Question 1

The ________ provides the same results as a check because it withdraws funds from a checking account.

Accepted Answer

A debit card works like a check because it deducts funds from a checking account when a purchase is made using the card. Credit cards allow for borrowing on credit and must be paid back with interest, smart cards are preloaded with funds and must be reloaded when the balance is depleted, and a cashier's check is a guaranteed payment method but does not withdraw funds from a checking account.

Question 2

Banks prefer that customers use an electronic funds transfer system rather than traditional methods of payment because

Accepted Answer

The traditional method of payment using checks is costly and inefficient. Electronic payments save the bank time and money.

Question 3

Which of the following can include an embedded RFID chip that allows the holder to access secure areas in buildings or buy gas with the swipe of a card?

Accepted Answer

Smart cards can include an embedded RFID chip that allows the holder to access secure areas in buildings or buy gas with the swipe of a card. Direct deposit cards, e-cards, and check conversion cards do not typically include this technology.

Question 4

For banks, check-processing activities

Accepted Answer

Check-processing activities can be expensive and time-consuming for banks because they have to go through multiple stages of sorting, encoding, and clearing before the funds are available for the customer to use. However, it is still a necessary service that banks provide for customers who prefer to use checks as a means of payment.

Question 5

Timothy has $42,000 in a savings account with the Jefferson Credit Union. While economic conditions have caused financial institutions to struggle, Timothy feels that his money is safe due to the fact that the credit union's accounts are protected by the

Accepted Answer

The National Credit Union Administration insures deposits at credit unions for up to $250,000 per depositor, per institution.

Question 6

Brendan travels extensively for his company. He stays at hotels that provide him with a(n) ________ that is imbedded with his personal information as well as a code to unlock his hotel room.

Accepted Answer

Smart cards are embedded with microprocessors that can store a variety of information. They are often used in place of keys in hotels and dorm rooms.

Question 7

As is common payroll procedure for most employers, Penelope's company ________ her paycheck semimonthly into her checking account. This is a paperless process and no check is issued to the employee. By logging into her personnel system, Penelope has record of the net pay that was deposited into her personal checking account and an account of how much was taken out for taxes, Medicare, social security (FICA), and other deductions. Penelope's company has adopted an efficient ________ system.

Accepted Answer

Most companies today utilize direct deposit as a means to issue paychecks weekly, bi-monthly, or monthly. Funds are electronically transferred from the employer's account to each employee's account. Direct deposit is one of many ways that companies and banks utilize ETF, electronic funds transfer.

Question 8

________ replace the typical magnetic strip on a credit or debit card with a microprocessor.

Accepted Answer

Smart cards are the cards that replace the typical magnetic strip on a credit or debit card with a microprocessor. They are also known as chip cards or integrated circuit cards. Smart cards offer enhanced security and can store more information than traditional magnetic stripe cards.

Question 9

After Xavier and Alyssa deposited nearly $55,000 in a savings account at Bigbux Bank, the bank failed and filed for bankruptcy. Because the Bigbux was an FDIC member bank, Xavier and Alyssa

Accepted Answer

The Federal Deposit Insurance Corporation insures most bank deposits up to $250,000. When a bank fails, the FDIC arranges for its accounts to be transferred to another bank or pays depositors the amount lost, up to $250,000 per account.

Question 10

On payday, employers can designate their banks to electronically transfer funds from the business's checking account to the employees' checking account. This represents an example of a(n)

Accepted Answer

A direct deposit is part of an electronic funds transfer system where checks are eliminated.

Question 11

Ricardo has an authorized work permit issued by the U.S. government to work in the U.S. Each day, he travels from Mexico to El Paso, TX, to work in the construction trade. At the time that he was first employed, his U.S. employer issued him a(n) ________. Each week, the employer scans his work stipend onto it. Ricardo can purchase with it, access cash through an ATM with it, and transfer funds with it. The risk for Ricardo is ________.

Accepted Answer

Employers can issue payroll debit cards to employees, particularly for employees who do not have bank accounts. These are like any other debit card. The bank issuer does not insure the funds if the card is lost or stolen and unauthorized persons gain access to the funds.

Question 12

Payroll debit cards

Accepted Answer

Payroll debit cards are an efficient way for some firms to pay their workers. Employees can access funds from their pay account immediately, and even use ATM to withdraw cash by using the card.

Question 13

The purpose of creating the FDIC was to

Accepted Answer

The FDIC was established during the Great Depression to protect depositors from loss and restore public confidence in banking institutions.

Question 14

Roberto deposited $66,000 in various individual accounts at his local credit union. He and his wife also have a joint savings account worth $54,700. What portion of these deposits is insured?

Accepted Answer

The NCUA insures accounts for up to $250,000 per depositor, but depositors can obtain additional coverage by opening joint accounts, which are insured separately. Thus, both Roberto's individual accounts and his joint account would be fully insured since neither exceeds the $250,000 limit.

Question 15

Which of the following explains why online banks often offer their customers better interest rates than traditional banks?

Accepted Answer

Online banks, such as E*Trade Bank, can offer better interest rates and lower fees because they do not have the costs of physical overhead that brick-and-mortar banks have.

Question 16

The Federal Deposit Insurance Corporation (FDIC) operates as a(n)

Accepted Answer

The Federal Deposit Insurance Corporation is an independent agency of the United States government that insures bank deposits.

Question 17

When a customer purchases an item with a debit card,

Accepted Answer

Electronic funds transfer enables money to be sent from one account to another electronically.

Question 18

Which of the following is a major difference between Internet banks and traditional banks?

Accepted Answer

Online banks have lower overhead costs because they do not have the same expenses as traditional banks, such as rent for physical locations and salaries for as many employees. This allows them to offer higher interest rates and lower fees to customers.

Question 19

Enrico banks at a commercial bank that advertises its membership in the FDIC. This means that

Accepted Answer

The FDIC is an independent agency that insures individual bank accounts.

Question 20

A(n) ________ allows money to be exchanged electronically more quickly and more economically than with paper checks.

Accepted Answer

Electronic funds transfer systems (EFT) allow for money to be exchanged electronically, directly from one bank account to another. This process is faster and more economical than using paper checks. Electronic check conversion (ECC) is a process where paper checks are converted into electronic transactions, but it still involves a delay and higher costs than EFT. Virtual banking operations (VBOs) and telechecking systems (TELE) are not directly related to the electronic exchange of money.

Quiz 20: Money, Financial Institutions, and the Federal Reserve