Test Your Banking & Payments IQ

How savvy are you when it comes to banking and payment basics? Take this short quiz and find out. Don't stress—we know this may bring about pop quiz vibes from back in the day but this one won't be graded! The answers are at the bottom and you might find a few surprises.

1. Which compounding method will grow your savings the fastest?
   1. Annual compounding
   2. Daily compounding
   3. Monthly compounding
   4. Quarterly compounding
2. What "rule" can help you shave years off your mortgage payments?
   1. The 1/13 rule
   2. The 50% rule
   3. The 95% rule
   4. Ja Rule
3. Deposits held by a federal credit union are insured by:
   1. Federal Deposit Insurance Corporation (FDIC) 
   2. National Credit Union Administration (NCUA)
   3. Vandalay Industries
   4. Fannie Mae
4. What does APY stand for?
   1. Average Payment Yearly
   2. Always Pay Yearly
   3. Annual Percentage Yield
   4. Average Percentage Yield
5. Which of the following would you not do if you are using a "laddering strategy" for your Share Certificates/CDs?
   1. Place all of your money in the longest-term, highest-yield certificate you can find. 
   2. Place equal amounts into different certificates with varied term lengths. 
   3. Reinvest the proceeds into a new long-term certificate when each certificate matures. 
   4. Break up your savings into smaller, equal amounts. 
6. When would it be better for you to have a Money Market account rather than a regular savings account?
   1. If you already have a significant amount of money saved. 
   2. When you'd like to get a higher annual percentage yield (APY) in exchange for a larger minimum deposit. 
   3. When you would like to occasionally write checks to withdraw funds. 
   4. All of the above
7. Which of the following does not deduct money directly from your account?
   1. A credit card
   2. A debit card
   3. A check
   4. An ATM
8. Over half of American consumers are: 
   1. All for a cashless society
   2. Okay with a cashless society
   3. Neutral on a cashless society
   4. Against a cashless society
9. Which of the following is the No. 1 social media platform used by banks and credit unions in the U.S.?
   1. Facebook (Meta)
   2. Instagram
   3. TikTok
   4. LinkedIn
   5. YouTube
10. Which of the following is the most common problem U.S. consumers' face while paying bills online?
    1. Their preferred payment method is not available. 
    2. The payments take too long to process. 
    3. Not having enough money in their account.
    4. Forgot their username and/or password.
11.  Which is the top payment method U.S. consumers say they will use to do the majority of their holiday shopping this year?
    1. Debit card
    2. Mobile payments (like Apple Pay)
    3. Credit card
    4. Borrow money from Mom
    5. Buy now, pay later
12. On average, how many different payment methods does the American consumer use?
    1. 1
    2. 4
    3. 6
    4. 9
13. What is the average amount of cash that U.S. adults carry in their wallet, purse, or pocket?
    1. $12
    2. $25
    3. $42
    4. $73
14. When you write a check, the delay between when the check is written and when the money is deducted from your account is called:
    1. Amortization
    2. Float
    3. Maturity
    4. Kiting

Resources: Northwest, eMarketer, National Credit Union Administration, Fannie Mae, Federal Reserve

Answer Key

Here are the answers to the above quiz—how did you do?

1. B. Daily compounding
Compounding is the process of generating income on an asset´s generated earnings. Savings accounts typically offer compounding periods of daily, monthly, quarterly or annually. Accounts with daily compounding will have a higher Annual Percentage Yield, or APY, than accounts offering monthly, quarterly, or annual compounding, given the same interest rate.

2. A. The 1/13 rule
Paying your mortgage bi-weekly (every two weeks) with half of your monthly amount results in one extra payment per year, accelerating your mortgage payoff. Be sure to check with your lender to see if there is a penalty for early payoff.

3. B. National Credit Union Administration (NCUA)
The National Credit Union Share Insurance Fund (NCUSIF) is the federal fund created by Congress in 1970 to insure member deposits in federally-insured credit unions. Administered by the National Credit Union Administration, the fund provides members with up to $250,000 of insurance on deposits held at a federally-insured credit union.

4. C. Annual Percentage Yield
The "Annual Percentage Yield", or APY is the effective annual rate of return once compounding interest is factored in.

5. A. Place all of your money in the longest-term, highest-yield certificate you can find.
"Laddering" involves investing in a Share Certificate or CD at different intervals, equal amounts of money in short-, medium- and long-term certificates. When the first one comes due, you reinvest the proceeds of that certificate in the longest-term certificate available. You do the same for each certificate as it becomes due. This allows for your investments to be in long-term, higher yield certificates, but since they will all mature at different intervals you still have regular access to a portion of your savings.

6. D. All of the above
Money Market accounts provide several advantages over standard savings accounts, including the ability to write a limited number of checks from the account on a monthly basis. Money market accounts also typically come with higher minimum balance requirements, which means you have to have an already substantial amount of savings before opening one. Money market accounts typically offer a higher Annual Percentage Yield, or APY, than standard savings accounts for larger deposits.

7. A. A credit card
ATM withdrawals, debit card transactions, and checks all deduct funds directly from the attached account when the transaction is processed. Transactions made with a credit card add to your credit balance, but do not immediately impact your checking account balance.

8. D. Against a cashless society
Fifty-five percent of consumers are against a cashless society, down from 62% two years ago, according to consumer analytics platform CivicScience. However, the percentage of consumers who are at least okay with the idea is up from 26% in 2022 to 29% in 2024.

9. A. Facebook (Meta)
Meta (formerly Facebook) is the top platform, used by 95% of U.S. banks and credit unions, according to the American Bankers Association's 2023 State of Social Media in Banking report. LinkedIn comes in second, followed by Instagram (62%), YouTube (39%), and TikTok (7%). By the way, did you know Tower has a Facebook page? Follow us for financial wellness tips, important announcements, and more.

10. D. Forgot their username and/or password
Nearly a quarter of consumers said they couldn't remember their username and/or password, according to a survey by Regina Corso Consulting commissioned by Invoice Cloud, as reported by The Financial Brand. Click here for more information on selecting a secure password for your accounts.

11. C. Credit card
Thirty-seven percent of consumers say they will use credit cards to pay for their holiday purchases this year, followed by debit cards (32%) and cash (24%), per CivicScience. Only 3% of shoppers plan to use mobile payments and just 1% say they will most likely use buy now, pay later services.

12. B. 4
Per J.D Power, consumers have different reasons for using different payment methods, from ease of use to perception of social status associated with each.

13. D. $73
The average amount of cash Americans carry around is $73, according to the Federal Reserve's 2023 Diary of Consumer Payment Choice Survey.

14. B. Float
Check float is the amount of time it takes between when you write a check and when the money is actually withdrawn from your account. For example, if you write a check to BGE, BGE will credit your utilities account on the date the check is received. However, the check still needs to be processed for payment and the money withdrawn from your account. The time between your payment and the withdrawal is called the float.