Banking Today

Measuring Money Supply All the available in the U.S. M1 Liquid Money (Easy Access) 44%= Currency, money not in an account 55%= Checking Accounts M2 M1 + Near Money (Interest Bearing) Exp. Savings Accounts, CD, Money Market

Banking Services Storing Money Saving Money Safe place to keep money Saving Money Savings, Checking, Money Market, CDs Loans (More money out than in) Lending helps economy function, money in hands of consumers increases demand, money in investors’ hands leads to more businesses Banks loose money if borrowers default on loans, do not pay back

Banking services, cont. Mortgages Credit Cards Loan to buy real estate Down Payment, minimum of 20% to avoid insurance fees Period of time, usually 30 years Credit Cards Interest Based Loans bank lend at time of purchase and consumer repays in bill

Types of interest Interest = price paid to use borrowed money Principal = initial amount of borrowed money Simple interest is only applied on the principal Compound interest is applied to both principal and accumulated interest

Types of Financial Institutions Commercial banks Traditionally provided services to businesses Offer checking, savings, and loans Some state chartered others are national Savings and Loan Associations Traditionally just savings accounts and loans for homes Thrifts- loans for working class people Savings Banks Offered savings and checking accounts for people with less deposits than commercial banks

More Financial Institutions Credit Unions Co-ops that specialize in lending and some offer checking accounts Finance Companies Offer consumer installment loans for large cost items Higher rates due to better chance of defaults

Electronic Banking Automated Teller Machines Debit Cards Home Banking Replaces the need for some tellers Debit Cards Able to withdraw money from a checking account from ATM or purchase goods at stores with an ‘electronic check’ Home Banking Internet banking, paying bills and other banking services Automatic Clearing Houses Regular payments in place of writing physical checks for bills Stored Value Cards Pre-paid cards, electronic gift cards, rebate cards