Math, Banking, and Credit Unit Marketing I

Banking Terms to Know Endorse – To sign the back of a check Three types of Endorsements Blank – Signature only Restrictive – “For Deposit Only”, then Signature Full or Special – “Pay to the order of ……”, then Signature

Signature Card – Card filled out when opening an account so the bank can identify your signature Deposit – To put money into an account Withdrawal – To take money out of an account (check, debit card, etc) Debit Card – works same as writing a check. Different from a credit card b/c the money comes right out of your checking acct. instead of being charged

Check Register – a booklet, stub or carbon copy of a check Check Register – a booklet, stub or carbon copy of a check. Used to keep track of all transactions in an account. VERY IMPORTANT to be kept accurate and up to date. Bank Statement – Monthly report of your checking account from the bank. May contain images of cancelled checks. Reconcile – Comparing your bank statement to your check register

Cancelled check – a check that you have written that has cleared the bank (it has been paid by the bank) Overdraft (Bounced check) – writing a check for more money than is in the account. Overdraft protection – Arrangement for the overdraft amount to come out of another account (Like savings) or be charged to your credit card.

Outstanding Check – A check you have written but has not yet been paid by the bank (Doesn’t appear on your statement) Outstanding Deposit – Deposit you have made but doesn’t appear on your statement

Parts of a check

Reconciling a Bank Statement Getting the balance in the check register and the balance on the bank statement to agree. Process Compare C.R. and B.S., make note of any outstanding checks or deposits on the worksheet on the back of the bank statement. Subtract any service charges, etc that may have been taken out of your account from your check register. Complete worksheet on back of your statement Statement Balance + Outstanding Deposits – Outstanding Checks = Balance in Check Register

Credit – Buy Now Pay Later Commercial Credit – Credit for businesses Personal Credit (Consumer Credit) – Credit for personal spending

Laws Dealing with Credit Equal Credit Opportunity Act (ECOA) 1975,1977 – Protects against credit discrimination Truth in Lending 1968 –Requires creditors to disclose the finance charges and APR to applicants Fair Credit Reporting Act 1970 – Gives consumers specific rights in dealing with credit reporting agencies. State Laws – vary by state

Types of Credit Revolving Credit Accounts – Consumers pay what they want toward the balance. Interest may be charged to the balance at the end of the month Installment Credit Accounts – The total amount of the loan is broken down into payments including interest. Monthly installments are made until the loan is paid

Regular Credit Accounts – (Open Accounts) – Allow customers to buy any time during a set period and pay the entire amount due. Budget Credit Accounts – short term credit – ex. 90 days same as cash Bank Credit Cards – May be used at a variety of businesses, retailer sends the bank the charge slip for payment. The bank charges the business a fee for the service. Bank bills the customer. Ex. Mastercard, Visa

Travel and Entertainment Cards – used at restaurants, clubs, hotels, etc. For travelers who don’t want to carry large amt. of cash. These charge an annual fee. The balance must be paid at the end of the month. Ex. American Express, Diners Club

Secured Loans – The borrower pledges some valuable possession as collateral. If the loan isn’t repaid the item belongs to the lender Unsecured Loans – Signature Loan – higher risk loan so interest rate could be higher, offered to those with excellent credit ratings. No collateral

Sources of Credit Commercial Banks Savings and Loan Associations Credit Unions Sales Finance Companies Other businesses (Manufacturers, wholesalers, retailers, etc)

Costs of Credit Annual Fees – a fee just to have the card Finance Charges – interest charged on unpaid balance Higher Prices – businesses must cover the expense of offering credit and protect itself against those who do not repay. Interest Rates – Fee the lender charges for the use of the money.

Benefits to Businesses who offer Credit Competitive Gain new customers Encourage customers to buy Foster customer loyalty Marketing information tool

Benefits of Obtaining Credit Purchase expensive items Convenience Emergency items Maintain stock levels Buy time until there is available cash Credit rating Save money (in some instances)

Credit Reports National Credit Bureaus Experian Equifax Trans Union A credit report is now free, but to get your credit score there is a charge. Credit report can be checked by anyone with whom you are trying to obtain credit, prospective employers, landlords, insurance agents

6 C’s of Credit Lenders look at these things to see if you qualify for credit - Are you a good risk? Character (Your reputation for repaying) Capacity (Do you have the ability to repay?) Capital (What assets or financial resources do you have. Ex. Property, savings, etc)

Collateral (Something of value that you agree that the bank will take if you do not pay the loan) Coverage (Do you have enough insurance to cover the loan if something should happen to you) Circumstances (How much money are you requesting? What will it be used for? and For how long will it be needed?"

Warning Signs of Financial Difficulties Not knowing how much you owe Often paying bills late Obtaining a new loan to pay old loans Paying only the minimum payment Spending more than 20% on loans and credit card payments Job loss would cause immediate financial problems Spending more than you earn Using savings to pay day to day expenses