2 Banking Terms to Know Endorse – To sign the back of a check Three types of EndorsementsBlank – Signature onlyRestrictive – “For Deposit Only”, then SignatureFull or Special – “Pay to the order of ……”, then Signature
3 Signature Card – Card filled out when opening an account so the bank can identify your signature Deposit – To put money into an accountWithdrawal – To take money out of an account (check, debit card, etc)Debit Card – works same as writing a check. Different from a credit card b/c the money comes right out of your checking acct. instead of being charged
4 Check Register – a booklet, stub or carbon copy of a check Check Register – a booklet, stub or carbon copy of a check. Used to keep track of all transactions in an account. VERY IMPORTANT to be kept accurate and up to date.Bank Statement – Monthly report of your checking account from the bank. May contain images of cancelled checks.Reconcile – Comparing your bank statement to your check register
5 Cancelled check – a check that you have written that has cleared the bank (it has been paid by the bank)Overdraft (Bounced check) – writing a check for more money than is in the account.Overdraft protection – Arrangement for the overdraft amount to come out of another account (Like savings) or be charged to your credit card.
6 Outstanding Check – A check you have written but has not yet been paid by the bank (Doesn’t appear on your statement)Outstanding Deposit – Deposit you have made but doesn’t appear on your statement
8 Reconciling a Bank Statement Getting the balance in the check register and the balance on the bank statement to agree.ProcessCompare C.R. and B.S., make note of any outstanding checks or deposits on the worksheet on the back of the bank statement.Subtract any service charges, etc that may have been taken out of your account from your check register.Complete worksheet on back of your statementStatement Balance + Outstanding Deposits – Outstanding Checks = Balance in Check Register
9 Credit – Buy Now Pay Later Commercial Credit – Credit for businessesPersonal Credit (Consumer Credit) – Credit for personal spending
10 Laws Dealing with Credit Equal Credit Opportunity Act (ECOA) 1975,1977 – Protects against credit discriminationTruth in Lending 1968 –Requires creditors to disclose the finance charges and APR to applicantsFair Credit Reporting Act 1970 – Gives consumers specific rights in dealing with credit reporting agencies.State Laws – vary by state
11 Types of CreditRevolving Credit Accounts – Consumers pay what they want toward the balance. Interest may be charged to the balance at the end of the monthInstallment Credit Accounts – The total amount of the loan is broken down into payments including interest. Monthly installments are made until the loan is paid
12 Regular Credit Accounts – (Open Accounts) – Allow customers to buy any time during a set period and pay the entire amount due.Budget Credit Accounts – short term credit – ex. 90 days same as cashBank Credit Cards – May be used at a variety of businesses, retailer sends the bank the charge slip for payment. The bank charges the business a fee for the service. Bank bills the customer. Ex. Mastercard, Visa
13 Travel and Entertainment Cards – used at restaurants, clubs, hotels, etc. For travelers who don’t want to carry large amt. of cash. These charge an annual fee. The balance must be paid at the end of the month. Ex. American Express, Diners Club
14 Secured Loans – The borrower pledges some valuable possession as collateral. If the loan isn’t repaid the item belongs to the lenderUnsecured Loans – Signature Loan – higher risk loan so interest rate could be higher, offered to those with excellent credit ratings. No collateral
15 Sources of Credit Commercial Banks Savings and Loan Associations Credit UnionsSales Finance CompaniesOther businesses (Manufacturers, wholesalers, retailers, etc)
16 Costs of Credit Annual Fees – a fee just to have the card Finance Charges – interest charged on unpaid balanceHigher Prices – businesses must cover the expense of offering credit and protect itself against those who do not repay.Interest Rates – Fee the lender charges for the use of the money.
17 Benefits to Businesses who offer Credit CompetitiveGain new customersEncourage customers to buyFoster customer loyaltyMarketing information tool
18 Benefits of Obtaining Credit Purchase expensive itemsConvenienceEmergency itemsMaintain stock levelsBuy time until there is available cashCredit ratingSave money (in some instances)
19 Credit Reports National Credit Bureaus Experian Equifax Trans Union A credit report is now free, but to get your credit score there is a charge.Credit report can be checked by anyone with whom you are trying to obtain credit, prospective employers, landlords, insurance agents
20 6 C’s of CreditLenders look at these things to see if you qualify for credit - Are you a good risk?Character (Your reputation for repaying)Capacity (Do you have the ability to repay?)Capital (What assets or financial resources do you have. Ex. Property, savings, etc)
21 Collateral (Something of value that you agree that the bank will take if you do not pay the loan) Coverage (Do you have enough insurance to cover the loan if something should happen to you)Circumstances (How much money are you requesting? What will it be used for? and For how long will it be needed?"
23 Warning Signs of Financial Difficulties Not knowing how much you oweOften paying bills lateObtaining a new loan to pay old loansPaying only the minimum paymentSpending more than 20% on loans and credit card paymentsJob loss would cause immediate financial problemsSpending more than you earnUsing savings to pay day to day expenses