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1 Chapter 10 Banking. Chapter 10.1 Comparing Financial Institutions Objectives  Describe the services offered by financial institutions;  Distinguish.

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Presentation on theme: "1 Chapter 10 Banking. Chapter 10.1 Comparing Financial Institutions Objectives  Describe the services offered by financial institutions;  Distinguish."— Presentation transcript:

1 1 Chapter 10 Banking

2 Chapter 10.1 Comparing Financial Institutions Objectives  Describe the services offered by financial institutions;  Distinguish among various types of financial institutions; and  Explain guidelines for choosing a financial institution. 2

3 3 How Banks Work Bank – a financial institution where you may deposit money. Money that you deposit is lent to borrowers who need cash for businesses or personal financial needs.

4 4 Interest – a fee paid for the opportunity to use someone else’s money over a period of time.  Savings Account – bank pays you interest (low amount) for letting it use your money  Loans – borrowers pay the bank interest (high amount) for money needed, allowing bank to make a profit.

5 5 Other Banking Services:  Checking Accounts  Safe Deposit Boxes  Investments  Financial Planning

6 6 Financial Institutions Types: 1. Commercial Banks – is owned by shareholders and operated for their profit. 2. Mutual Savings Banks – are state-chartered and are operated by trustees for the benefit of depositors. 3. Savings and Loans – were originally specialized in providing funds to home buyers, but now provide a variety of financial service. 4. Credit Unions – is nonprofit and owned by its members. 5. Internet-Only Banks – saves money because it is not maintaining a branch office or employees, therefore passing the savings to customers.

7 7 Financial Services Modernization Act (1999) This allowed financial institutions to consolidate the financial services they offer, which transformed the banking industry.

8 8 Three Factors To Consider: Deposit Insurance – protects your account when a bank fails. o Federal Deposit Insurance Corporation (FDIC) – federal agency that insures savings, checking, and other deposit accounts in most commercial banks, saving banks, and saving associations. o National Credit Union Administration (NCUA) – deposit insurance for credit unions.

9 9 Services and Convenient Access Offering: Services You Need. Convenient Hours. A Location Near You. Phone / Internet Services. Rates and Fees Be Aware of: Interest Rate Fees Special Account Requirements

10 10.2 Banking Electronically Objectives  Explain various electronic banking methods; and  Give consumer guidelines for using electronic banking. 10

11 11 Electronic Banking Methods electronic funds transfer (EFT) – movement of funds by electronic means

12 12 ATM Transactions Automated Teller Machine (ATM) – computer terminal that gives bank customers electronic access to their account at any time through the use of a specially coded card Personal identification number (PIN) – secret code that protects the security of your account Know where ATM card is all the time. Memorize PIN When entering pin, shield key pad or screen. Be aware of surroundings Count cash later.

13 13 Point-of-Sale Transaction Point-of-sale transaction – paying for an item by making an electronic funds transfer at the place of purchase Debit card – allows the user to subtract money from a bank account in order to obtain cash or make a purchase Online – must enter PIN into keypad Offline – sign a receipt like credit card

14 14 Automated Services Direct deposit Automated transfers between your accounts Automated loan payments Automated payments to a third party

15 15 Telephone Banking Telephone Banking – access your account by phone find out account balance make transfers between accounts hear list of previous transactions

16 16 Online Banking  login name and password Advantages complete bank transactions at home any time pay and receive bills online save time save postage

17 17 Consumer Protection Electronic Fund Transfer Act – 1978 protects consumers using some forms of electronic banking Stolen Card liability

18 Chapter 10.3 Managing a Checking Account Objectives  Identify reasons for having a checking account;  Describe factors to consider in selecting a checking account; and  Explain checking account procedures and responsibilities. 18

19 19 How Checks Work Check – is a written order that instructs a bank to pay a specific amount of money to a particular person or business. Payee – the one to whom a check is made out to Canceled Check – a check that is stamped and perforated to show that it’s been paid.

