Chapter 5, 6: definition

Annual percentage rate (APR): nominal rate on which interest is calculated per year (p. 132)
Annual percentage yield (APY) represents the effect of compounding
Bearer instrument instrument which is payable to whomever holds it (p. 154)
Bill of exchange negotiable and unconditional written order, such as a check, draft, or trade
agreement, addressed by one party to another (p. 155)
Bill of exchange negotiable and unconditional written order, such as a check, draft, or trade
agreement, addressed by one party to another (p. 155)
Blank endorsement on a check, simply the signature of the holder; the least secure, but most
negotiable, of the four main types of endorsement (p. 160)
Cash card commonly used at an automated teller machine (ATM) to withdraw cash, make
transfers and deposits, or perform almost any other banking function at the machine by
inserting the card and entering a personal identification number (PIN) (p. 172)
Certificates of deposit (CDs) certificates issued by banks that guarantee the payment of a fixed
interest rate until a specified date in the future (p. 127)
Charge card card that specifies that consumers must pay the account in full at the end of the
month (p. 171)
Check 21 federal legislation that allows banks to process check information electronically (p.
123)
Compound interest practice of adding interest to the principal and charging interest on the
new total (p. 131)
Credit card card that allows consumers to pay all or part of their bills each month and finance
the unpaid balance (p. 172)
Debit card transfers money from a person’s designated account to the account of the retailer
(p. 172)
Demand deposit type of transaction account that is payable on demand whenever the
depositor chooses (p. 122)
Discount rate interest rate that the Federal Reserve sets and charges for loans to member
banks (p. 113)
Draft order signed by one party (the drawer, or drafter) that is addressed to another party (the
drawee) directing the drawee to pay to someone (the payee) the amount indicated on the
draft
Elements of negotiability a written, signed, unconditional promise or order to pay a fixed
amount on demand or at a defined time
Federal funds rate amount of interest charged for short-time interbank loans
Federal Reserve Act created a system to stabilize the banking system in 1913
Full endorsement transfers a check to another specified party (p. 161)
Holder in due course person or financial institution that acquires a check or promissory note
received in good faith as payment and is entitled to payment by the drawer of the check or
note
Interbank transactions transactions that occur when banks make or receive deposits from each
other or from the Fed (p. 136)
Interest price paid for the use of money
Money market deposit accounts (MMDAs) time deposits that offer a higher rate of interest
than regular savings accounts and usually require a higher initial deposit to open (p. 127)
Negotiable instrument written order or promise to pay a sum of money, either to a specified
party or to the person who holds it (p. 152)
Overdrawn when an account has insufficient funds to meet its obligations
Person-to-person (P2P) online payments from consumers to other consumers; facilitated by
business platforms that generate revenue by charging a fee for serving as the payment
intermediary
Post-dated check check which is dated later than when it was written
Promissory note written promise to pay at a fixed or determinable future time a sum of money
to a specified individual
Qualified endorsement attempt to limit the liability of the endorser without limiting an
instrument’s further negotiability
Radio frequency identification (RFID) uses a transponder to convey identifying information
including the account holder’s account or balance information and the fees being assessed to
the account by the business for products or services
Restrictive endorsement limits the use of the instrument to a means specified by the endorser
Returned check check written on an account that does not have adequate funds to cover it and
which is returned unpaid to the person who deposited it
Smart card credit, debit, or other type of card that has an embedded microchip
Stagflation condition of a high rate of inflation, a slow rate of economic growth, and a high rate
of unemployment (p. 51) Stale check check which is dated six months or more before it is
presented for payment or deposit
Statement savings account provides a monthly or quarterly computerized statement detailing
all account activity, including interest credited and fees charged
Time deposits deposits including savings accounts, money market deposit accounts,
certificates of deposit (CDs), and various bonds that are held for or mature at a specified time
Transaction account account that allows transactions to occur without restrictions on the
frequency or the volume of transactions
Transit number nine-digit number that identifies the bank that holds the checking account and
is responsible for payment