Understand the banking system. Objective 4.01 Understand the banking system.

Classification of Financial Institutions Depository Institutions Earn money to finance their business by accepting deposits from customers Types include: Commercial banks, which offer many different services, including savings, loans, and checking accounts. Savings and loan associations (S&Ls), which traditionally specialize in savings and home loans, but now are very similar to commercial banks. Mutual savings banks, which are owned by the depositors and specialize in savings and home loans. Credit unions, which are not-for profit, serve their members only, and are owned by their depositors.

Classification of Financial Institutions cont. Non-Depository Financial Institutions Earn money to finance their business by selling specific services such as policies, investments, and loans Types include: Life insurance companies Investment companies Consumer finance companies Mortgage companies Check-cashing outlets Pawnshops

Classification of Financial Institutions cont. Which characteristics of financial institutions are used for comparing them? Services offered Safety Convenience Fees and charges Restrictions

Financial Service Offerings Payment Services Savings Services Lending Services Electronic Banking Storage of Valuables Investment Advice Management of Trusts

Financial Institution Selection: Questions to ask about each type: Services –Does the institution offer savings, checking, loans, credit cards, safe deposit boxes, trusts, etc? Safety – Does the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA) insure the institution against losses?

How do Banks make money?

Move to Electronic Banking E-Banking Services ATMs Point-of-Sale Payments Direct Deposit Automatic Bill Payment Payment Options Debit Cards Online Stored Value Cards Smart Cards Mobile Banking Smart Phone / iPad Text Online Browser Apps