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Banking and Financial Services
CHAPTER 17 Banking and Financial Services 17-1 Banks and Other Financial Institutions 17-2 Financial Services and Electronic Banking 17-3 Checks and Payment Methods
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Chapter 17 Standards Addressed 1.1.11F – Identify, define, and apply key vocabulary 6.2.9C – Explain the structure and purpose of the Federal Reserve System 11.1.9B – Explain the responsibilities associated with managing personal finances: savings, checking, credit, etc. 2.2.11A – Use computation concepts, operations and procedures with real numbers in problem-solving situations.
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Banks and Other Financial Institutions
17-1 Banks and Other Financial Institutions Goals Explain the purpose of the Federal Reserve System. List the types of financial institutions. Discuss factors for selecting a financial institution.
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The Federal Reserve System-FED
Chapter 17 The Federal Reserve System-FED Definition-supervise and regulate member banks and to help banks serve the public efficiently
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The Federal Reserve (Fed)
Chapter 17 The Federal Reserve (Fed) All national banks are required to join, state banks have the choice - “Member Banks” 12 reserve districts, one central Federal Reserve Bank in each district PA, NYC, and NJ is its own district, FED bank in Philadelphia The “bank’s bank” – loans money to member banks Main purpose – designed to regulate help the banking system, keep the economy operate efficiently, and protect depositor’s money
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Chapter 17 Fed Activities Holds “reserves” – banks cannot lend all of the money they receive from customers 15% is held in reserve “Clearing” – paying of checks among different locations
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Chapter 17 Checkpoint >> What is the main purpose of the Federal Reserve System, and where is the closest Federal Reserve Bank located?
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Chapter 17 Answer The Federal Reserve System was created by the federal government to supervise and regulate member banks and to help banks serve the public efficiently by holding reserves and clearing checks. The closest Federal Reserve bank is located in Philadelphia.
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TYPES OF FINANCIAL INSTITUTIONS – DEPOSIT
Chapter 17 TYPES OF FINANCIAL INSTITUTIONS – DEPOSIT Commercial banks – Full Service Banks – offer checking accounts, savings accounts, make loans to people and businesses Most common type, examples – Muncy Bank and Trust, Woodlands Bank, Soverign Want to make a profit Offers a wide variety of services Regulated by – FDIC – Federal Deposit Insurance Corporation Protects depositor’s money in case of bank failure Insured up to $250,000 for each account 99% of all banks are FDIC members Credit Unions – user-owned, not-for-profit, cooperative Financial institution , owned by its members Examples – PSECU, Service 1st, PALCO Members have a common element –partial ownership in the credit union Offers same services as commercial bank Most regulated by the NCUA – National Credit Union Agency; insures up to $250,000.(fix this on your packet!)
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TYPES OF FINANCIAL INSTITUTIONS
Chapter 17 TYPES OF FINANCIAL INSTITUTIONS Savings and loan associations – (S & L) Now “Savings banks” Specialize in savings accts. & home loans Mutual savings banks Very similar to S & L’s, but benefits depositors (similar to credit unions) Primarily found in the northeastern U.S.
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TYPES OF FINANCIAL INSTITUTIONS
Chapter 17 TYPES OF FINANCIAL INSTITUTIONS (continued) Non-deposit financial institutions Life insurance companies Investment companies Consumer finance companies Mortgage companies Check-cashing outlets Pawnshops
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Chapter 17 Checkpoint >> 1. Explain the difference between deposit and non-deposit financial institutions.
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Chapter 17 Answer Deposit institutions, such as a bank or credit union, allow members to deposit money (funds) into an account, where non-deposit institutions do not accept deposits. They earn their money selling specific services.
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SELECTING A FINANCIAL INSTITUTION
Chapter 17 SELECTING A FINANCIAL INSTITUTION Services offered: Savings accounts Checking and payment accounts Loans and other credit plans Other services, such as safe-deposit boxes Safety – “Check 21” Convenience Fees and charges Restrictions
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Chapter 17 Checkpoint >> Of the above factors that should be considered when selecting a financial institution, which one do you think is the most important? Why?
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Financial Services and Electronic Banking
CHAPTER 17 2/4/2019 17-2 Financial Services and Electronic Banking Goals Identify the financial services used by consumers. Explain types of checking accounts. Describe electronic banking activities.
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Chapter 17 Key Terms safe-deposit box service charge debit card
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TYPES OF FINANCIAL SERVICES
Chapter 17 TYPES OF FINANCIAL SERVICES Savings services – checking & savings accounts, CDs Lending services - loans: car, home, personal Investment advice – money management, home buying, stocks, trusts – inheritance, elderly, college savings
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TYPES OF FINANCIAL SERVICES
Chapter 17 TYPES OF FINANCIAL SERVICES Electronic banking – “EFT” Examples – ATM, point-of-sale, direct deposit, automatic bill pay Storage of valuables – safe deposit boxes Examples – jewelry, rare coins, stock certificates Yearly rentals – price depends on size
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Chapter 17 Checkpoint >> What are the main financial services used by consumers? Answer The main financial services used by consumers are savings services, payment services, lending services, electronic banking, storage of valuables, investment advice (trusts).
