Financial Institutions 3 Main Types – Banks – Credit Unions – Savings and Loan Associations (S&L) Advantages – Convenient access to your money – Security – Saves money – Access to knowledgeable people – Building block of credit – Earn interest
Types of Saving Regular Savings Account – Interest paid monthly – May require a minimum deposit Certificates of Deposit (CDs) – Money must remain in account for a term – Higher interest rate than a savings account Electronic Transfer Account – Direct deposits for government payments Money Market Account – Limited check writing and withdrawals – Pay higher interest than regular savings accounts – Interest rate may change U.S. Government Securities – Often offers highest return with lowest risk
Choosing a Savings Account How much will my savings earn? How easy is it for me to access my money? Whats the minimum amount needed to open the account? Is there a minimum balance to keep the account open? Does the account have a maturity date? Is the account liquid or long-term?
Checking Account Basics Advantages Convenientmoney available Safer than carrying cash Proof of payment Easier budgeting Disadvantages Cost of over-drafting account can be costly Greater responsibility for record keeping Minimum balance or fee requirements
Choosing a Checking Account What types of checking accounts are available? Is a minimum balance needed on an account and is it able to earn interest? Does the account have ATM or Debit cards available? Are overdraft protection plans available? What are account disclosures?
Maintaining a Checking Account 1.Record all transactions in your register – Checks – Debits – ATMs 2.Keep a running balance of your account 3.Balance your checkbook with your monthly statement 4.Subtract checks and ATM withdrawals from your checkbook right away
Overdrafts Overdrafting or Bouncing a check – Spending more than you have using a check Overdrafting with ATM or Debit Card Use – Spending more than you have using your card – Your ATM/Debit Card is not a Credit Card Standard overdraft practices – Transaction covered for a flat fee-$20/$30 each time you overdraw
Overdraft Protection Overdraft protection – Offered by some financial institutions – Moves money from savings to checking in cases of overspending Options Include – Transfer from savings, line of credit, tied to a credit card New Rules: – Rather than auto enrollment in overdraft plans customers must opt in to this coverage for ATM/debit card use
Savings and Checking Accounts Opening an account – Identification – Social Security number – Money to put in the account Using an ATM – Deposit money – Withdraw money – Check your balance – Transfer money between accounts
Savings and Checking Accounts Direct Deposit and Electronic Transfer Account – Automatically deposit checks directly into a savings or checking account Pre-Authorized Transactions – Scheduled payments automatically pulled from your account Online banking – Manage all accounts with a secure website
Go Direct All federal benefit payments are moving to electronic payments by March 1, 2013. 1.Direct deposit to a bank or credit union account or 2.Direct Express® card account (default) – Prepaid debit card – Make purchases, pay bills and get cash back – No bank account required – No sign-up fees or monthly account fees, but… – See: Fee_Schedule.pdf.Fee_Schedule.pdf. – Optional text message notifications and alerts.
Looking Ahead Electronic Wallet (smart phone transactions) Continued movement from paper – Fewer paper checks or statements Electronic monitoring and management Shifting fees – al la cart – need to watch Blurring of banked and under-banked – Retail financial services at stores – Convenience services – check cashing, bill paymentmore popular and competitive