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Consumer Education Chapter 7

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Presentation on theme: "Consumer Education Chapter 7"— Presentation transcript:

1 Consumer Education Chapter 7
Banking Services Consumer Education Chapter 7

2 How Banks Work 7.1

3 How Banks Work Banks are a business; they work to earn a profit
Most profit comes from interest charged on money they lend to customers Money lent out to customers comes from the deposits of other customers

4 How Banks Work – Why use banks?
Protect your money’s purchasing power Inflation – interest earned offsets inflation Banks are regulated Owners must invest, money is on reserve Most deposits are insured Federal Deposit Insurance Corporation (FDIC) Up to $250,000 (increased in 2008) Banks make borrowing easier (reduce risk) Money flow – savers to borrowers

5 Money and Financial Transactions
Bartering – trading goods and services without using money Money allows an equal comparison of goods and services Currency – paper money and coins used for financial transactions Check – an order to a bank to pay a specified sum to a business or person (payee) Statement – a monthly record of all transactions of an account provided to a customer by a bank

6 Advantages of Using Checks
Safety-only able to be cashed by payee Bank that cashed the check can be held responsible (should ask for ID) Lost checks can be reissued Can also issue a stop payment order Convenience-don’t have to carry large amounts of cash, can send through mail Record of your transaction- cancelled check (check that is stamped and perforated to show that it has been paid) is proof of payment Register

7 Use Your Checking Account
7.2

8 Your Checking Account Checking account-a bank account that allows depositors to write checks Must be 18. Must open an account with adult if younger. Called a joint account. Will sign a signature card. Bank should check that the signature is authentic. Charged a fee for checks Many charge a service charge unless you have a combination of accounts or a minimum balance. May have free student accounts.

9 Writing a check (blue/black ink)
Correct date (usually valid for 6 months) Write numbers clearly starting immediately after $. Write amount in words. Include cents as 30/100 or no/100 for even dollar amounts If they don’t match, bank uses the written amount (words). Sign! Cannot be cashed without signature.

10 Record in your register (CAN use pencil)
Booklet the comes with the checks. Record all transactions including check numbers. Keep your account balance-total amount in the account at a specific date. Overdrawing (overdraft, bouncing a check) writing a check for more than you have in your account. Often caused by forgetting to record a transaction…by check or debit

11 Cash a check (blue/black ink)
Must endorse (sign on the back) with the exact name on the check Blank-sign only (not very safe) Restrictive-sign and for deposit only Special (endorsement in full)-Sign and pay to the order of ___________ . Referred to as a third party check. Some banks won’t cash.

12 Routing number-identifies the bank
Account number-identifies the customer

13 Deposit slip (blue/black ink)
Any small errors can be neatly crossed out and corrected. Must add initials by error. Significant mistakes-write VOID across a check or rewrite a deposit slip.

14 Checking Account Types and Costs
Types of accounts Interest –bearing accounts- pay interest. May need to have a large minimum balance. Noninterest-bearing accounts-No interest Checking account fees Monthly service charge-flat monthly charge or may charge per transaction (per check) Overdraft fee

15 Balance your checkbook
7.3

16 Reconcile-bringing into agreement the bank statement and your check register
Why reconcile? Avoid overdrafts Catch bank errors Outstanding-a transaction that has occurred but has not yet been recorded by your bank. (debits or credits)

17 What if the bank made an error?
Bring documentation to bank (deposit slip, cancelled check, etc) and talk to teller

18 How to reconcile Step 1: Use the check column to check off all transactions on the statement. Step 2: Write down on form the ending balance from the bank statement. Step 3: Add any outstanding deposits (not checked off) Step 4 Subtract any outstanding checks (not checked off) Remember to look at previous months to see if anything outstanding from previous months.

19 It doesn’t balance! Check that checks and deposit amounts were put into register correctly. Check addition and subtraction on deposits. Check math on register. Check outstanding items. See your banker…do NOT go on until error is discovered.

20 Electronic Banking 7.4

21 Electronic Banking Electronic Funds Transfer
Moving money from one account to another by use of a computer Advantages-less expensive, quicker, less likely to lose money, electronic record of the flow of money Included ATMs, direct deposits, debit cards, auto bill pay, and online banking Automated Teller Machine (ATM) A computer terminal that you can use to make deposits, withdraw cash, transfer money, check your balance, and pay certain bills

22 Personal Identification Number (PIN)
A secret number that identifies you to the ATM as the owner of the card and the account Usually don’t pay a fee for using own bank’s ATM. Report a lost card immediately. Be aware of surroundings at ATMs.

23 Electronic Banking Direct Deposit Debit Cards
Paychecks that are electronically deposited into a checking or savings account Still get a pay stub and/or a non-negotiable check Debit Cards Debit-(on-line) use pin Credit-(off-line) sign. This is NOT credit! In the past, credit took 1-2 days to be deducted from your account

24 Pay by Phone Automatic Withdrawal
Setting up an electronic funds transfer from your account over the phone (routing number and account number are used) Automatic Withdrawal Bills that are paid automatically from your checking or savings account and electronically transferred

25 Consumer Protection and Responsibilities
Electronic Funds Transfer Act Must be informed of fees associated with EFTs Reporting a lost card If reported within two days-maximum liability $50 More than 2 days up to two months-maximum liability $500 Over 2 months-maximum liability entire amount in account

26 Other Banking Services
Certified Checks A personal check on which a bank has written its guarantee that payment will be made Cashier’s Check (or Teller’s Check) A bank check issued and signed from the banks own account Money Order A check that draws on the money of the bank or other financial business that issues it Postal Money Orders – issued and backed by U.S. Postal service Traveler’s Checks – checks that you pay for in advance, and that can be replaced if lost or stolen

27 Traveler’s Checks:

28 Other Payment Methods cont.
Wire Transfers a financial transaction that electronically moves funds from one bank to another Safe Deposit Boxes Boxes with individual locks that can be rented from the bank What’s the difference? Online Bill-Pay / Automatic Payments / Online Payments

29

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