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Quiz: Banking and Cash Management

Test your understanding of banking and cash management concepts.

1. What is the primary difference between a bank and a credit union?

  1. Banks are for-profit institutions; credit unions are not-for-profit member cooperatives
  2. Banks offer checking accounts; credit unions do not
  3. Credit unions charge higher fees than banks
  4. Banks are insured by FDIC; credit unions have no insurance
Show Answer

The correct answer is A. Banks are for-profit corporations owned by shareholders, while credit unions are not-for-profit cooperatives owned by their members. This often results in credit unions offering better rates and lower fees. Option B is false—credit unions offer checking accounts. Option C is backwards—credit unions typically have lower fees. Option D is false—credit unions are insured by NCUA, which provides equivalent protection to FDIC.

Concept Tested: Commercial Banks vs Credit Unions

See: Financial Institutions

2. Which type of account typically offers the highest interest rate?

  1. Traditional savings account at a large national bank
  2. Checking account with minimum balance requirements
  3. High-yield savings account at an online bank
  4. Standard checking account with no fees
Show Answer

The correct answer is C. High-yield savings accounts, especially at online banks, typically offer the highest interest rates (currently 4-5% APY) because online banks have lower overhead costs. Traditional savings accounts (A) offer minimal interest (0.01-0.5%). Checking accounts (B and D) typically offer little to no interest.

Concept Tested: High-Yield Savings Accounts

See: Savings Accounts

3. What does FDIC insurance protect?

  1. Your deposits up to $250,000 per depositor, per insured bank
  2. All money in your account regardless of amount
  3. Your investments in stocks and bonds
  4. Your credit card balances and loans
Show Answer

The correct answer is A. FDIC (Federal Deposit Insurance Corporation) insures deposits up to $250,000 per depositor, per insured bank, per ownership category. This protects your money if the bank fails. Option B is incorrect—amounts over $250,000 aren't fully insured at a single institution. Option C is false—FDIC doesn't cover investments. Option D is backwards—FDIC protects deposits, not debts.

Concept Tested: FDIC Insurance

See: Banking Security

4. You have a checking account with a $500 balance. You write checks for $200, $150, and $300. If your bank charges a $35 overdraft fee, what will your balance be after all transactions clear?

  1. -$150
  2. -$185
  3. $500
  4. -$35
Show Answer

The correct answer is B. Starting balance: $500. After $200 and $150 checks clear: $150 remains. The $300 check overdraws the account by $150 and triggers a $35 overdraft fee, resulting in -$185. Option A only accounts for the overdraft amount, not the fee. Option C incorrectly suggests no transactions processed. Option D only shows the overdraft fee amount.

Concept Tested: Account Reconciliation

See: Account Management

5. What is the main advantage of online banking over traditional branch banking?

  1. Online banks never require identification verification
  2. Online banks typically offer higher interest rates and lower fees
  3. Online banks allow unlimited cash withdrawals
  4. Online banks don't require internet access
Show Answer

The correct answer is B. Online banks have lower operating costs (no physical branches), allowing them to offer better interest rates on savings and lower or no monthly fees. Option A is false—all banks require ID verification. Option C is misleading—online banks provide ATM access but not necessarily unlimited free withdrawals. Option D is contradictory—online banks require internet for account access.

Concept Tested: Online Banking Services

See: Online Banking

6. Which practice helps prevent overdraft fees?

  1. Writing as many checks as possible
  2. Tracking your balance and all pending transactions
  3. Never checking your account balance
  4. Spending more than your available balance
Show Answer

The correct answer is B. Tracking your balance and pending transactions helps you know exactly how much money you have available, preventing accidental overdrafts. This includes monitoring checks that haven't cleared, pending debit card transactions, and scheduled automatic payments. Options A, C, and D all describe behaviors that increase the risk of overdrafts.

Concept Tested: Account Reconciliation

See: Avoiding Overdrafts

7. What is an ACH transfer?

  1. A type of credit card reward program
  2. An electronic bank-to-bank transfer processed through the Automated Clearing House network
  3. A fee charged for using out-of-network ATMs
  4. Insurance that protects against fraud
Show Answer

The correct answer is B. ACH (Automated Clearing House) transfers are electronic payments between banks used for direct deposit, bill payments, and bank-to-bank transfers. They typically take 1-3 business days and are usually free or low-cost. Option A describes rewards programs. Option C describes ATM fees. Option D describes fraud protection, not payment methods.

Concept Tested: ACH Transfers

See: Electronic Payments

8. Which feature would you prioritize when choosing a checking account for everyday use?

  1. High interest rate earnings
  2. Low or no monthly fees and easy access to ATMs
  3. Investment opportunities
  4. Credit card rewards points
Show Answer

The correct answer is B. For everyday checking accounts, prioritize low fees, easy ATM access, and convenient features. Checking accounts typically don't offer significant interest (option A). Investment opportunities (C) are separate from checking accounts. Credit card rewards (D) are unrelated to checking account selection.

Concept Tested: Account Features Comparison

See: Choosing Accounts

9. What is the purpose of account reconciliation?

  1. To calculate interest earnings
  2. To compare your records with the bank's records and ensure they match
  3. To close your account
  4. To apply for a loan
Show Answer

The correct answer is B. Account reconciliation means comparing your personal transaction records (checkbook register, app, spreadsheet) with your bank statement to ensure they match, identify any errors or unauthorized transactions, and maintain an accurate understanding of your balance. Options A, C, and D describe different banking activities unrelated to reconciliation.

Concept Tested: Account Reconciliation

See: Balancing Accounts

10. Which type of payment typically processes the fastest?

  1. Personal check mailed to payee
  2. ACH transfer
  3. Wire transfer
  4. Cash sent through postal mail
Show Answer

The correct answer is C. Wire transfers process almost immediately (same day or next day) and are used for time-sensitive or large transactions, though they typically charge fees ($15-50). Personal checks (A) take days to mail and clear. ACH transfers (B) take 1-3 business days. Mailing cash (D) is slow, risky, and not recommended.

Concept Tested: Wire Transfers

See: Electronic Payments