Unit I: Banking

Overdraft protection...

• Allows you to withdraw more money than you have in your account

• Protects your account from unauthorized transactions

• Helps you save money for emergencies

• Provides insurance for your deposits

Answer explanation

Overdraft protection allows you to withdraw more money than you have in your account, providing a safety net for unexpected expenses. This is the primary function of overdraft protection.

Which of the following is TRUE about banks and credit unions?

• Banks are for-profit institutions, while credit unions are non-profit

• Banks offer higher interest rates on savings accounts than credit unions

• Credit unions are insured by the FDIC, while banks are not

• Banks are owned by their customers, while credit unions are owned by shareholders

Answer explanation

The correct statement is that banks are for-profit institutions, while credit unions operate as non-profit entities, focusing on serving their members rather than generating profit.

Which of the following is NOT required to open a checking account?

• Proof of identity

• Proof of address

• Social security number

• Minimum age requirement

Answer explanation

The minimum age requirement is not universally required to open a checking account, as some banks may allow minors to open accounts with a parent or guardian's consent. The other options are typically mandatory.

Which of the following is NOT a common way most people are using P2P, such as Venmo?

• Splitting bills with friends

• Paying rent or utilities

• Sending money to family members

• Investing in stocks

Answer explanation

Investing in stocks is not a common use of P2P payment apps like Venmo, which are primarily used for splitting bills, paying rent, or sending money to family, rather than for investment purposes.

What feature is the LEAST important for a college student to look for in a checking account?

• Low or no monthly fees

• Convenient ATM access

• High interest rates

• Online and mobile banking

Answer explanation

High interest rates are generally less important for college students, who prioritize low fees, convenient access, and online banking for managing their finances rather than earning interest on their checking account.

Which of the following is FALSE about check registers?

• They help you keep track of your account balance

• They are used to record deposits and withdrawals

• They are no longer necessary with online banking

• They can help you detect errors or fraud

Answer explanation

The statement 'They are no longer necessary with online banking' is false. Check registers are still useful for tracking balances, recording transactions, and detecting errors or fraud, even with online banking.

What is a typical overdraft fee?

• $10

• $25

• $50

• $100

Answer explanation

A typical overdraft fee is commonly around $25. This amount is standard among many banks, making it the most likely choice compared to the higher options of $50 or $100.

How can you protect your checking account when using online and mobile banking?

• Use strong and unique passwords

• Avoid using public Wi-Fi networks

• Regularly monitor your account activity

• All of the above

Answer explanation

To protect your checking account while using online and mobile banking, it's essential to use strong and unique passwords, avoid public Wi-Fi networks, and regularly monitor your account activity. Therefore, the correct answer is 'All of the above'.

Why is understanding a bank's fees particularly important for students or young adults?

• They are more likely to have a low income

• They are more likely to have a high credit score

• They are more likely to have a mortgage

• They are more likely to have a college degree

Answer explanation

Understanding a bank's fees is crucial for students or young adults because they are more likely to have a low income. High fees can significantly impact their limited budgets, making financial literacy essential.

Which is NOT a typical goal for a savings account?

• Saving for retirement

• Saving for a down payment on a house

• Saving for a vacation

• Saving for a new car

Answer explanation

Saving for a new car is typically a short-term goal, while savings accounts are more commonly used for long-term goals like retirement or a down payment on a house. Thus, it is not a typical goal for a savings account.