2. Banking
Chapter 7
What types of financial services might help you to better manage your cash flows?

3. Banking
Chapter 7
Understanding the services provided by financial institutions will help you choose the best options to manage your money wisely.

4. automated teller machine (ATM) debit card commercial bank
Banking
Chapter 7
direct deposit
automated teller machine (ATM)
debit card
commercial bank
savings and loan association (S&L)
credit union
certificate of deposit (CD)
money market account
rate of return
compounding
annual percentage yield (APY)
overdraft protection
stop-payment
endorsement
bank reconciliation

5. Banking
Chapter 7

6. Identify types of financial services.
Banking
Chapter 7
Section 1
Financial Services and Institutions
Identify types of financial services.
Describe the various types of financial institutions.
Describe problematic financial businesses.

7. How to Manage Your Cash 7 Banking Section 1
Chapter 7
Section 1
Financial Services and Institutions
How to Manage Your Cash

8. Types of Financial Services
Banking
Chapter 7
Section 1
Financial Services and Institutions
Types of Financial Services
Payment Services
Savings
Categories of Financial Services
Other Financial Institutions
Borrowing

9. Electronic Banking Services
Chapter 7
Section 1
Financial Services and Institutions
Electronic Banking Services
Direct Deposit
Saves time, money, and effort
Safe
direct deposit
an automatic deposit of net pay to an employee’s designated bank account

10. Electronic Banking Services
Chapter 7
Section 1
Financial Services and Institutions
Electronic Banking Services
Automatic Payments
With authorization, funds are withdrawn from your account
Make sure there are sufficient funds in your account
Check your bank statement to make sure the transfer is correct

11. Electronic Banking Services
Chapter 7
Section 1
Financial Services and Institutions
Electronic Banking Services
Automated Teller Machines (ATMs)
automated teller machine (ATM)
computer terminal that allows a withdrawal of cash from an account
ATMs are used with a debit card
A debit card is used with a PIN
debit card
cash card that allows one to withdraw money or pay for purchases with a checking or savings account
Financial institutions can charge fees for the convenience of using ATMs

12. Electronic Banking Services
Chapter 7
Section 1
Financial Services and Institutions
Electronic Banking Services
Plastic Payments
Electronic payments
Online payments
Stored-value cards
Smart cards

13. Evaluating Financial Services
Banking
Chapter 7
Section 1
Financial Services and Institutions
Evaluating Financial Services
Questions to Ask
Is it worth opening a checking account that has no fees—but does not earn interest, if you must keep a minimum balance?
Would you trade the convenience of getting cash from the ATM near your office for lower ATM fees?
Is a higher interest rate on a certificate of deposit worth giving up liquidity?

14. Types of Financial Institutions
Banking
Chapter 7
Section 1
Financial Services and Institutions
Types of Financial Institutions
commercial bank
a for-profit institution that offers a full range of financial services, including checking, savings, and lending
Deposit Institutions
Commercial Banks
savings and loan association (S&L)
a financial institutional that traditionally specialized in savings accounts and mortgage loans, but now offers many of the same services as commercial banks
Savings and Loan Associations (S&L)
Mutual Savings Banks
Credit Unions
credit union
a nonprofit financial institution that is owned by its members and organized for their benefit

15. Types of Financial Institutions
Banking
Chapter 7
Section 1
Financial Services and Institutions
Types of Financial Institutions
Non-Depository Institutions
Life Insurance Companies
Investment Companies
Finance Companies

16. Problematic Financial Businesses
Banking
Chapter 7
Section 1
Financial Services and Institutions
Problematic Financial Businesses
Be Careful of These Financial Businesses
Pawn Shops
Payday Loans
Check Cashing Outlets
Rent-to- Own Centers

17. Comparing Financial Institutions
Banking
Chapter 7
Section 1
Financial Services and Institutions
Comparing Financial Institutions
Where can you get the highest rate of interest on your savings?
Where can you obtain a checking account with low (or no) fees?
Will you be able to borrow money from the institution—with a credit card or another type of loan—when you need it?
Do you need an institution that offers free financial advice?
Is the institution FDIC- or SAIF-insured?
Does the institution have convenient locations?
Does it have online banking services?
Does it have any special banking services that you might need?

18. Comparing Financial Institutions
Banking
Chapter 7
Section 1
Financial Services and Institutions
Comparing Financial Institutions

19. 7 Banking Section 1 Financial Services and Institutions
Chapter 7
Section 1
Financial Services and Institutions
Analyze why it might be worth a person’s time to open a checking or savings account at a bank rather than using a check-cashing outlet.
Answers may vary but the students should realize that many banks offer free checking or savings accounts meaning you can cash a check for free.

20. Compare the costs and benefits of different savings plans.
Banking
Chapter 7
Section 2
Savings Plans and Payment Methods
Compare the costs and benefits of different savings plans.
Explain features of different savings plans.
Compare the costs and benefits of different types of checking accounts.
Use a checking account effectively.

21. Types of Savings Plans 7 Banking Section 2
Chapter 7
Section 2
Savings Plans and Payment Methods
Types of Savings Plans

22. Types of Savings Plans 7 Banking Section 2
Chapter 7
Section 2
Savings Plans and Payment Methods
Types of Savings Plans
Three Limitations of a Certificate of Deposit (CD)
Your money must stay in the account for one month to five or more years.
You must pay a penalty for withdrawing your money early.
There is usually a minimum deposit amount.
certificate of deposit (CD)
savings alternative in which money is left on deposit for a stated period of time to earn a specific rate of return

23. The FDIC insures money market accounts up to $250,000.
Banking
Chapter 7
Section 2
Savings Plans and Payment Methods
Types of Savings Plans
The FDIC insures money market accounts up to $250,000.
money market account
a savings account that requires a minimum balance and earns interest that varies from month to month

24. You can purchase Series EE Savings Bonds from the federal government.
Banking
Chapter 7
Section 2
Savings Plans and Payment Methods
Types of Savings Plans
You can purchase Series EE Savings Bonds from the federal government.

