Depository Institution Essentials

What is a Depository Institution? Depository institutions are businesses which offer multiple services in banking and finance Commercial Banks Credit Unions These are the two most common types of depository institutions. What is the name of a depository institution in your community? ?

Types of Depository Institutions Commercial Bank Credit Union Description Full service institutions- may offer all of the services provided by depository institutions Non-profit cooperative institution that is owned by the members and often provides more customer friendly interest rates than commercial banks Used by? Open to anyone who wants to utilize a depository institution Members must possess a common bond Type of Insurance Coverage Federal Deposit Insurance Corporation (FDIC) National Credit Union Administration (NCUA) Insurance Protects Will restore the lost funds in savings tool accounts up to $250,000 per account

Choosing a Depository Institution All depository institutions differ from one another in regards to locations, services offered, interest rates offered, and specific features provided Choose the correct depository institution to meet individual needs Individuals may choose to use one depository institution or multiple depository institutions Individuals may have more than one type of account at the same depository institution

Choose a depository institution that will help meet financial goals A goal is defined as the end result of something a person intends to acquire, achieve, do, reach, or accomplish Financial goals are specific objectives to be accomplished through financial planning

Advantages and Disadvantages of Using a Depository Institution Do you use a depository institution? ? Assists in managing finances and reaching financial goals Protection from loss (insurance) Opportunity to earn interest May have to pay fees May have required minimum balances Sharing financial information

Services Offered by Depository Institutions Individual depository institutions may offer all or some of these services. Services Offered by Depository Institutions Savings Tools Investment Tools Credit Safe-Deposit Boxes Financial Counseling

Services Many services offered by depository institutions are interest bearing Interest bearing accounts either charge the consumer interest for money borrowed or earn interest for the consumer Interest rate - percentage rate used annually to calculate the total interest either gained or lost from an account Interest - the price of money Look for high interest rates on interest-earning accounts and low interest rates when borrowing money.

Savings Tools Savings tools are secure, easily accessible accounts that assist in money management May be interest or non-interest earning As long as the depository institution is insured, savings tools are insured against lost Checking Accounts Savings Accounts Money Market Deposit Accounts Certificate of Deposits (CDs)

Savings Tools Checking Account Savings Account Used to transfer funds deposited into the account to make a cash purchase Interest or non-interest earning Hold money not spent on current consumption Interest earning At a credit union a checking account is known as a share draft account and a savings account is known as a share account.

Savings Tools Money Market Deposit Account Certificate of Deposit Offers higher interest rates than a savings account Have a minimum balance requirement Limited to a certain number of transactions each month Interest earning Restricted access to the funds

Investment Tools Stocks Bonds Earn higher interest rates than savings tools but the funds are not as easily accessible Not insured against loss Stocks Bonds

? Credit Loans Credit Cards Credit is when goods, services, or money is received in exchange for a promise to pay a definite sum of money at a future date Consumer is charged interest Loans ? What might a person need a loan to purchase? Credit Cards

? Other Services Safe-Deposit Boxes Financial Counseling A secured box to store valuable and important personal items Information and advice is given to customers to help them make financial decisions What services offered by depository institutions would you use? ?

Depository Institution Features Electronic Banking (E-Banking) Made possible by electronic funds transfers (EFTs)- utilize computer networks to transfer funds electronically (rather than by check or cash) among depository institution accounts Adds to the convenience and money management tools of certain depository institution services Allows 24-hour access to move money electronically in a fast and paperless way

Advantages and Disadvantages of E-Banking 24-hour access Fast transactions Paperless transactions Convenience Worldwide access Increased risk of fraud and identity theft if consumers are not careful with their personal information Regulation E was established to combat the security issues of electronic banking Covers all EFT’s including transfers occurring through an electronic terminal, computer, telephone, or magnetic tape

E-Banking Safety To take full advantage of e-banking: Keep personal security as your first priority Know how to protect your personal information If a consumer feels his or her funds have been accessed without permission Report the problem immediately to the depository institution involved

Direct Deposit & Direct Payment Types of E-Banking Will vary among depository institutions Will vary between services and accounts at the same depository institution Direct Deposit & Direct Payment Debit Cards Online Banking ATM’s

Debit Cards Plastic card which looks like a credit card but is electronically connected to the cardholder’s depository institution account Functions like a check but electronically Usually used for savings tools, especially checking, savings, and money market deposit accounts Require using a personal identification number (PIN) or signature to perform transactions

Debit Card Safety Tips Keep receipts and check statements carefully and frequently for any unauthorized or incorrect charges Sign the back of the card in the signature box with “Please see ID” in addition to a signature Do not make a PIN number one that reveals a birth date, social security number, address, or telephone number Keep PIN numbers safe If a debit card is lost, report it to the depository institution as soon as possible

Fraudulent Debit Card Charges If reported within 2 days, the consumer is held responsible for no more than $50 in fraudulent charges If reported within 60 days, the consumer is held responsible for no more than $500 in fraudulent charges After 60 days, the consumer is held liable for no more than the amount of unauthorized transfers

Automated Teller Machines (ATMs) Electronic computer terminals which offer automated, computerized banking Usually used for savings tools, especially checking and savings accounts Accessed with ATM and/or debit cards Allow customers to make deposits, withdrawal cash, make account transfers, and check account balances May be offered in many different locations or few (if any) locations

Direct Deposit & Direct Payment Direct Payments Allows paychecks and benefit checks to be directly deposited into a specified depository institution account (savings or investment tools) Authorize bills to be paid electronically by a specified depository institution account (savings or investment tools)

Online banking is also known as internet banking. Complete transactions with a depository institution from a personal computer (PC) or through other wireless technology (personal digital assistant (PDA) or cellular phone) May access account information and statements, transfer funds, manage and pay bills, and apply for loans and mortgages May be used for savings tools, investment tools, and credit accounts

Online Banking Safety Tips The Uniform Resource Locator (URL) should end with an “s,” https://www.yourbank.com. Or, have a closed pad lock in the bottom right hand corner of the website Do not authorize online bill paying through an email account, go directly to the company’s website Passwords should be combinations of letters, numbers, and characters Change passwords at least once per month Make sure to log out from online bill paying sites immediately Never enter an online banking site on a wireless network away from home; use a wireless network at home only if it is thoroughly protected What features offered by depository institutions would you use? ?

Researching Depository Institutions What services does the depository institution offer? What features of these services are offered? Does the depository institution offer high interest rates on interest-earning accounts and low interest rates on credit accounts? Where is the depository institution located? Is the depository institution insured against loss?

Summary What is a depository institution? How do depository institutions differ from one another? How should an individual choose a depository institution? Businesses which offer multiple services in banking and finance Type Services offered Interest rates offered Location Features offered Research depository institutions and choose the one(s) that best fits needs and helps reach personal financial goals

Summary Depository institutions offer many services to customers. What are these services? Depository institutions offer features to their services. What are these features? Savings tools Credit Safe-deposit boxes Investment tools Financial counseling Electronic banking- Debit cards ATMs Direct deposit Direct payment Online banking Find the depository institution that best fits your needs and helps you reach financial goals!