1. Banking Ms. Nwaolu Intro to Bus. And MKTG 2/20/13

2. Objectives Students will  Understand and discuss the different types of financial institutions  Explain the role of banks and banking system  Discuss regulation of the banking system and its importance  Review things to consider when deciding where to bank  Define and discuss common bank fees

3. Types of Financial Institutions  Deposit Institutions- a financial institution that accepts deposits and channels the money into lending activities. Ex. Commercial Banks, Credit Unions, Savings and Loans, and Mutual Savings Banks  Non-Deposit Institutions- government or private organization that serves as an intermediary between savers and borrowers, but does not accept deposits. Ex. Life Ins. Co., Investment Co., Consumer Finance Co., Mortgage Co., Check Cashing Outlets, & Pawnshops.

4. Deposit Institutions  Commercial Banks are banks that offers full services to the general public and to companies like checking accounts, savings accounts, loans, CD’s, IRAs, etc  Credit Unions are user owned, not-for- profit cooperative financial institutions. Users are called members and they own shares in a CU.

5. Deposit Institutions  Savings and Loan Associations specialize in savings accounts and mortgage loans. However they also offer checking accounts, business loans, & investment services. They usually have a Fed. Or state charter.  Mutual Savings banks specialize in savings accounts and mortgage loans. Some offer personal and auto loans.  Usually cheaper than commercial banks.

6. The Banking System  The Federal Reserve System (Fed), set up by the US gov, supervises and regulates members banks.  US divided into 12 Federal reserve districts w/ a central Federal bank in each district.  The Fed has a few main functions: hold bank reserves & clear checks.  Banks can not lend all of the money they receive from customers. Why?  Clearing of checks refers to paying checks among different banks in different cities.

7. Regulation of Banking System  Federal Deposit Insurance Corp.-Independent Gov. Agency that insures up to 250,000 of deposits per member per bank. (est. by Glass-Steagall Act of 1933)  Anti-laundering & Anti-terrorism  Bank Secrecy Act (BSA) of 1970- prevent against concealing the source of money obtained illegally  Patriot Act of 2001 –US Treasury Secretary has authority to regulate financial transactions, particularly those involving foreign individuals and entities.  Truth in Lending Act of 1968  promote the informed use of consumer credit.  Usury- The illegal action or practice of lending money at unreasonably high rates of interest.

8. How Do You Decide Where to Bank?  Highest rate of interest?  Checking account with low or no fees?  Credit card interest?  Free financial advice?  Convenient locations?  Online banking services?  FDIC insured?

9. Bank Fees  Minimum balance or account maintenance fee-must keep a certain amount in the account at all times  Overdraft & Insufficient funds fee-A deficit in a bank account caused by drawing more money than the account holds.  Stop payment fee-a depositor's order to a bank to refuse payment on a check.  ATM fee-fee for using an ATM that does not belong to your financial institution.  Online banking fee-nominal fee to manage your online bank account.

10. Closure  What are the two major types of financial institutions?  Give examples of the two types of financial institutions?  What is the difference between a commercial bank and a credit union?  What is the FDIC? How and when was it established?  Explain usury and why bank regulation is so important.  What are some things to consider when choosing where to bank?  List and describe some common bank fees.

11. Types of Financial Services  Savings Services  Payment Services  Lending Services  Electronic banking  Storage of valuables  Investment advice  Management of Trust

12. Financial Services  Savings Services-One of the main functions of a financial institution is to safe keep the money of their customers.  Payment Services-The ability to transfer money to others is necessary for daily business activities. Types of payments include checking accounts, debit cards, online payments and automatic withdrawals.

13. Financial Services  Lending Services-Most people, businesses, and governments borrow money at some time. Lending is one of the ways in which banks get income. Lending services include car loans, home loans, personal loans, college loans, etc  Electronic Banking-Electronic banking is the using of computers and other technology to conduct various banking activities

14. Financial Services  Storage of Valuables- banks offer safe- deposit boxes for the storage of items such as birth records, jewelry, insurance polices, & investment certificates.  Investment Advice- there is usually a financial counselor on hand to help people with realty purchases, investments, and money management.

