Fundamental Payroll Certification (FPC) Practice Exam

Which best describes the term “automated clearinghouse”?

1. A system for processing cheque deposits

2. A network that facilitates electronic money transfers among banks

3. An online banking system for managing personal accounts

4. A service that offers loans across different financial institutions

The correct answer is: A network that facilitates electronic money transfers among banks

The term "automated clearinghouse" refers specifically to a network that facilitates electronic money transfers among banks. This system allows for the efficient and secure transfer of funds through direct debit and credit transactions without the need for physical checks. This electronic processing system helps in streamlining payment processes such as payroll deposits, bill payments, and other forms of electronic fund transfers. By using an automated clearinghouse, banks can handle a large volume of transactions quickly and with reduced paperwork, leading to faster and more accurate financial operations. The other options describe different financial services but do not accurately represent the function of an automated clearinghouse. For example, processing cheque deposits is about handling physical checks, which is distinctly different from electronic transfers. Similarly, an online banking system focuses on managing personal accounts rather than transferring funds between institutions, and a loan service discusses borrowing rather than payment processing.