2Chapter 10.1 Comparing Financial Institutions ObjectivesDescribe the services offered by financial institutions;Distinguish among various types of financial institutions; andExplain guidelines for choosing a financial institution.
3How Banks WorkBank – 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.
4Interest – a fee paid for the opportunity to use someone 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.
6Financial 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.
7Financial Services Modernization Act (1999) This allowed financial institutions to consolidate the financial services they offer, which transformed the banking industry.
8Three 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.
9Services and Convenient Access Offering:Services You Need.Convenient Hours.A Location Near You.Phone / Internet Services.Rates and FeesBe Aware of:Interest Rate FeesSpecial Account Requirements
10 10.2 Banking Electronically ObjectivesExplain various electronic banking methods; andGive consumer guidelines for using electronic banking.
11Electronic Banking Methods Electronic Banking Methodselectronic funds transfer (EFT) – movement of funds by electronic means
12ATM TransactionsAutomated Teller Machine (ATM) – computer terminal that gives bank customers electronic access to their account at any time through the use of a specially coded cardPersonal identification number (PIN) – secret code that protects the security of your accountKnow where ATM card is all the time.Memorize PINWhen entering pin, shield key pad or screen.Be aware of surroundingsCount cash later.
13Point-of-Sale Transaction Point-of-sale transaction – paying for an item by making an electronic funds transfer at the place of purchaseDebit card – allows the user to subtract money from a bank account in order to obtain cash or make a purchaseOnline – must enter PIN into keypadOffline – sign a receipt like credit card
14Automated ServicesDirect depositAutomated transfers between your accountsAutomated loan paymentsAutomated payments to a third party
15Telephone BankingTelephone Banking – access your account by phonefind out account balancemake transfers between accountshear list of previous transactions
16Online Bankinglogin name and passwordAdvantagescomplete bank transactions at home any timepay and receive bills onlinesave timesave postage
17Consumer ProtectionElectronic Fund Transfer Act – 1978protects consumers using some forms of electronic bankingStolen Card liability
18Chapter 10.3 Managing a Checking Account ObjectivesIdentify reasons for having a checking account;Describe factors to consider in selecting a checking account; andExplain checking account procedures and responsibilities.
19How Checks WorkCheck – 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 toCanceled Check – a check that is stamped and perforated to show that it’s been paid.
20Overdraft (Bounce) – is a lack of sufficient funds to cover 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 feeOverdrafts are used to penalize because they cost time, money, and effortRepeatedly writing bad checks is a criminal behavior
21Advantage of ChecksMore secure than cash.Useable only by payeeLegal proof of paymentDeposit Slip – form that is used to put money into an accountUsually takes one or more days to access those funds
22Choosing a Checking Account Minimum BalanceUsually given a penalty when below minimum amountFeesMonthly service chargeCheck feeATM and Debit card fees
23Transaction LimitsLimited number of withdrawalsLimited number of teller-assisted transactionsInterestAccounts that collect interest my have more restrictionsOverdraft ProtectionBank will transfer fund prior to overdraft
24Using a Checking Account Must be 18 years old (as stated in the book)Signature Card – verifies your signatureStarter ChecksMaking DepositsMailATMDrive-up WindowTeller Transaction
25 Endorsing a CheckYou Can:DepositCash ItTransfer It To Another PayeeEndorsement – a signature that entitles the payee to either receives payment or transfers it to someone else.
26Three Ways to Endorse a Check Blank Endorsement – Only endorsers nameSpecial Endorsement – Limits payment to a particular payeeRestrictive Endorsement – write “For deposit only” above name and it can only be deposited in your account.
27Recording Transactions Ways to Record TransactionsPressure Sensitive Copies (Carbon Copies)Check StubsCheck Register
28Writing a CheckUse ink (Black or Blue)If you make a mistake tear up check and write “VOID” in check registryHave picture identificationYou can have a stop payment on check if stolen or lost
29Receiving Your Bank Statement Sent by bank once a monthGives balance at beginning and end of monthService chargesReconciling Your AccountReconcile – to bring the bank statement and your own record of transactions into agreement
30Steps for Reconciling Your Account Check to see if all transactions are listed in registry are same as statementPlace a check mark on those that matchOutstanding – ones that were received by the bank after the closing date of your statementAll transactions shouldadd up withoutstanding subtracted
31Using Other Payment Methods Chapter 10.4Using Other Payment MethodsObjectivesDescribe alternatives to cash, personal checks, and credit cards; andExplain possible reasons for using each form of payment.
32Guaranteed ChecksTypes: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)
33Money Orders– is a purchased certificate that is a safe and convenient way to pay a specified amount to a particular payeePostal Money Order – is issued and backed by the U.S. Postal ServiceTypes: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)
34Traveler’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.
35Money Transfer Services WorldwideSent 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)
36Prepaid Cards (Stored-value cards) – cards sold in specified dollar amounts that can be purchased for products or services.Types:Phone cardsGift cardsMerchandise creditsPublic transit cards
37Online Payment Services Goal is to make quick and easy paymentsSafer by reducing the need to share personal information or credit cardsDeductions/payments are usually deducted directly from an account.