1. Banking Services: Savings and Payment Services
CHAPTER 4
Banking Services: Savings and Payment Services
Overdraft fees now average $35 per transaction.
That was $31.9 billion in 2013.
-- The Wall Street Journal

2. Types of Financial Institutions
Deposit type financial institutions
Commercial banks – for profit – insured by FDIC
Credit unions – nonprofit – insured by NCUA
Non-deposit type financial institutions (uninsured)
Money market mutual funds
Post office, convenience stores – money orders
Check-cashing outlets charge 1% to 3% or more
A bank or credit union will cash your checks for free
Pawnshops make loans on possessions (60%?!)
Loan-Until-Payday companies (244%?! 400%!)
Where do you see the most check-cashing outlets, pawnshops, loan-until-payday companies, etc.?

3. Types of Financial Accounts
Savings accounts
Savings accounts, share accounts, Certificates of Deposit (CDs)
Payment accounts
Checking accounts, share draft accounts
Overdraft Protection? Careful! Compare costs.
Must now “opt-in”
Other accounts
Money market
Insured if at bank or credit union
Uninsured if at a mutual fund company
Trust account
Asset management accounts
Club accounts – “Vacation Club,” “Christmas Club”
Tanda? Cundina? Paluwagon?

4. Types of Payment Methods
Checking accounts
Usually free if enroll in electronic statements
Older forms of payments
Certified check
Cashier’s check
Money order
Travelers checks
Newer forms of payments
Debit cards, credit cards
Gift cards, smart cards
Paypal, Apple Pay, Android Pay

5. Automated Teller Machines
A computer terminal that allows customers to conduct banking transactions
Debit card or cash card activates transactions
Linked to a bank account – Requires a PIN
Liability if debit card is lost or stolen
To reduce ATM fees you can...
Compare ATM fees before opening an account
Use your own bank’s ATM when possible
Withdraw larger cash amounts as needed
Use personal checks, traveler’s checks, credit cards, and pre-paid cash cards when traveling

6. Evaluating Savings Plans
Rate of return or yield
Percentage increase in value due to interest
Compounding - interest on interest
Annually, semiannually, quarterly, daily
Annual Percentage Yield (APY)
After-Tax Rate of Return
(1 – Marginal-Tax-Rate) x Rate-of-Return
(1 – 25%) x 4% = 0.75 x .04 = 0.03 = 3%
So even if you are earning 4%, after you pay the taxes on the interest you earned, you are actually earning only 3%

7. Check Reconciliation
More than half Americans do not reconcile their checkbook balances
Check Register
Keep it current!
Write every transaction down – Immediately!
Keep an electronic register and a written one
Bank Statement
Check reconciliation forms
Check register spreadsheet
Quicken, etc.

8. Check Reconciliation When you get the monthly bank statement…
(continued)
When you get the monthly bank statement…
Record cleared checks
Identify outstanding checks
Record deposits confirmed
Identify deposits in transit
Look for transactions that were left out of the check register
Reconcile!
Let’s try an example…