Chapter 5 Section 5.1

What are we going to cover? Identify types of financial services Describe the various types of financial services.

What can banks offer you? Break them up into two categories. Short – term Long - term Short-Term Needs Daily purchases Living expenses Emergency fund Daily Cash Needs Savings Checking Credit 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

Long-Term financial security Long-Term Needs Long – Term Needs Major Purchases Long-Term financial security Savings Credit Services Investment Services Other Services Certificates of Deposit (CD) U.S. Savings Bonds Cash loans for cars, education or homes Mutual Funds Financial Advise Tax Preparation Insurance Budgeting

Banks offer 3 major types of services Savings Time Deposit – when someone puts money into the bank for a period of time. Payment Services Checking Account Borrowing Short-term Long-term

Electronic Bank Services Direct Deposit An automated deposit system where money is automatically put into your account without you having to cash the check. 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

Plastic Payments Point-of-Sale Transactions Store-Valued Cards 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.

Plastic Payments Continued 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.

Opportunity Cost for Financial Services Is a higher interest rate on a certificate of deposit worth giving up liquidity? Would you trade the convenience3 of getting cash from the ATM near you or getting lower fees to travel farther…

FDIC and SAIF Federal Deposit Insurance Corporation (FDIC) This is the insurance company that covers your money in case something were to happen to it. Up to $100,000 per account. Savings Association Insurance Fund (SAIF) This is still run by the FDIC but is for Savings and Loans.

Two major types of financial institutions 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.

Deposit Institutions 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

Deposit Institutions 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.

Non-Deposit Insitutions 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 Mortgage 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.

Bank Assignment #2 You are to go back to two banks again. They can be the same as last time. However here are a new set of questions that you need to ask. What type of bank is this? If I was to put money into this bank….. What would be my best short term option, long term option? What fees are attached to your checking/savings accounts. Is this institution FDIC or SAIF insured?