1. Thursday, March 30, 2017
Objective: Students will be able to identify the types of loans available to consumers and explain the responsibilities and obligations of borrowing money. Purpose: If you need additional money to make a purchase or investment, it helps to know how to get that money.

2. Banks Bank: A financial institution licensed as a receiver of deposits
Two types: Commercial Banks and Investment Banks
Banks are heavily regulated by the government
Why do you think this is the case?

3. Commercial Banks

4. Commercial Banks
Main Responsibilities: managing withdrawals and deposits
Also supply short-term loans to individuals and small businesses
Help customers manage day-to-day transactions
Purpose for consumers: Use for basic checking and savings accounts, certificates of deposit and sometimes for home mortgages

5. Banks earn interest by using the money customers have deposited to lend to businesses and other borrowers.

6. The Fed requires banks to keep a fraction of their funds on hand and lend the remainder to customers. What could happen if banks kept only 5 percent in reserve?

7. Impact of Bank Size Large Banks Small-Bank Networks
“Big Four” banks: Chase, Citibank, Wells Fargo, Bank of America
Advantages: many convenient branch and ATM locations
Disadvantages: higher fees and impersonal nature
Small-Bank Networks
Advantage: more personalized
Disadvantages: only regional or local service, fewer ATMs
Examples: US Bank, PNC, BB&T

8. Savings banks and S&Ls have become less common because they don’t differ significantly from other banks. About how many more commercials banks are there in the United States than savings banks?

9. What lenders look for Stable employment Stable residence
Responsible handling of other debts
The more money that a banks lends out, and the higher the interest rate, the more profit a bank can make.

10. Information to know when borrowing money
amount borrowed
interest rate
term (length of the loan)
payment schedule (how often are payments due)
total payments

11. Loans
Purposes:
Help individuals start businesses
Help existing businesses grow
If an individual fails to repay a loan, that person defaults

12. Types of Loans Secured loans Unsecured loans
a loan that is obtained by offering an asset as collateral to ensure repayment of the loan
you lose the asset if you are unable to make the payments
examples: Car loan, mortgage/home loan
Unsecured loans
a loan that is obtained without the use of collateral
fines or lawsuits are filed if you are unable to make the payments
examples: payday loans, student loans, credit cards

13. Other Loans Payday Loans Consolidated Loans
short-term loans borrowed using your next paycheck
have high APRs and can be difficult to pay off
Consolidated Loans
a loan made in order to consolidate several debts into one loan
usually taken out for the purpose of reducing the monthly payments by extending them over a longer time period

14. Electronic Banking Automated Teller Machines (ATMs)
Computers that customers can use to withdraw money from a bank account at their own convenience
Costs: no fee if ATM is operated by the bank a customer uses, otherwise, there is a minimal fee (usually between $1.50 and $3.00)

15. Having a Checking Account
Make sure that the bank you use is insured by the FDIC
FDIC: a federally sponsored corporation that insures your money up to the insurance limit of $250,000 per account
You need an ID and Social Security number to open a checking account
Money must also be deposited in your new account before it becomes active

16. Having a Checking Account
Debit Cards
money you spend is deducted from your checking account balance
also used to withdraw money from ATMs, giving you access to your money 24/7
Direct Deposit
allows your employer to deposit your paycheck directly into your bank account
An employer may ask for your Social Security number, a voided check containing your bank’s routing number, and your account number

17. Types of Checking Accounts
Basic Checking
useful if you have few bills and limited debit card uses
monthly maintenance fees may apply unless you retain a minimum balance or enroll in direct deposit
Free Checking
the free period may only be for the first several months

18. Online Banking
allows you to access your statements, canceled checks, and notices online only
automatic bill paying: bill is automatically paid by the bank on a predetermined date
You save time, postage, and the possibility of missing a payment and incurring late fees

19. Follow these tips to develop good habits that will help keep you protected when banking online. Online transactions offer layers of encrypted protection to safeguard your transaction and privacy.

20. Types of Checking Accounts
Checking with Overdraft Protection
money is lent to you by the bank in case of an overdraft, up to a preset limit
this service comes with hefty fees
No matter what type of account you have, your bank will send you a monthly statement that lists all of your transactions
Make sure that the statement matches your records

21. To avoid problems with checks: 1. Write clearly. 2
To avoid problems with checks: 1. Write clearly. 2. Do not cross out or write over a mistake. 3. Tear a check with any errors into small pieces and write “Void” next to the check number in your check register. 4. NEVER write a check for more than your account balance.

22. How to balance a checkbook
Enter all transactions into your checkbook register each day. This includes ATM withdrawals, online bill payments and debit card purchases.
Review your account statement as soon as it arrives. Compare the monthly statement to your checkbook register, and place a check mark next to all of the items that match.

23. How to balance a checkbook
Adjust your checkbook register if necessary. Add or subtract items on your register that appear on your statement but were overlooked when filling in your register.
If you find errors, double-check everything. It’s easy to make a mistake such as transposing numbers, so it’s a good idea to double-check every entry first. Then, if there are still errors, contact your bank.

24. Budgets can vary based on lifestyle and income
Budgets can vary based on lifestyle and income. Developing a budget that includes all of the categories of spending will help determine how much money to set aside for each category.

25. Be budget smart! Follow these tips to stay on track with your spending and saving.

26. Evaluating a Cashless Economy