Depository Institutions Take Charge of Your Finances 1.7.3

Depository Institutions Depository Institutions – businesses which offer multiple services in banking and finance These institutions include: Banks Savings and Loans Credit Unions They are regulated by various state and federal agencies This is what the power point presentation will cover to give the students an idea of the topics.

Depository Institutions Why consumers may use them: Why consumers may not use them: Fees are too high Minimum balances required are too high They wish to keep their financial information private To keep money safe To receive the advantages of interest earning accounts To have the opportunity to receive lower cost loan

Federal Reserve Bank Distributing and receiving cash and coin Federal Reserve Bank – is part of the central banking system in the United States Collecting checks Electronically transferring funds Distributing and receiving cash and coin Services include:

Federal Reserve Bank Which federal reserve bank is located in your region?

Life of a Deposited Check Step 1: A check is deposited… Step 2: The depositor’s bank encodes, endorses, and sends the check to the reserve bank in the region or to a private clearing house Step 3: Then the check makes its way to the regional reserve bank, or the clearinghouse for the region where the check originated Step 4: From here it goes to the check writer’s bank Step 5: The check writer’s bank deducts the amount from the account

Depository Institutions Commercial Bank Credit Union Savings and Loan Association

Commercial Bank Commercial Banks Usually the largest depository institutions Considered full-service depository institutions Available to a variety of consumers Examples – Wells Fargo, US Bank, Chase Bank

Credit Union Credit Unions Owned by members who share a common bond Non-profit cooperative depository institution Owned by members who share a common bond Examples – Rocky Mountain Credit Union, Teachers Federal Credit Union

Savings and Loan Association (S&Ls) Focus on providing loans and mortgages Customers must have a savings account with them Examples – American Federal Savings Bank, Pioneer Federal Savings & Loan.

Types of Insurance Federal Deposit Insurance Corporation (FDIC) Federal government agency which protects depository institution accounts Insures commercial banks and savings and loan associations National Credit Union Administration (NCUA) Provides insurance for credit unions

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

Interest Type of account Interest rate Impact on the consumer Interest - the amount of money that is either gained or lost when accessing services offered by a depository institution Interest rate - the percentage used annually to calculate the total interest either gained or lost Type of account Interest rate Impact on the consumer Interest bearing - money earned from an investment instrument High More money earned by the consumer Low Less money earned Interest bearing - the charge for money that a consumer borrows from a depository institution More money paid by the consumer Less money paid Credit unions typically offer rates which have the most positive impact on the consumer

Depository Institution Services

Common Services Offered Checking account Also known as a Share Draft Account at a credit union Paper checks or debit cards that are used to withdraw money May or may not be interest earning Savings account Also known as a Share Account at a credit union An account in which money is typically deposited to earn interest Interest earning

Interest Bearing Accounts Ownership, represented by shares in a corporation Stock Share certificate account at a credit union An insured interest – earning savings instrument with restricted access to the funds Certificate of Deposit An account which offers higher interest rates than a savings account and may offer limited check writing privileges Money Market Account A debt instrument issued by an organization such as a business or the government Designed as an investment for the purchasers to earn interest Bond

Interest Bearing Accounts Credit Card A card used to make a purchase now and repay later If the balance is paid before the grace period ends, interest is not added If the balance is paid after the grace period, the payment of interest is required Loan Money borrowed and paid back with interest Mortgage – loan for a home Personal – interest rates vary depending upon type of loan Loan types can include vehicle, school, etc.

Additional Services Which May Be Offered Safe-Deposit Box A secured box in a bank to be used for valuable and important personal items. Financial Counseling Information and advice is given to customers to help make financial decisions.

Conclusion& Review

Review 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