The variety of banking services Banking and Financial Services

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Categories of Banking Services * May vary from bank to bank, but these are common services offered Retail, also referred to as “Personal” Corporate, business, or commercial Investment Wealth Management Many banking services exist and are offered by banks and other financial institutions, which is why they may be categorized differently from each other. They generally are considered retail or personal banking, business or commercial banking, investment services, and wealth management. Copyright © Texas Education Agency, 2013. All rights reserved. 3

Banking Services - Retail Personal Checking Savings Lending Other Services Banking Service Options Retail, or personal, banking services include, but are not limited to, checking accounts, savings accounts, lending, and other services. There are several options that institutions use to offer these services to customers. Copyright © Texas Education Agency, 2013. All rights reserved. 4

Checking Accounts Types: Free checking Money market Express Maintain a low or zero minimum balance Student accounts Money market Interest earned on an average balance Limited withdrawal or checking privileges Express If you prefer online banking or ATMs May be a fee to use the drive-through Lifeline-used mainly by lower-income customers Banks offer many types of different checking accounts depending upon the needs of the customer. Free checking is suited for students and those people who may only be able to maintain a low minimum balance. Money market accounts benefit customers with a higher balance but who may not need to write many checks. Express-type accounts are for people who would rather bank online or using an ATM and may be charged a fee to use the drive-through teller. Some banks have a lifeline account for lower-income customers. Copyright © Texas Education Agency, 2013. All rights reserved. 5

Checking Accounts (continued) Fees Overdraft Monthly maintenance Debit cards Check ordering Other considerations of checking accounts include various fees such as overdraft and monthly maintenance fees, the use of debit cards, and whether or not checks will be ordered for the account. Copyright © Texas Education Agency, 2013. All rights reserved. 6

Savings (Deposit) Accounts Basic Low interest rate Low, if any, minimum balance Money Market Higher interest rate Higher required balance Limited withdrawal privileges CDs (Certificates of Deposit) Fixed interest rate, depends upon length of time specified Penalty if funds withdrawn early Various savings, or deposit, accounts are offered by banks as well. Basic savings usually provides a low, if any, interest rate and a low minimum balance requirement. Money market accounts offer higher interest rate due to the higher balance, but limited withdrawal privileges. Certificates of Deposit, CDs, offer a fixed interest rate based on the length of time committed, but charge a penalty if the money is withdrawn early. Copyright © Texas Education Agency, 2013. All rights reserved. 7

Lending Mortgage Auto Student Unsecured vs. secured New loan Home equity refinance Auto Student Unsecured vs. secured Unsecured=personal loans with no collateral and higher interest rate Secured=collateral such as home, car, electronics and lower interest rate Lending services include loans for a new home, refinancing, or home improvements, auto loans, student loans. They are classified as either secured or non-secured. Secured has collateral which can be taken in the event of non-payment. Unsecured loans have no collateral which usually results in a higher interest rate. Copyright © Texas Education Agency, 2013. All rights reserved. 8

Other Services Investments Wealth Management Insurance Credit Cards IRAs (Individual Retirement Accounts) Stocks, bonds, mutual funds Wealth Management Customers with assets generally more than $1 million Bank can make decisions on behalf of the customer or the Customer can make decisions Insurance Credit Cards Compare rates Reward programs Other services include investments, wealth management, insurance, credit cards, and trust services. Copyright © Texas Education Agency, 2013. All rights reserved. 9

Other Services (continued) Trust Services Estate planning – how assets are handled after a customer’s death Trust account administration – an officer of a financial institution can be appointed administrator Retirement planning – 401(k), IRA Safe-deposit boxes Trust services are usually for estate planning and retirement planning. An employee of the financial institution can be appointed as the trustee and the institution can charge fees for trustee services. Safe-deposit boxes are also provided at many commercial banks, in several sizes and for different prices. Copyright © Texas Education Agency, 2013. All rights reserved. 10

Banking Service Options Physical location Online 24/7 access Mobile Download app Photo (substitute) check feature ATM Withdraw Deposit Balance Banking services can be accessed and offered in a number of ways. Today, aside from the physical location, services and accounts can be accessed online through a computer, mobile as in phones or tablets, and through ATMs. Copyright © Texas Education Agency, 2013. All rights reserved. 11

Banking Services - Commercial Raising Capital Investing Risk Management International Payroll In addition to personal banking services, there are also corporate, or business/commercial, services. These services include ways to raise capital, investing, risk management, international services, and payroll. Copyright © Texas Education Agency, 2013. All rights reserved. 12

Raising Capital Commercial loans Real estate SBA (Small Business Administration) loans Interim Financing-construction loans Capital can be raised for projects such as real estate investing and construction loan financing. In addition, businesses can make loans for different purposes, and smaller businesses can obtain financing through SBA loans. Copyright © Texas Education Agency, 2013. All rights reserved. 13

Investing Investing in securities Corporate Retirement plans Managing corporate portfolios Goal of maximizing profit Corporate Retirement plans Offering investment allocation options for a company’s employees Managing funds Financial institutions can provide investment services for businesses such as managing corporate investment portfolios and corporate retirement plans. Copyright © Texas Education Agency, 2013. All rights reserved. 14

Risk Management Types of risk: Insurance: Credit- the potential for borrower non-payment Market (economy)- possible instability Investment- possibility of loss of money Liquidity- difficulty of converting to cash Fraud- possibility of being deceived Insurance: Policies for employees Life, accident, health Warranties and extended service contracts Risk management is an area within an institution that monitors types of business risk that exist which can affect interest rates and products/services that are offered to the business. Common risks examined are credit, market, investment, liquidity, and fraud risk. Another part of risk management is offering types of insurance for employees. These may include life, accident, and health insurance as well as warranties and extended service contracts for products. Copyright © Texas Education Agency, 2013. All rights reserved. 15

International Foreign currency exchange-buying and selling foreign currency to make a profit on exchange rates Trade services-buying and selling foreign or domestic stocks, bonds, and commodities Banks and financial institutions also provide international services such as buying and selling foreign currency as well as stocks, bonds, and other commodities. Copyright © Texas Education Agency, 2013. All rights reserved. 16