CH. 7.1 - HOW BANKS WORK BANKING SERVICES

http://www.youtube.com/watch?v=Rnb6Nmy pnIE&feature=player_detailpage http://www.youtube.com/watch?feature=pla yer_detailpage&v=bbKQvdLDAic

THE ROLE OF BANKS Banks are in Business to Earn a Profit! They earn money by selling Financial Services They earn money from interest on money they lend out to consumers

THE ROLE OF BANKS Banks Provide Security. They provide a safe haven for your money! Smarter than putting money under your mattress! Banks are Regulated. Banks have more rules and regulations than almost any other type of business. Why? Great Depression of 1929! Insured Deposits: FDIC (Federal Deposit Insurance Corporation) – the Federal Government insures deposits in most banks up to a maximum of $250,000 – So if the bank fails, you will still get your money back!! – Thanks Great Depression!

THE ROLE OF BANKS Banks Make Borrowing Easier. To buy a House, Car other Fixed expenses, banks lend money to consumers. In order for Banks to lend money, they use the money from the savers. The people that just like to save their money. If someone wanted to borrow $100 from you and is willing to pay you $120 after 1 year…what information would you want about this person before you would lend your money? Make a list of questions.

TYPES OF MONEY Currency – paper money and coins used for financial transactions Only used for small transactions now-a-days Large payments are made through checks or electronic transactions. How does the Federal Government make Currency counterfeit free? Foreign currency…

ADVANTAGE OF USING CHECKS Check – an order to a bank to pay a specified sum to a person or Business. Safety: it is not as dangerous as currency. Checks are made out to a specific person or business are the only person/people that can cash that check Safer to send through the mail. Do not want to have money in envelopes

ADVANTAGE OF USING CHECKS Convenience: easier to buy things. You cannot carry $20,000 to buy a new car, but 1 check would do the job for you!! Records your Transactions: Banks automatically record the check when it cashes. Easier to keep track of purchases. Better than currency