1. Banking Savings Checking Credit Cards

2. Types of Savings: Savings Account Certificate of Deposit
Market Money Account
Consider Liquidity—
how easily or quickly you can/want to withdraw your money

3. Savings Accounts
Putting money aside for short-term goals & emergencies
Interest rates are usually about 1% (maximum)
Simple Interest
Compound Interest
Pros: low risk, high liquidity
Cons: low interest rate

4. Money Market Account Similar to regular savings account
Limited check writing may be allowed
Higher interest rate than savings account
Higher minimum balance to open and maintain the account.
Pros: higher interest rate, high liquidity
Cons: minimum balance, limited withdrawals

5. Certificate of Deposit (CD)
Money must remain in the account for a fixed period of time (called the term)
3 months – 5 years
Pay a penalty for withdrawing money early
Minimum deposit
Pros: low risk, higher interest rate
Cons: low liquidity

6. Where does the interest come from?
Banks pay interest to customers for the usage of their money.
Banks will take the majority of these deposits (banks must keep a percentage of these deposits as reserves) and loan them out to other customers for mortgages, cars, school loans, businesses, etc…
The interest charged for these loans is greater than the interest that is paid to customers on their savings, money market accounts, and certificates of deposit.
This is the primary way that banks make money.

7. Final Thoughts on Savings Accounts:
Individuals should use savings accounts, money market accounts, and/or certificates of deposit to save for emergencies and/or short-term financial goals.
The money is safe and will be there when you need it.
The interest rates paid on these accounts is typically much lower than what you would receive by investing your money. That is why it is appropriate to invest your money for longer-term financial goals.
Also, the interest rates paid on these accounts typically does not keep pace with the rate of inflation.

8. Checking Accounts Used for “every day purchases”
Usually do not pay any interest
Single vs. Joint Checking Accounts
Single : you are the only person with access to the account
Joint: you share the account and money in the account with one or more persons
Be careful about having joint checking accounts!
Pros: low risk, high liquidity
Cons: low/no interest rate, balance may be required to avoid fees

9. Debit Cards
Debit Cards: Money spent using your debit card is withdrawn immediately from your checking account and sent straight to the company you are paying.
PIN (Personal Identification Number): is a secret code that only you should know that grants access to the money in your account at ATMs and merchants
Pros: Convenient, Allows you to carry less cash
Cons: Can easily lose track of account balance, Opens checking account up to fraud, Others can gain access to account if card is lost and/or if PIN is known

10. Checks
Never have your Social Security Number, Driver’s License Number, or Phone Number printed on your checks
Many checks are now processed electronically
Date
Payee Name
Amount in
numbers
Amount written in
words
Memo (optional)
Payer Signature

11. Deposit Slips
Available in the back of your checkbook or at the bank, used for making deposits at your bank

12. Direct Deposit
Automatic deposit of wages into a consumer’s bank account
Convenient and safer than paper check deposits

13. Fees Checking Fee – fee for having a checking account open
Some banks offer free checking with direct deposit or certain minimum balances
Minimum Balance Fee – fee for failing to keep a certain minimum balance in your checking account
ATM Fee– fee charged for using another bank’s ATM
NSF Fee – non-sufficient funds (bounced check) – fee for over withdrawing on your account
around $35

14. Other Bank Policies and Services
Automatic Withdrawals – bill payments are made automatically
Best for fixed payments
Overdraft Protection *See next slide.

15. Overdraft Protection
Overdraft “Protection”: Bank will cover payment over the amount you have in your bank account
Like a short-term loan from the bank to cover a purchase
Expensive fees to cover overdrafting
Overdraft Line of Credit: Purchase is covered by a line of credit.
You must pay high interest
No overdraft protection:
Your debit card will be declined

16. Any Questions?