Banking plays a central role in financial planning. Knowing how banks work and understanding banking best practices are key to helping your money grow. Even something as basic as opening a savings account requires you to have knowledge of banking to get the maximum benefits. See how well you do on this banking quiz!
1. Putting money in a savings account is called…?
- A: Making an investment
- B: Making a deposit
- C: Making a withdrawal
Answer: B — Making a deposit. Putting money into a savings account gives you minimum returns but it allows you to access the money at short notice.
Making an investment is when you use your money to get higher returns. In this case, you may not be able to access the money at short notice.
Withdrawal refers to taking money out of your account.
2. ___ is money the bank pays you based on the amount of money in your savings.
- A: Interest
- B: Bonus
- C: Capital
Answer: A — Interest. Banks pay customers interest for keeping money in a savings account. If you’ve ever taken out a student loan, you’ll be familiar with an interest rate–or the extra money you have to pay back for the service of taking out a loan.
This time, however, the bank is paying YOU interest for the service of borrowing your money.
3. What do you need to withdraw money from an ATM?
- A: Credit card
- B: Withdrawal slip
- C: Debit card
Answer: C – Debit card. When you open a savings account with any bank, they will issue you a debit card. You need to swipe this card and enter your unique PIN number to withdraw money. You can withdraw only whatever amount you have balance in your savings account.
A credit card allows you to spend at any outlet on credit. This means you don’t necessarily need to have the amount in your account to spend it but you will need to pay off the outstanding on your card at the end of the month.
A withdrawal slip is a bank-issued form that you can use to withdraw money from your account but it cannot be used at an ATM. It requires you to visit the bank personally and fill out the form to get the money.
4. A high yield savings account is always better than a low yield savings account.
- True
- False
Answer: False. A high yield savings account gives you a higher rate of interest as compared to a low yield savings account. However, this also requires you to make a higher initial deposit and maintain a higher balance. This may not suit everyone across the board. The best type of savings account for you depends on your financial circumstances.
5. What would you sign to add cash to your savings account?
- A: Check
- B: Signature card
- C: Deposit slip
Answer: C — Deposit slip. To deposit cash into your savings account, you have to go personally to the bank, sign a bank-issued form with details of the amount you wish to deposit and the account you wish to deposit it into. You then hand over the filled-in deposit slip and the cash to the teller and get a signed counterfoil confirming the deposit.
A check is that you sign when you want to give money to a third party either as a gift or to pay them for services.
A signature card is a document that the bank keeps with your signature on file. When you want to withdraw money or take a loan the bank checks the signature on the check against their signature card to verify that it is yours. This acts as a fraud prevention tool.
6. A ____ is the money that you borrow to buy a home, business, or real estate.
- A: Loan
- B: Withdrawal
- C: Mortgage
Answer: C – Mortgage. A mortgage is a specific type of loan that is taken for buying any type of real estate. When you take a mortgage you put the value of the house as collateral for the loan.
A withdrawal refers to the cash that you take out from your own savings account using either a debit card or a withdrawal slip.
7. What does a credit report show you?
- A: Your loan and bill-paying history
- B: Your monthly credit card statement
- C: All your financial assets and liabilities
Answer: A — Your loan and bill-paying history. Your credit report includes details on who you owed, how much you owed, and whether you made the payments on time, were late with the payments, or did not make the payments at all. Too many negative marks will pull your score down.
Your monthly credit card statement gives you details of everything you purchased on credit during that month and how much you need to pay by the deadline.
8. How long do negative marks stay on your credit report?
- A: 7 years
- B: 5 years
- C: 2 years
Answer: A – 7 years. After 7 years most negative information will simply fall off your credit report. However, it does not erase your actual debt. While your debt may not be listed on your credit report, you will still owe your creditor till you’ve paid off the amount in full.
9. Using a PIN is mandatory when using a debit card at an ATM
- True
- False
Answer: True. When you insert your debit card into the ATM slot, you have to enter your unique PIN in order to withdraw cash from your account or even to see the balance in your account. You cannot carry out any transactions without entering your PIN. This is to prevent any unauthorized person from accessing your account in case your debit card is stolen.
10. ____ is the monthly report with detailed information about your transactions and balance.
- A: Credit report
- B: Overdraft
- C: Bank statement
Answer: C — Bank statement. Banks send all of their customers a bank statement at the end of the month. This statement reflects all the deposits and withdrawals carried out during that month, as well as the current balance.
A bank has nothing to do with your credit report. Credit reports are prepared by credit bureaus.
An overdraft occurs when the balance in your savings account falls below zero, which means you’ve withdrawn more than you had in your account.
How Did You Do on the Banking Quiz?
There is a lot to learn when it comes to banks, savings, and financial preparation. College is the ideal time to get started. If you didn’t quite ace this banking quiz, it’s time to start doing a bit of research.
