"Bankers are just like anybody else, only richer” -Ogden Nash Copyright © eNestEgg Press, LLC.

Learning Objectives Different types of financial services How to evaluate different types of financial institutions Financial business’s to be wary of Electronic banking Copyright © eNestEgg Press, LLC.

Why we need banks Your life requires you to have a daily spending plan and tools. There are a variety of institutions and services that can help you maintain control of your cash and reach your goals. 8.2% of American households are unbanked. 20.1% are under banked Copyright © eNestEgg Press, LLC.

Financial Services Savings- (time deposit account) storing your money for later use, generally offer low rates of return. Checking-(Payment services) easily transfer money to others for your daily needs. Borrowing- ranges from credit card services to getting a mortgage to pay for your home. Copyright © eNestEgg Press, LLC.

Financial Services Other Financial services- insurance, investments, tax assistance, financial planning Cash management account- Many Financial institutions now provide a complete package of services. Checking, ATM and credit cards, online banking, investment access and lines of credit are offered. Copyright © eNestEgg Press, LLC.

Comparing Financial Institutions Questions to ask: Is the institution convenient to use? How much return will I get on my savings? How much is this institution going to charge me for their services? Would borrowing from this institution be a good idea? Reading: Introduction-Types of Financial Institutions and Their Roles: Introduction-Types of Financial Institutions and Their Roles Copyright © eNestEgg Press, LLC.

Question Cluster 1 Copyright © eNestEgg Press, LLC.

Deposit Institutions Commercial Banks Organized and Run like corporations Offer many financial services; Checking, Lending, Savings, and Others. Savings and Loan Associations Traditionally focused on savings accounts and mortgage loans. Many now offer services comparable to a bank. Copyright © eNestEgg Press, LLC.

Deposit Institutions Mutual Savings Banks These also specialize in savings and mortgages Owned by the depositor (you), profits are converted to a higher rate on your savings. Copyright © eNestEgg Press, LLC.

Deposit Institutions Credit-unions User owned, nonprofit organizations. Membership is much more flexible than it used to be. Very often have lower fees and lower loan rate. Credit unions tend to have the highest customer satisfaction levels. Credit Unions are a very viable option for students and young adults. Reading: How can my college student find the right bank?How can my college student find the right bank? Copyright © eNestEgg Press, LLC.

Non-deposit Institutions Life Insurance Companies In addition to life insurance, many firms offer investment and retirement planning. Investment Companies Offer Money Market Funds, a savings/investment plan. Not insured by the federal government. Money Market Funds- a type of mutual fund characterized as a low-risk, low-return investment. Copyright © eNestEgg Press, LLC.

Non-deposit Institutions Brokerage Firms Serve as a middle man for the purchase of stocks, bonds, and other investments Charges commission and other fees Charges commission Credit card Companies Acts as a short term loan for retail products. Copyright © eNestEgg Press, LLC.

Non-deposit Institutions Finance Companies Make short and medium term loans. Tend to charge higher rates. Mortgage Companies Loans for home services Financial Supermarkets An institution or company that offers a wide range of financial services under one roof. Financial supermarkets provide services which typically include banking, stock brokerage and insurance, and occasionally real- estate brokerage. Financial Supermarket Investopedia Copyright © eNestEgg Press, LLC.

Question Cluster 2 Copyright © eNestEgg Press, LLC.

Financial Businesses to be wary of Without access to regular financial services many people (who tend to be the unbanked and under banked) must resort to predatory financial services. Pawnshops Used to obtain quick cash loans based on putting up your own personal property. They charge high rates and will sell items you are not able to buy back from them. YouTube: Beware Pawn Shops Reading: Disadvantages of Pawnshop Loans (Source: Nolo.com)Disadvantages of Pawnshop Loans Copyright © eNestEgg Press, LLC.

Financial Businesses to be wary of Check Cashing establishments Used by people who do not have bank accounts. They charge a large percentage (usually 2-3%, some go as high as 20 %!) Also offer services including paying your utility bills and private postal boxes. These extra services can usually be obtained elsewhere cheaper. Reading: Check Cashing: Still Not a Good DealCheck Cashing: Still Not a Good Deal Copyright © eNestEgg Press, LLC.

Financial Businesses to be wary of Payday loans Payday loans (online payday loans) Most frequent users are low income workers trapped by misfortune. A typical payday loan fee is $15 per $100 $15/14 days= $1.07 per day $1.07 per day X 365 days = annual percentage rate of 391%!!!! Reading 1: Common Scams and FraudsCommon Scams and Frauds Reading 2: The trap of payday loans can lead to triple-digit interest rateThe trap of payday loans can lead to triple-digit interest rate Reading 3: The average payday loans borrower spends more then half year in debt to lenderThe average payday loans borrower spends more then half year in debt to lender Copyright © eNestEgg Press, LLC.

Financial Businesses to be wary of Rent to Own Rent to Own Centers Depending on the number of payments you elect, the price can potentially be double or triple the objects actual price! You are essentially leasing the item, therefore you are not certain to own the item after a period of time you must first complete a certain number of monthly payments. Reading: Beware of the Real Cost of Rent-to-Own Stores of Furniture, Appliances, and Electronics.Beware of the Real Cost of Rent-to-Own Stores of Furniture, Appliances, and Electronics. Copyright © eNestEgg Press, LLC.

Online banking and electronic services Most traditional banks now offer an almost complete range of services online. There are also internet only banks (E Trade) What’s the upside? Online banks often pay higher interest rates. They also often charge lower fees. Online banking can be very convenient for paying bills and transferring funds. Online banks allow you to quickly and easily access a wide range of financial data and services. Online banks can save you a lot of time. Less paper to deal with Copyright © eNestEgg Press, LLC.

Online banking Online banking and electronic services What’s the downside? It is more difficult to deposit cash and checks as there is no face-to-face transactions at the bank. Easy access to funds also makes it easy to overspend. Some online banks to not offer reimbursement for ATM usage. This can become very costly. Many people have privacy and security concerns handling their financial affairs online. Reading 1: Online Banking: Advantages and DisadvantagesOnline Banking: Advantages and Disadvantages Reading 2: Benefits and Drawbacks of Internet BankingBenefits and Drawbacks of Internet Banking Reading 3: 2015 Best Online Bank Review and Comparisons2015 Best Online Bank Review and Comparisons Copyright © eNestEgg Press, LLC.

Online banking and electronic services Other electronic bank services include: Automatic teller machines (ATM) - An electronic banking outlet. Use your own banks ATM as often as possible to avoid fees. Take out larger sums of cash to avoid fees on transactions. Debit Cards- spend your own funds Stolen or lost Fraud Overdraft charges Reading: FDIC Study: Outrageous Overdraft Fees(Source: Bankrate.comFDIC Study: Outrageous Overdraft Fees(Source Copyright © eNestEgg Press, LLC.

Question Cluster 3 Copyright © eNestEgg Press, LLC.