What is demand deposit?

Many transaction accnts are demand deposit accnts & are payable on
demand whenever the depositor chooses.

How do the total funds in transaction accounts affect the money supply?

Because of their high liquidity.

What are the disclosure statements?

Is the official documents that provide full information about bank policies
such as lending policies, electronic funds transfer policies interest
crediting and compliance with banking regulation.

Describe the benefits of an express checking accnt. What are dome disavantages?

Are designed for people who prefer to bank by ATM, telephone or online;
usually offers unlimited check writing, low minimum balance requirements
and low or no monthly fees. Disadvantages: just popular with students and
younger customers on the go who dont want so spend a lot of time on
banking, high teller fees are charged.

Compare & constrast savings accnts & money market deposit accnts.

- Similarities: Both types of accnt pay interest on deposits and your funds in
both are insured by the FDIC to the maximum amt allowed by law. Both
types allow you to make as many deposits as you want. However, there is
limit of 6 withdrawals or transfers per statement cycle (a limit set by federal
law).
- Differences: +) With MMDAs, it may has limits in accessing your funds.
Nowadays, its uncommon to find MMDAs that allow you to write
checks, make electronic transfer and use ATM, debit cards. With savings
accnts, it grants you an immediate access to your funds, savings accnts
can provide a complete and clear picture of all banking accnt acitvities.

+) MMDAs offer a higher rate of interest than saving accnts. The minimum
balance requirements to avoid the imposition of fees are also higher.

+) Liquidity of MMDAs is not as high as savings accnts.

Explain the difference between APR and APY.

- APR (annual percentage rate) is the nominal rate on which is calculated per
year, it doesnt indicate how many times the rate is applied to the balance,
- APY (_____ Yield) represents the effect of compounding. It gives the
actual percentage interest that will be accrued over a year.

Describe how the FED can put more money into the economy through its open
market operations.

It buys U.S. government securities on the open market by using money that
is part of the Feds Balance Sheet. The seller of the securities deposit money
from the Fed in financial institutions. Thus, deposits flow from the sale of
government securities into bank accnts. By generating funds from those sale,
bank then have more money to lend and the money supply expands as a
consequence of the multiplier effect,

Name 3 things a bank must do to meet the requirements of Federal Reserve

Regulation CC

1. Provide consumers who have transaction accnts with disclosures stating

when their funds will be available for withdrawal.

2.Post a notice of the banks availability policy pertaining to consumer

accnts.

3. Include a notice of funds availability on the front of all preprinted deposit

slips.
What 3 things are shown by a checks identification numbers?

The check number, the bank number and the account number.

What is a promissory note?

Is a written promise to pay at a fixed or determinable future time a sum of

money to a specified individual.

Define the term elements of negotiability?

When you present a check to a bank for payment, the bank must assure that
the check meets certain legal requirements. These conditions are commonly
called elements of negotiability.

Why do banks encourage the use of cash cards?

Less expensive than human tellers and are usually available 24 hours a day.

Define biometrics and provide 2 examples.

Refers to using a distinct individual characteristic to uniquely identify a

specific person. Ex: Fingerprints, retina sans, Voice recognition

In banking, who is the holder in due course?

The person or financial institution that acquires a check or promissory note

received in good faith as pmt and who is entitled to pmt by the drawer of the
check or note.

What is draft? When is a draft typically used?

Is an order signed by one party (the drawer, or drafter) that is addressed to

another party (the drawee) directing the drawee to pay s.o (the payee) the
amount indicated on the draft. Most drafts are used for the purchase of goods
and services when the transaction goes beyond the bounds of U.S. banking
law.
4 primary types of endorsement.

- Blank endorsement (or sometimes called an open endorsement) is the

least secure and most negotiable and common endorsement. Its simply
the signature of the holder.
- Restrictive endorsement is use to limit the use of instrument to a means
specified by the endorser when the holder of a check may wish to
prescribe a little more carefully how the check is negotiated.
- Full endorsement (special endorsement) transfers the check to another
specified party. It limits neither the transferability nor the further
negotiability of the check.
- Qualified endorsement is an attempt to limit the liability of the endorser
without limiting an instruments further negotiability.

What is float? 3 specific ways it can be caused. What effect does float have on the
money supply?

When the same funds are counted in 2 depository banks, the funds are called
float. The float distorts the money supply and reserve figures. There are:
Malfunction float (caused by machine breakdown), Transportation float
(delays in moving checks from 1 way to another). Holdover float (occurs
when banks are slow in processing transactions).

What is EFT? Discuss 2 common forms of EFT. Advantages of EFT.

Is an acronym for electronic funds transfer. Its easy and convenient, fast
and secure, efficient and less expensive than paper cheque payments and
collections.
1. Direct deposit: funds from your employers bank account are transferred
electronically to your bank account, with no need for paper-based payment
systems.

2. Cardholder-initiated transactions, using a payment card such as a credit or

debit card.
What is GoDirect and why is it important?

Is an marketing campaign used to encouraging recipients of federal funds to

receive pmts by EFT. Its important because the program help drive EFT
further into the psyche of American consumers (it make consumers more
receptive to efforts by private employers to encouraging direct deposit as
well).

What technology enabled Check 21? Describe how this technology achieves costs
savings.

The digital-imaging technology. By eliminating storage, recordkeeping,

postage and labor costs associated with paper checks.

What did the UCC largely eliminate?

The wide variation of legal regulation that could hamper the national pmts
system.

Explain the UCC rules for a postdated check?

A postdated check is allowable as long as the bank customer give the bank
advance notice of the check, including the check number, accnt number,
amount, date and to whom the check is payable.

Name and describe the technology used most frequently in the U.S. for contactless
pmts.

Radio frequency identification (RIFD), which is also known as automatic

identification and data capture (AIDC), uses a transponder to convey
identifying information including the accnt holders accnt or balance
information and the fees being assessed to the accnt by the business for
products or services.

EFAA was passed to combat an abuse of the check pmt system practiced
by a few banks. To set the rules that balanced the needs of consumers with
the need for banks to protect themselves from uncollectible checks.