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BANKING 101 Modified from original presentation by Union Bank employees.

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Presentation on theme: "BANKING 101 Modified from original presentation by Union Bank employees."— Presentation transcript:

1 BANKING 101 Modified from original presentation by Union Bank employees

2 Choosing a bank Big bank vs. small (community) bank What is important to you? Location Interest Loan (mortgages, car, etc.) Savings Certificate of Deposit (CD) Freebies Checking Savings w/o minimum balance or low balance Online banking Customer service Hours open Drive up window Other Safe deposit box

3 Opening a Bank Account To open a bank account you must provide: Valid photo ID (proof of age and identity) (interest can be reported to IRS) Driver’s license State issue or military ID Alien registration number Utility bill Apartment Lease Social Security Card (to report to FDIC)


5 ATM cards Allows you to access your money quickly After hours can withdrawal or deposit funds Must have a PIN number to use Creating PINs Easy for you to recall Difficult for others to guess Don’t use personal dates Don’t use repetitive numbers Choose a longer PIN

6 Debit Cards Banks have limits on how many withdrawals per month can be done with debit cards (standard rule is 6) Loss of Liability (up to $50 if reported within 2 business days) Cash back

7 Checking Regular checking account Monthly and per-check fees Accounts with a minimum balance Drop below minimum and you have to pay the full monthly fee Free checking Usually offered with direct deposit Interest bearing account Interest paid on balance at end of the day Overdraft Protection (opt-in) Kicks in when customer writes a check for more than they have in the account Comes at a price – interest on the amount floated Insufficient funds can be expensive – fee to the bank and the payee Stop Payment – can cost anywhere from $18 - $32 Cashing checks

8 Savings Statement (regular) – minimal withdrawals allowed Savings Club – no withdrawals until the year end Education Club/529 – withdrawals only for education expenses CD (Certificate of Deposit) – no withdrawals until the end of the term IRA (Individual Retirement Account) – penalty free withdrawals only at appropriate age

9 Compound interest fun fact A savings account with $50 monthly deposits can earn, in 30 years: @ 0% = $18,000 ($0.00) @ 2% = $24,727.33 ($6,727.33) @ 4% = $34,868.15 ($16,868.15)

10 Electronic Transfer Identify the advantages and disadvantages of: Automatic transfer from checking to saving (forced savings) Online bill payment and credit payment Deposit of checks using a cell phone Direct deposit of checks Funds available quicker Employee responsibility to verify funds deposited Important to notify bank when email or home address changes

11 Online Banking Access to bank accounts to pay bills and monitor accounts

12 As Good as Cash Cashier/Bank checks (guaranteed by bank) Drawn on bank’s own funds and signed by cashier Treated as guaranteed funds Used for real estate, brokerage transactions, etc. Amount is taken out of customers account immediately Bank assumes responsibility for covering check Unlike personal checks (funds removed when check presented for payment) Certified checks (funds are set aside to pay) Bank verifies that sufficient funds exist and funds set aside to cover check Cannot “bounce” Traveler’s check: many use for vacations funds, slowly being replaced by Credit Cards Money Order: funds are pre-paid

13 Do You Lose Money if your Bank Fails? FDIC has protected Banks since 1934 Savings deposits, checking deposits, and CD Prior to FDIC banks where plagued with bank “runs” Great Depression shattered peoples confidence in banks 2014 – FDIC insures accounts for up-to $250,000 Maximum $250,000 per each group (savings, checking, and CDs) at each different bank FDIC receives no federal funds – each member bank pays a premium Establishes Reserve requirements (2014: 3% for first $13.3 million) Federal Reserve backs the FDIC

14 CDs Sold by banks and credit unions Similar to savings account, they are insured with FDIC or NCUA Different from savings: Fixed term Difficult to get funds prior to maturity date (less liquid) Fixed interest rate CD is held until maturity at which time it can funds can be withdrawn Given higher interest rates Larger funds usually means higher interest rates

15 Money Market Account Similar to savings account, but require higher balance Interest rates vary The more money in account the higher the interest Limit the number of transactions you can do in a month

16 Individual Retirement Accounts (IRAs) Useful when employers do not offer retirement accounts Types: Traditional IRA – contributions are tax deductible Roth IRA – funds withdrawn tax-free many situations Both accounts have contribution limits

