Section 5.1

 Identify types of financial services  Describe the various types of financial services.

 Depository Institutions – businesses which offer multiple services in banking and finance  These institutions include:  Banks  Savings and Loans  Credit Unions  Institutions are regulated by various state and federal agencies

WHY CONSUMERS MAY NOT USE THEM:  Fees are too high  Minimum balances required are too high  They wish to keep their financial information private WHY CONSUMERS MAY USE THEM:  To keep money safe  To receive the advantages of interest earning accounts  To have the opportunity to receive lower cost loan

 Federal Reserve Bank – is part of the central banking system in the United States  Services provided to depository institutions include:  Collecting checks  Electronically transferring funds  Distributing and receiving cash and coin

 Which federal reserve bank located in your region?

 Break them up into two categories.  Short – term  Long - term Short-Term Needs Daily purchases Living expenses Emergency fund Daily Cash NeedsSavingsCheckingCredit Cards Check cashing Automated tellers (ATM’s) Prepaid cards Regular Savings Money Market Savings Regular Checking Online Payments Payment by phone Cashier’s checks Money orders

 Savings  Time Deposit – when someone puts money into the bank for a period of time.  Payment Services  Checking Account  Borrowing  Short-term  Long-term

 Direct Deposit  An automated deposit system where money is automatically put into your account without you having to cash the check.  Automatic Payments Automatic Payments  Auto-Pay – Each month a certain amount is deducted from your account and sent to where you ask it to go.  ATM’s  Automated Teller Machines  Debit Cards  Some banks say that if you loose your card you should contact them immediately. If you do not you may be liable for $500 or more

 Point-of-Sale Transactions  Is a purchase by a debit card of a good or service at a retail store.  ON-line – having a PIN number to authorize a payment. Works very much like a ATM card.  OFF-LINE – a certain amount will be deducted from your account within a few day.  Store-Valued Cards  School lunch cards, long-distance phone cards. Only good for a specific action. Often rechargeable or reloadable.

 Electronic Cash  The thought process of getting rid of actual money.  The idea is that no one will need to carry money with them. Even credit cards. It will be scanned by finger print or some other form of identification.

 Is a higher interest rate on a certificate of deposit worth giving up liquidity?  Would you trade the convenience of getting cash from the ATM near you or getting lower fees to travel farther…

 Federal Deposit Insurance Corporation (FDIC)  This is the insurance company that covers your money in case something were to happen to it.  Up to $250,000 per account.  Savings Association Insurance Fund (SAIF)  This is still run by the FDIC but is for Savings and Loans.

 National Credit Union Administration (NCUA)  Provides insurance for credit unions

 Insurance protection  Each depositor is insured up to $100,000 for money deposited in a regular account  Each depositor is insured up to $250,000 for qualified retirement deposits  The same protection is available from both FDIC and NCUA  Insurance is important because the risk of loss.  Risk of Loss is used to determine which party should be responsible for damage occurring to products after a service transaction has been completed but prior to delivery.

 Deposit  You are putting your money in the bank for you  Non-Deposit  Mainly profit driven.  Use your money for you but also use it to drive the amount of money that they make.

 Commercial Bank  Is a FOR-PROFIT institution  Offers a large variety of financial services  Checking  Savings  Lending  Authorized to do business either through federal or state governments

 Savings and Loan Associations  Is a financial institution that traditionally specialized in savings accounts and mortgages.  Have a federal or state charter.  Mutual Savings Banks  Specialize in savings accounts and mortgage loans.  Pay usually lower interest rates than most commercial banks charge and higher interest rates on savings accounts.

 Credit Unions  Is a nonprofit financial institution that is owned by its members and organized for their benefit.  Offer a large range of many services.

 Life insurance companies  Though we you have probably heard that companies like this cover you incase of an accident.  However some of these companies do much more:  Some offer long-range investment opportunities  Some offer retirement plans.  Investment Companies  These companies get together and invest your money along with many others into stocks, bonds and other securities.  When they do this it is called a mutual fund.

 Finance Company  Make higher-interest loans to consumers and small business that cannot borrow else-where because of below average credit rating.  Mortgage company  Specifically used to borrow money for the purchase of a home.

 Money management is part of everyday life!  Depository institutions offer multiple services – shop around for the one which best fits your needs!  Ensure the depository institution is insured by the FDIC or NCUA  Comparison shop the financial services and interest rates offered before choosing a depository institution