15. Financial Services  Management of trust-Trust are property or money that banks manage on behalf of it customers. Trust are usually good for the elderly or young people who do not have experience or time to manage their trust.

16. Financial Services-Savings Accts Savings Plans  Savings Accounts-low or zero min. balance. Ease of withdrawal. Pays interest while keeping your money safe.  Certificate of Deposit-earn high interest rate than regular savings. Requires a min. deposit. Guaranteed rate of return  Money Market-have large min. balance requirements and pays interest based on current rates of government and corporate securities. Some check writing.

17. Financial Services- Checking Accts  There are 3 main types of checking accounts- Regular checking Accounts, Interest-Earning Checking Accounts, an Special Checking Accounts  Regular checking accounts are good for people who write lots of checks. Also there is no service charge for regular checking accounts as long as there is a minimum balance in the account.

18. Financial Services- Checking Accts  Interest-Earning Accounts- banks may offer accounts that earn interest, however these accounts usually require a higher monthly balance and if the balance falls under a minimum may pay no interest an charge a service fee.  Special Checking Accounts- Special checking accounts are usually for people who do not write a lot of checks. They may also charge a fee.

19. Financial Services- Checking Accts  When comparing checking accounts there are a few things to consider : minimum balance, Interest-rate earned if any, monthly service charge, fees for services like printing or stop payment on checks, any other restrictions.

20. Financial Services  Electronic banking- allows you to have 24 hour access to various banking activities using technology.  Electronic banking activities incl. Automatic Teller Machines (ATMs) Payments at Point of Sale (POS) direct deposit, and Automatic Bill Payments

21. Financial Services  ATMS- commonly called a cash machine, ATMs allow for many banking services. Some of these services include, depositing cash and checks, withdrawing money from various accounts, & checking account balances.  Access to these banking services usually come in the form of debit cards. Debit cards allow you to have access to your money.

22. Closure  List and describe the 7 types of financial services?  List and describe the different types of savings accounts.  What are the different types of checking accounts?  What should you consider when comparing checking accounts?  Describe electronic banking and electronic banking services.

23. Debit cards Advantages  Convenience – easier than writing a check  Replaces checkbook & cash  Accepted where checks might not  Reduces risk of theft Disadvantages  Account must have sufficient funds at time of transaction  Interchange fee charged on seller  Funds removed from account immediately – no more interest

24. Checks and Payment Methods There are a few benefits to having a checking account.  Convenience and ease of making payments  Safety with less risk than cash  Proof of payment  A record of finances for good money management

25. Anatomy of a check

26. Checks  Before you can deposit a check it must be endorsed. An endorsement is written evidence that you received payment or transferred payment to someone else.  There are three types of endorsements: Blank Endorsements, Full endorsements, and Restrictive Endorsements.

27. Check endorsement  Blank endorsement-an endorsement that only consist of the endorsers name. John Q. Smith  Restrictive endorsement-limits the use of the check for the purpose given. For deposit only John Q. Smith  Special or third party endorsement-allows you to transfer the check to another person. Payable to Jane Doe John Q. Smith

28. Checks Completing a check properly is very important.  Write checks only on the form provided by your bank.  Write checks in ink.  Only write checks if money is available.  Use the current date (avoid postdating)  Avoid making checks payable to cash.  Always write out the amount.  Void checks that have errors.  Record every payment from your checking account in your check register.  The check register is a separate book used for recording transactions.

29. Checks  At the end of the month, financial institutions will send you a bank statement ( banks record on the status of your account)  However you should also keep a record using your check register.  When you compare the banks record to your record you should make sure that the totals match. This is called bank reconciliation.

30. Checks  There are other types of checks that financial institutions offer. These checks are: certified checks, cashiers checks, travelers checks, and money orders.  A certified or bank check is a check in which the bank certifies payment. The money comes directly from the account and acts like a debit card.

31. Checks  Cashiers check are checks that the bank writes from its own funds. Usually cashiers check cost a minimal fee if the check is written to someone other than an account holder.  Travelers checks are special forms designed for making payments when you are away from home. They are safer than carrying cash and may have a minimal fee attached. You can usually buy them at banks, credit unions, and travel bureaus.