20 20 Overdraft (Bounce) – is a lack of sufficient funds to cover the full amount of a check, marked “NOT SUFFICIENT FUNDS” Both you and the payee will be charged a substantial fee Overdrafts are used to penalize because they cost time, money, and effort Repeatedly writing bad checks is a criminal behavior

21 21 Advantage of Checks More secure than cash. Useable only by payee Legal proof of payment Deposit Slip – form that is used to put money into an account Usually takes one or more days to access those funds

22 22 Choosing a Checking Account Minimum Balance Usually given a penalty when below minimum amount Fees Monthly service charge Check fee ATM and Debit card fees

23 23 Transaction Limits Limited number of withdrawals Limited number of teller-assisted transactions Interest Accounts that collect interest my have more restrictions Overdraft Protection Bank will transfer fund prior to overdraft

24 24 Using a Checking Account Must be 18 years old (as stated in the book) Signature Card – verifies your signature Starter Checks Making Deposits Mail ATM Drive-up Window Teller Transaction

25 25 Endorsing a Check You Can: Deposit Cash It Transfer It To Another Payee Endorsement – a signature that entitles the payee to either receives payment or transfers it to someone else.

26 26 Three Ways to Endorse a Check 1.Blank Endorsement – Only endorsers name 2.Special Endorsement – Limits payment to a particular payee 3.Restrictive Endorsement – write “For deposit only” above name and it can only be deposited in your account.

27 27 Recording Transactions Ways to Record Transactions Pressure Sensitive Copies (Carbon Copies) Check Stubs Check Register

28 28 Writing a Check Use ink (Black or Blue) If you make a mistake tear up check and write “VOID” in check registry Have picture identification You can have a stop payment on check if stolen or lost

29 29 Receiving Your Bank Statement Sent by bank once a month Gives balance at beginning and end of month Service charges Reconciling Your Account Reconcile – to bring the bank statement and your own record of transactions into agreement

30 30 Steps for Reconciling Your Account 1.Check to see if all transactions are listed in registry are same as statement 2.Place a check mark on those that match 3.Outstanding – ones that were received by the bank after the closing date of your statement 4.All transactions should add up with outstanding subtracted

31 Objectives  Describe alternatives to cash, personal checks, and credit cards; and  Explain possible reasons for using each form of payment. 31 Chapter 10.4 Using Other Payment Methods

32 32 Guaranteed Checks Types: Certified Check – is from a personal checking account that has been stamped by the bank to guarantee that there are sufficient funds in the account to cover it, by putting a hold on the money. (a fee is usually charged) Cashier’s Check – is issued and guaranteed by a bank, by using a bank check that is addressed to the payee. (a fee is usually charged)

33 33 Money Orders – is a purchased certificate that is a safe and convenient way to pay a specified amount to a particular payee Postal Money Order – is issued and backed by the U.S. Postal Service Types: Domestic – can be cashed at post offices and banks in the U.S. (a fixed fee is charged) International – Sent and cashed outside the U.S. (a higher fee is charged)

34 34 Traveler’s Checks – are documents that function as cash but can be replaced if lost or stolen. Used on vacations and trips. Amounts - $25, $50, or $100. Service charge fee is a percentage of the face amount. Must be signed 2 times: once in front of the selling agent and again in front of the payee. Return change will be given back in cash. Must record the serial numbers in a separate location. If they are lost or stolen then report the serial numbers.

35 35 Money Transfer Services Worldwide Sent and delivered at designated locations. Service fees are expensive. Wire Transfer – a financial transaction that electronically moves funds from one bank to another. (Service fees for sending, receiving or both)

36 36 Prepaid Cards (Stored-value cards) – cards sold in specified dollar amounts that can be purchased for products or services. Types: Phone cards Gift cards Merchandise credits Public transit cards

37 37 Online Payment Services Goal is to make quick and easy payments Safer by reducing the need to share personal information or credit cards Deductions/payments are usually deducted directly from an account.

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