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TYPES OF CHECKING ACCOUNTS
Chapter 17 TYPES OF CHECKING ACCOUNTS Regular checking accounts- best for those who write a lot of checks No per-check charge, minimum balance Share draft- name for checking account at some credit unions because you are a shareholder
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Interest-earning- requires a high monthly balance to earn interest
Chapter 17 Interest-earning- requires a high monthly balance to earn interest Special checking accounts- best if you only write a few checks per month Charge customers cents per check written
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Checkpoint >> What are three main types of checking accounts?
Chapter 17 Checkpoint >> What are three main types of checking accounts? Answer regular checking accounts interest-earning checking accounts special checking accounts
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COMPARING CHECKING ACCOUNTS
Chapter 17 COMPARING CHECKING ACCOUNTS Minimum balance Interest rate earned, if any Monthly service charge Fees for other services, such as printing checks and stop payment orders Other restrictions
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ELECTRONIC BANKING Electronic Banking (See figure 17-3, pg. 431)
Chapter 17 ELECTRONIC BANKING Electronic Banking (See figure 17-3, pg. 431) Automatic teller machines-withdraw, deposit, check balance, transfer funds Payments at the point-of-sale Direct deposit-payroll, social security Automatic bill payments
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ELECTRONIC PAYMENT OPTIONS
Chapter 17 ELECTRONIC PAYMENT OPTIONS Debit card transactions Online payments Stored-value cards Smart cards
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Chapter 17 BANKING IN THE FUTURE Financial services combined with wireless technology-processing credit charges with cell phones Personalized systems for obtaining, transferring, and using funds-mobile banking apps
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Chapter 17 Checkpoint >> How do you think the common electronic banking services have benefited customers? Positively? Negatively? Explain your answer!
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Checks and Payment Methods
17-3 Checks and Payment Methods Goals Describe three main types of endorsements. Describe proper check-writing procedures. Explain the bank reconciliation process. Identify other payment methods.
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Key Terms endorsement check register stop payment order bank statement
Chapter 17 Key Terms endorsement check register stop payment order bank statement bank reconciliation outstanding checks signature card forgery cancelled checks outstanding checks/ deposits
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OPENING A CHECKING ACCOUNT
Chapter 17 OPENING A CHECKING ACCOUNT Benefits of checking accounts Convenience and ease of making payments Safety to make payments with less risk than using cash Proof of payment A record of finances for managing your money
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THE FIRST DEPOSIT Signature card Joint account – Deposit slip -
Chapter 17 THE FIRST DEPOSIT Signature card Purpose – Joint account – Deposit slip -
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Chapter 17 Signature Card
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TYPES OF ENDORSEMENTS Blank endorsement – Full (special) endorsement -
Chapter 17 TYPES OF ENDORSEMENTS Blank endorsement – Most common type Full (special) endorsement - Two signatures required “Pay to the order of” Restrictive endorsement – “For Deposit Only”
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Sample Endorsements Restrictive Endorsement Special Endorsement
Chapter 17 Restrictive Endorsement Special Endorsement Two Signatures Required Sample Endorsements
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Chapter 17 Checkpoint >> List the three types of endorsements and explain when they are used. Answer The three types of endorsements are blank, restrictive, and full (special). Blank endorsement is the most common and is used to cash a check. A restrictive endorsement limits the use of a check, most commonly used to make deposits. A full or special endorsement allows you to transfer the check to someone else.
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USING A CHECKING ACCOUNT
Chapter 17 USING A CHECKING ACCOUNT Check-writing procedures Elements (parts) of a check The check register Writing a check Proper check writing - Stopping payment
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Chapter 17 Parts of a Check
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Checkpoint >> What is the purpose of a check register? Answer
Chapter 17 Checkpoint >> What is the purpose of a check register? Answer The purpose of a check register is to record all account activities so that the account holder will always know the account balance. The check register is also used for reconciling a checkbook with a bank’s monthly statement.
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THE RECONCILIATION PROCESS
Chapter 17 THE RECONCILIATION PROCESS Bank statement information Determine checks paid Find differences Calculate adjusted balance
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Monthly Account Statement
Chapter 17 Monthly Account Statement
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Chapter 17 Reconciliation Form
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Chapter 17 Checkpoint >> What are causes of differences between the bank statement balance and a person’s check register? Answer Checks that have not cleared Transactions that may not have been recorded in the check register Service charges Deposits mailed to the bank that may not have arrived by the time the statement was issued Interest earned Transactions whose amounts were not recorded correctly
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OTHER TYPES OF PAYMENTS
Chapter 17 OTHER TYPES OF PAYMENTS Certified checks Cashier’s checks Traveler’s checks Money orders
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Chapter 17 CERTIFIED CHECKS Personal check for which a bank has guaranteed payment Certification stamped on face Signed or initialed by a bank officer
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CASHIER’S CHECKS Check that a bank draws on its own funds
Chapter 17 CASHIER’S CHECKS Check that a bank draws on its own funds Costs the amount of the check plus a service fee More acceptable than the personal checks
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Chapter 17 TRAVELER’S CHECKS Special forms designed for making payments when away from home Require your signature in two places Cash a check or pay for a purchase Commonly accepted throughout the world
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Chapter 17 MONEY ORDERS Form of payment that orders the issuing agency to pay the amount printed on the form to another party A bank money order A postal money order An express money order A telegraphic money order
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Chapter 17 Checkpoint >> How does a certified check differ from a cashier’s check? Answer A certified check is a personal check for which a bank has guaranteed payment. A cashier’s check is a check that a bank draws on its own funds.
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