17 Loans What is a loan? What type of loans can you get? Student loans Personal loans Car loans Mortgages Secured (collateralized) Unsecured (uncollateralized) Interest rates are based on credit scores

18 Safety Deposit Box 1. Your items are protected from fire, flood or other natural disasters at home. 2. It’s a cost-effective way to keep valuables private and safe. 3. Your items are protected from theft at home. 4. Your items are protected from being lost or misplaced. 5. Your family members will know where to find your important papers. You rent the space from your bank


20 Money Order Scams You receive a fake money order and mail the merchandise You receive a money order in excess of amount owed, overpayment to be mailed somewhere else Red flags: An offer that came from out of the blue International money orders Messages with numerous grammar and spelling mistakes Refusal to pay you electronically Buyer is not very interested in checking out the merchandise or product details Buyer asks for sensitive information like your bank account number, etc. It sounds too good to be true

21 Check Fraud Copy or duplicating actual financial documents Stealing blank checks Cancelled checks from garbage Paid bills in your mail box, thieves take them Chemical alteration Victims Financial institutions Business who accept and issue checks Consumer Types of Fraud: Forgery Counterfeiting and Alteration Paperhanging Check Kiting Signs for bad checks

22 Loaning your ATM card What problems can you see with loaning out your ATM card?

23 Check Cashing stores Pros Convenience (later hours) Payday loans and other types of loans Money transfers Bill payments Money orders P.O. boxes Stamps, envelopes, and mailing services Notary public Currency exchange Prepaid debit and credit cards Public transportation passes and tokens EBT services Photocopying and faxing services ATM machines Motor vehicle renewal and registration Cons Resort to check cashing stores because cannot get a bank account due to problems with credit history High fees (3-5% of check) Leave store with a great deal of cash on them (dangerous) Stores usually located in higher crime areas

24 Payday Loan Small, short-term unsecured loan Sometimes called cash advances Must have previous payroll and employment records Payment due borrowers next pay day Borrower writes a postdated check For $15 charge on a $100 14-day payday loan, the annual percentage rate is 391.34% They have a 10-20% default rate

25 Title Loan Also called: Auto title loan Pink slip loan Secured loan where borrow used their vehicle as collateral Lender places a lien on the vehicle Temporarily surrender the hard copy of vehicle title Leander can repossess vehicle if loan not paid Short-term high interest loans (36% to well over 100%)

26 What is Identify Theft? It occurs when someone steals your personal information – e.g. credit card or Social Security number – and uses it fraudulently It can cost you time and money It can destroy your credit and ruin your good name

27 How Does Identity Theft Happen? Identity thieves may: Go through your trash or “dumpster dive” Steal your wallet or purse Steal your mail or submit a change of address form for your mail Use “phishing” or take emails to get you to provide personal information Steal personnel records from their employers

28 What Can you do? Deter Deter identify thieves by safeguarding your information Detect Detect suspicious activity by routinely monitoring your financial accounts and billing statements Defend Defend against identity theft as soon as you suspect a problem

29 Deter Identify thieves by safeguarding your information. Shred financial documents before discarding them Protect your Social Security number Don’t give out personal information unless you’re sure who you’re dealing with Don’t use obvious passwords Keep your information secure

30 Detect suspicious activity by routinely monitoring your financial accounts and billing statements Be alert Mail or bills that don’t arrive Denials of credit for no reason Inspect your credit report Law entitles you to one free report a year from each nationwide credit reporting agencies if you ask for it. Online: by phone: 1-877-322-8226; or by mail: Annual Credit Report Request Service, PO Box 105281, Atlanta, VA Inspect your financial statements Look for charges you didn’t make

31 Defend against identify theft as soon as you suspect a problem Place a “Fraud Alert” on your credit reports by calling any one of the three nationwide credit reporting companies: Equifax: 1-800-525-6285 Experian: 1-888-397-3742 TransUnion: 1-800-680-7289 Review reports carefully, looking for fraudulent activity Close accounts that have been tampered with or opened fraudulently File a police report Contact the Federal Trade Commission

32 Where can you learn more? Online: By Phone:1-877-ID-THEFT By Mail:Identity Theft Clearinghouse Federal Trade Commission 600 Pennsylvania Avenue, NW Washington, DC 20580


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