit? The advantage of credit is that we can enjoy new purchases today while spreading repayment into the future
Why do financial institution charge the highest interest rates on CDs?Financial institutions usually charge the highest interest rates, since money may not be withdrawn on demand.
Why do people keep their money with a bank?
Why do people obtain credit? Part of personal money management is using credit. In order to take bachelor’s or master’s degree, buy a house, a car, an appliance, take a holiday or even invest, many of us must borrow.
Why do some people prefer to use debit cards?Debit cards allow you to shop in stores that accept these cards, as well as pay for things online or over the phone without paying cash.
Why do some people put their money in saving account? Because Savings accounts are accounts which pay somewhat higher interest but cannot be used directly as money (by, for example, writing a cheque). These accounts let you set aside a portion of your liquid assets that could be used to make purchases while earning a monetary return.
Why is it important for people to make saving?Saving is one of the most important things you do with your extra cash. What makes saving money just a pleasant experience is interest.
Why is savings considered one of the ways of good money management?You aren’t just saving your money, you are actually letting it grow. Your money is making more money.
Why may credit cost vary in size?