32. Checks  Money orders are for people who do not have checking accounts and that want to send payment through the mail.  The issuing agency is then ordered to pay the amount printed on the form to another party.  There is usually a small fee for money orders and if you lose them or they are stolen you may use the receipt to make a claim.

33. Closure  What are some advantages and disadvantages of debit cards?  What are some benefits of having a checking account?  On a check, what is a routing number? Who is the payee? Who is the drawee? Drawer?  What are some tips for completing a check properly?  What is a bank reconciliation?  List and describe the different types of bank checks.

34. Credit IBM

35. Objectives Students will  Learn about the fundamentals of credit  Review the different types of loans available  Define some key terms associated with credit  Describe the 5 C’s of credit  Learn about credit scores  Review benefits and concerns of using credit

36. Fundamentals of Credit  Credit is the privilege of using someone else’s money for a period of time.  The idea is that the person borrowing the money will pay the money back at a later date with interest.  Interest is the cost of borrowing money.  The person who receives credit is called the debtor. The person who gives credit is called the creditor

37. Know your loans  Car loan  Home mortgage  Personal Loan  Credit cards  Pawn shops  Instant tax refund  Payday loan  Differences in  Interest rates  Term  Security

38. Credit Card Key Terms  Annual percentage rate (APR) – interest on credit, converted to annual rate  Grace period – period during which interest does not accrue on credit card purchase  Minimum payment – minimum amount that must be repaid each month  Promissory note-written promise to repay  Collateral-Property used for security

39. Credit Card Key Terms Cont.  Cosigner-person responsible for the note if you do not pay  Down Payment-payment of part of the purchase price  Installment loan-monthly payments in specific amounts over a period of time.  Finance charge is the total dollar cost (incl. interest) and all other charges.

40. The 5 C’s of credit  Capacity – how much of a loan can you repay  Monthly income  Existing debt  Capital – assets you already have  Collateral – specific assets for use in securing the loan  Character – how likely you are to repay the loan  Credit history-a record of an individual's or company's past borrowing and repaying of money

41. Credit history Character  Promptness of bill payment  Checking account and check bouncing  Credit card or car loan and timeliness of payments  Job tenure – how long have you held your current job?  Have you used credit before  Housing tenure – how long have you lived at your current address?

42. Credit score  FICO score – your credit history reduced to a number  Between 300 – 850  Most scores between 650 – 799  Experian, Equifax, Transunion  Each has own score  Easy to get history, harder to get good score

43. Credit score  Credit score reflects your life  Missed payments  Number of cards  Amount of credit  Credit score affects your life  Ability to get credit  Interest rate charged  Employment  Insurance  Housing

44. Credit history  Identifying information  Prior credit transactions  Correction  Incorrect information  Fraud  Annualcreditreport.com  Part of history, not part of score  Marital status  Residence  Age Take quiz at www.creditscorequiz.orgwww.creditscorequiz.org Print results Take quiz at www.creditscorequiz.orgwww.creditscorequiz.org Print results Take quiz at www.creditscorequiz.orgwww.creditscorequiz.org Print results Take quiz at www.creditscorequiz.orgwww.creditscorequiz.orgTake quiz at www.creditscorequiz.orgwww.creditscorequiz.org

45. Credit Benefits and Concerns  Convenience- credit can make it easy for you to buy  Immediate possession- credit allows you to have the item now  Savings-sometimes you can buy an item on sale or for a discount when you use credit  Credit rating-if you use credit and pay your bills in full and on time this can help increase your credit score  Overbuying-people may buy everything on credit simply because they can  Careless buying- credit can tempt you to not buy on sale or discount because you get lazy in your shopping  Stores that offer credit may sell items at a higher price than stores that only accept cash. It is expensive to extend credit. You risk non-payment by the debtor  Overuse of Credit- people may overuse credit because it is tempting to buy everything on credit.

46. Closure Quiz  What is Credit?  The person who receives credit is called the _? The person who gives credit is the _____?  Define Interest? APR? Collateral? Cosigner?  Give two examples of Installment Loans?  What are the 5 C’s of Credit?  What are the three credit bureaus? What range are most scores between?  The credit score reflects ___? What does it affect?  List some pieces of information that is apart of your credit history, but not your credit score.  Name 2 benefits and 2 concerns of using credit?