Bank & Insurance Ms. Cichon Rosholt High School

Financial Institutions Commercial Bank: Financial institution that offers a wide variety of banking services including lending. – Saving are federally insured by the FDIC for coverage up to $250,000 per depositor Credit Union: not-for-profit financial institution owned by its members – Savings are federally insured by the NCUA for coverage up to $250,000 per depositor

FDIC= Federal Deposit Insurance Corporation NCUA= National Credit Union Association

What You Need to Know about Account Insurance Certain retirement accounts, such as Individual Retirement Accounts (IRAs), are federally insured up to $250,000 per depositor per insured financial institution As a depositor with an insured financial institution, you do not pay directly for your account insurance protection If a federally insured financial institution does fail, the federal insurers will make any necessary payouts to the depositor

Banking Services Checking and savings account Overdraft protection Loans Credit cards Debit cards ATM Online & telephone banking Direct deposit Money order Wire transfer

Checking Account Facts There are non-interest-bearing and interest- bearing checking accounts. Generally there are fewer restrictions associated with non- interest-bearing accounts

Checking Account Facts Usually there's a “clearing time” involved with checks, but now always. Don’t assume that writing a check allows time of the money to clear. Many companies are now converting the paper check to an electron check, which means funds are instantaneously withdrawn, just as they would be with a debit or check card

Checking Account Facts Do not assume that if you deposit a check, the money will be available immediately. Check your bank’s funds availably policy to see when funds will be available for withdrawal

Types of Savings Accounts Traditional – An account that keeps your funds “liquid” (instantly available for withdrawal) – Typically, traditional accounts provide the lower interest rates of any savings account because of your ability to have instant access to the fund

Types of Savings Accounts Money Market Account (MMA) – The interest rate varies depending on the current market rate – Limited check-writing capability

Types of Savings Accounts Certificate of Deposit (CD) – Deposit that earns a fixed amount of interest over a specified “term” or period of time. – Funds must stay in CD for the full term; early withdrawal my incur a fee – Generally, higher interest rates are paid for longer terms

Types of Savings Accounts Individual Retirement Account (IRA) – A retirement savings account that provides specific tax advantages

Smart Principles of Savings 1.Start any savings process with a goal in mind 2.Pay yourself first -Set up direct deposit to your savings -Consider automatically transferring 10% of your Income directly to your savings -If you don’t see it, you won’t miss it 3. Spend less than you earn 4. Avoid Debt!

Smart Principles of Savings 5. Recognize the difference between needs and wants 6. Avoid late fees and other penalties by paying bills on time 7. Save or invest bonuses and tax returns instead of spending them 8. Participate in employer-matching savings plans

Smart Principles of Savings 9. Create an emergency fund. You should have 3 to 8 months of liquid savings 10. Avoid interest fees on credit cards 11. Save money in interest bearing savings accounts to take advantage of compound interest - Compound interest is earned on a principal amount of money, which is then added to the principal on a regular basis. Interest continues to be earned on the entire amount

Tips for Opening a Checking or Savings Shop around Require written information about accounts you consider opening – The Truth in Savings Act gives you the right Do your research and understand the terms of the account before opening it – What is the APR? (Annual Percentage Rate) and APY (Annual Percentage Yield) for the account? – What are the major benefits for the account? – How does it compare with accounts offered at other financial institutions? – What penalties and fees are associated with the account?

Overdraft Protection Advantage You don’t have to worry about bouncing a check Disadvantage The fee you get charged every time you use it

Loans The Truth in Lending Act (TILA) creditor to give you written disclosure of important terms of credit agreements, such as APR, total finance charges, monthly payment amounts, payments due dates, total amounts being financed, length of the credit agreement, and any charges for late payment

Types of Loans Consumer Loan – Loans to consumers that may be for specified or unspecified purposes Mortgage Loans – For buying or refinancing a home or condominium Auto Loan – For buying a new or used vehicle

ATM Automated teller Machines Charges range from 1.5 to 4 dollars per transaction Maximum about of money to take out

Online and Telephone Banking Check the status of your accounts Update your profile Transfer money between accounts Balance your accounts Pay bills, and more

Money Order A payment order for an amount of money that you specify ahead of time. Merchants lit it because it is a more trust method of payment than a personal check and must have the funds prepaid before issuing

Wire Transfer Electronically money of transferring money from one bank or financial institution to another Immediately available on the receiving end of the transfer

Specialized Services Investment Services- Advice Insurance Trust Services- managing trust, wills, and legal documents and estates Youth Accounts Travelers Cheques Safe Deposit Boxes Certified Checks Cashier’s Checks Notary Services

Fee Service Fee- maintaining an account with a financial institution Check Fee- Fee charged for each check you write or for writing more than a specific limit per month Overdraft Stop Payment Fee ATM Use Fee

What are Finance Charges? Finance Charge: dollar amount the credit will cost you; the extra amount you pay for borrowing an amount of money

APR? Annual Percentage Rate: Cost of credit expressed as a yearly rate that includes costs and fees associated with the loan, measure the “trust cost” of the loan

APY Annual Percentage Yield (APY) The annual Percentage Yield is a percentage rate that reflects the total amount of interest paid on the account for a one0year period, based on the interest rate and how often interest is compounded.