25. Evaluating Savings Plans
Banking
Chapter 7
Section 2
Savings Plans and Payment Methods
Evaluating Savings Plans
rate of return
percentage of increase in the value of savings from earned interest
Factors affecting your selection of a savings plan
Rate of Return
– Compounding
– Annual percentage rate (APR)
Inflation
Tax Considerations
Liquidity
Safety
Restrictions and Fees
compounding
the process in which interest is earned on both the principal and on any previously earned interest
Organizations
annual percentage yield (APY)
amount of interest that a $100 deposit would earn, after compounding, for one year

26. Types of Checking Accounts
Banking
Chapter 7
Section 2
Savings Plans and Payment Methods
Types of Checking Accounts
Checking Accounts
Regular Checking Accounts
Interest-Earning Accounts
Activity Accounts

27. Evaluating Checking Accounts
Banking
Chapter 7
Section 2
Savings Plans and Payment Methods
Evaluating Checking Accounts
Fees and Charges
Special Services
Restrictions
Interest
Minimum balance
Monthly fee
Rates
ATM
Number of transactions
Printing, overdraft,
stop-payment fees
Compounding
Telephone banking
Online banking
Overdraft protection
overdraft protection
an automatic loan made to an account if the balance will not cover checks written

28. Using a Checking Account
Banking
Chapter 7
Section 2
Savings Plans and Payment Methods
Using a Checking Account
Check Register

29. Using a Checking Account
Banking
Chapter 7
Section 2
Savings Plans and Payment Methods
Using a Checking Account

30. Using a Checking Account
Banking
Chapter 7
Section 2
Savings Plans and Payment Methods
Using a Checking Account
If a check is lost or stolen, you can ask the bank to issue a stop-payment order.
stop-payment order
request made to a bank or other financial institution to not cash a particular check

31. Using a Checking Account
Banking
Chapter 7
Section 2
Savings Plans and Payment Methods
Using a Checking Account
Types of Endorsements
Blank
endorsement
signature of the payee
Restrictive
Special

32. Using a Checking Account
Banking
Chapter 7
Section 2
Savings Plans and Payment Methods
Using a Checking Account
Information on Your Bank Statement
Deposits
Checks You Have Written
ATM Withdrawals
Debit Withdrawals
Interest Earned and Fees

33. Using a Checking Account
Banking
Chapter 7
Section 2
Savings Plans and Payment Methods
Using a Checking Account
Use a bank reconciliation form to determine your true balance.
bank reconciliation
report that accounts for the differences between a bank statement and a checkbook balance

34. Using a Checking Account
Banking
Chapter 7
Section 2
Savings Plans and Payment Methods
Using a Checking Account
Other Payment Methods
Certified Check
Cashier’s Check
Money Order
Travelers Check
Prepaid Travelers Cards
Organizations

35. Financial Institutions and Your Money
Banking
Chapter 7
Section 2
Savings Plans and Payment Methods
Financial Institutions and Your Money
Banks make money by making loans. The amount of money a bank can lend is affected by the reserve requirement set by the Federal Reserve.

36. 7 Banking Section 2 Savings Plans and Payment Methods
Chapter 7
Section 2
Savings Plans and Payment Methods
Consider whether you would prefer to have a separate checking and savings account, or an interest-earning checking account. Explain your decision.
Sample answer: separate accounts, to avoid a minimum balance or for higher interest rates.

37. The Federal Reserve System
Banking
Chapter 7
The Federal Reserve System
The Fed has the responsibility of monitoring the economy.

38. Banking
Chapter 7

39. Banking
Chapter 7

40. H.O.T. pg. 220, Question 11, Interest Earned see pgs. 206/207
First Choice: 2.5%, Compounded QUARTERLY
Starting principle ($1,300) x 2.5% (.025), divided by 4 (4 quarters) = interest earned…add to starting amount = principle + interest
After Q1= [($1,300 x .025) /4] + $1,300 = $1,308.13
Q2= [($1, x .025) / 4] + $1, = $1,316.30
Q3= [($1, x .025) / 4] + $1, = $1,324.53
Q4= [($1, x .025) / 4] + $1, = $1,332.81
APY = ($1, $1,300) / $1,300 = (2.52%), compare to APR of .025 (2.50%)
Annual Percentage Yield = rate of return, amount of interest that a $100 deposit would earn, after compounding for one year
Second Choice: 2.75% Compounded BI-MONTHLY (every two months)
Starting principle ($1,300) x 2.5% (.025), divided by 6 (bi-monthly) = interest earned…add to starting amount = principle + interest
Period 1 = [$1,300 x .0275) / 6] + $1,300 = $1,305.96
2 = [$1, x .0275) / 6] + $1,300 = $1,311.94
3 = [$1, x .0275) / 6] + $1,300 = $1,317.96
4 = [$1, x .0275) / 6] + $1,300 = $1,324.00
5 = [$1,324 x .0275) / 6] + $1,300 = $1,330.07
6 = [$1, x .0275) / 6] + $1,300 = $1,336.16
APY = ($ $1,300) / $1,300 = (2.78%), compare to APR of (2.75%)
The second account will earn more interest.($ compared to $32.81….$3.35 more)

41. End of