Presentation on theme: "Depository Institutions"— Presentation transcript:
1 Depository Institutions Take Charge of Your Finances 1.7.3
2 Depository Institutions Depository Institutions – businesses which offer multiple services in banking and financeThese institutions include:BanksSavings and LoansCredit UnionsThey are regulated by various state and federal agenciesThis is what the power point presentation will cover to give the students an idea of the topics.
3 Depository Institutions Why consumers may use them:Why consumers may not use them:Fees are too highMinimum balances required are too highThey wish to keep their financial information privateTo keep money safeTo receive the advantages of interest earning accountsTo have the opportunity to receive lower cost loan
4 Federal Reserve Bank Distributing and receiving cash and coin Federal Reserve Bank – is part of the central banking system in the United StatesCollecting checksElectronically transferring fundsDistributing and receiving cash and coinServices include:
5 Federal Reserve BankWhich federal reserve bank is located in your region?
6 Life of a Deposited Check Step 1: A check is deposited…Step 2: The depositor’s bank encodes, endorses, and sends the check to the reserve bank in the region or to a private clearing houseStep 3: Then the check makes its way to the regional reserve bank, or the clearinghouse for the region where the check originatedStep 4: From here it goes to the check writer’s bankStep 5: The check writer’s bank deducts the amount from the account
7 Depository Institutions Commercial BankCredit UnionSavings and Loan Association
8 Commercial Bank Commercial Banks Usually the largest depository institutionsConsidered full-service depository institutionsAvailable to a variety of consumersExamples – Wells Fargo, US Bank, Chase Bank
9 Credit Union Credit Unions Owned by members who share a common bond Non-profit cooperative depository institutionOwned by members who share a common bondExamples – Rocky Mountain Credit Union, Teachers Federal Credit Union
10 Savings and Loan Association (S&Ls) Focus on providing loans and mortgagesCustomers must have a savings account with themExamples – American Federal Savings Bank, Pioneer Federal Savings & Loan.
11 Types of Insurance Federal Deposit Insurance Corporation (FDIC) Federal government agency which protects depository institution accountsInsures commercial banks and savings and loan associationsNational Credit Union Administration (NCUA)Provides insurance for credit unions
12 Insurance Protection Insurance protection Each depositor is insured up to $250,000 for money deposited in a regular account and $250,000 for retirement depositsAvailable from both FDIC and NCUAInsurance is important because of the risk of lossRisk of Loss is used to determine which party should be responsible for damage or loss of products after a service transaction has been completed but prior to delivery
13 Interest Type of account Interest rate Impact on the consumer Interest - the amount of money that is either gained or lost when accessing services offered by a depository institutionInterest rate - the percentage used annually to calculate the total interest either gained or lostType of accountInterest rateImpact on the consumerInterest bearing - money earned from an investment instrumentHighMore money earned by the consumerLowLess money earnedInterest bearing - the charge for money that a consumer borrows from a depository institutionMore money paid by the consumerLess money paidCredit unions typically offer rates which have the most positive impact on the consumer
15 Common Services Offered Checking accountAlso known as a Share Draft Account at a credit unionPaper checks or debit cards that are used to withdraw moneyMay or may not be interest earningSavings accountAlso known as a Share Account at a credit unionAn account in which money is typically deposited to earn interestInterest earning
16 Interest Bearing Accounts Ownership, represented by shares in a corporationStockShare certificate account at a credit unionAn insured interest – earning savings instrument with restricted access to the fundsCertificate of DepositAn account which offers higher interest rates than a savings account and may offer limited check writing privilegesMoney Market AccountA debt instrument issued by an organization such as a business or the governmentDesigned as an investment for the purchasers to earn interestBond
17 Interest Bearing Accounts Credit CardA card used to make a purchase now and repay laterIf the balance is paid before the grace period ends, interest is not addedIf the balance is paid after the grace period, the payment of interest is requiredLoanMoney borrowed and paid back with interestMortgage – loan for a homePersonal – interest rates vary depending upon type of loanLoan types can include vehicle, school, etc.
18 Additional Services Which May Be Offered Safe-Deposit BoxA secured box in a bank to be used for valuable and important personal items.Financial CounselingInformation and advice is given to customers to help make financial decisions.
20 Review Money management is part of everyday life! Depository institutions offer multiple services – shop around for the one which best fits your needs!Ensure the depository institution is insured by the FDIC or NCUAComparison shop the financial services and interest rates offered before choosing