Banking Services & Savings Chapter 7 & 8 Banking Services & Savings

Where do YOU keep your Money?

Why NO Shoebox under the Bed? Deposit Insurance Protected up to $250,000 FDIC (Federal Deposit Insurance Corporation) Interest

Interest ROCKS!!! Interest Principal Money you receive for keeping your $ in an account Showed as percentage Higher your interest rate, the more money you will make Principal $ you have deposited in your account

Simple Interest Interest paid once a year on the money you deposit (starting principal) Paid at end of year Deposit Interest Rate Simple Interest New Principal After 1 Year $750 3% $750 x 0.03 = $22.50 $750 + $22.50 = $772.50 4.5% $750 x 0.045 = $33.75 $750 + $33.75 = $783.75 6.75% $750 x 0.0675 = $50.63 $750 + $50.63 = $800.63

Simple Yr Balance Interest Rate Compound Interest End of Year Balance 1 $750 3% $750 x 0.03 = $22.50 $750 + $22.50 = $772.50 2 $772.50 + $22.50 = $795.00 3 $795.00 + $22.50 = $817.50

Compound Interest Interest paid on your principal and on previously earned interest “Interest earns interest” Interest must be left in account Compounded… Annually (every year) Semiannually (every 6 months) Quarterly (every 3 months) Monthly Daily

Compound (ANNUALLY) Yr Beg Balance Interest Rate Compound Interest End of Year Balance 1 $750 3% $750 x 0.03 = $22.50 $750 + $22.50 = $772.50 2 $772.50 $772.50 x 0.03 = $23.18 $772.50 + $23.18 = $795.68 3 $795.68 $795.68 x 0.03 = $23.87 $795.68 + $23.87 = $819.55

Simple vs. Compound Interest Principal: $750, 3% interest Yr Simple Interest End of Year Balance 1 $22.50 $772.50 2 $795.00 3 $817.50 Yr Compound Interest End of Year Balance 1 $22.50 $772.50 2 $23.18 $795.68 3 $23.87 $819.55

Principal = $10,000 Yr Beg Balance Interest Rate Simple Interest End of Year Balance 1 $10,000 3% $10,000 x 0.03 = $300 $10,000 + $300 = $10,300 2 $10,300 + $300= $10,600 3 $10,009 x 0.03 = $300 $10,600 + $300 = $10,900 Yr Beg Balance Interest Rate Compound Interest End of Year Balance 1 $10,000 3% $10,000 x 0.03 = $300 $10,000 + $300 = $10,300 2 $10,300 $10,300 x 0.03 = $309 $10,300 + $309= $10,609 3 $10,609 $10,609 x 0.03 = $318 $10,609 + $318 = $10,927

Savings Institutions 4 basic types of financial businesses Commercial Banks Savings Banks Savings & Loan Associations Credit Unions

Commercial Banks Largest institutions in the US Serves… Services Individuals Businesses Services Savings & checking accounts Consumer & business loans Investment services

Credit Unions Non-profit organizations Serves… Services… Members who share common bond Profession, company, union, church, etc Receive extra benefits Services… Savings & checking accounts Loans

Checking accounts A bank account that allows depositors to write checks to make payments Make payment by writing checks Cash or deposit checks Transfer money and checks Use debit cards & ATMs Opening a Checking Account Over 18 or joint account? Interest-bearing or Noninterest-bearing? Fees – maintenance, service charges? Application, signature card, initial deposit

Deposit Slips

Deposit slips

Endorsing Checks What is the purpose of endorsing? To accept the transfer of someone else’s money to you. When must you endorse? Cash a check Deposit a check

Writing a Check One hundred and 00/100 -------------Ninety-nine and 54/100 -----------------------------------------------------------------------------------------------

Writing a check

Using Debit Cards Connected to checking account Like writing a check Money is taken out of checking account

Using a Check Register Sally recording a check (#301) that she wrote to Gas N’ Go for the amount of $15.78. She subtracted that amount from her balance of $204.00 to get a new balance of $188.22.

What to record on a check register... Deposits Checks Debit Card Purchases ATM Transactions Fees Interest

Why use a check register? Record/have record of your transactions. Record transactions Record fees Record interest Calculate new balance Prevent overdrawing Writing a check for more than you have in your account Check will “bounce” Bank will charge you a fee

Bank Statements Receive at the end of each month Shows transactions, fees, and interest that have been recorded by the bank Balancing or Reconciling Compare your records to the banks records Use the “√” column of your register Check for bank errors

Electronic Banking Electronic Funds Transfer Move $ from one account to another by computer EFTs commonly made through… ATM (automated teller machines) Direct Deposits Automatic Bill Payments Online Banking

Automated Teller Machines Computer terminal… Make deposits Withdraw cash Transfer money Check account balances Pay some bills Must have ATM card & pin number Be aware of fees Using “foreign bank” ATMs can lead to double fees

Responsibility Laws protect consumers but require them to use EFTs responsibly Lose ATM card Report loss within 2 business days of loss or after receiving statement Liability limited to $50 Report within 60 days Liability up to $500 Report after 60 days Responsible for ALL losses

Other EFTs Direct Deposit Debit Cards Automatic Bill Payments Aka “check cards” Balance of checking account is immediately checked Automatic Bill Payments By Phone or Internet Automatic Bill Withdrawals Online Banking

Other Banking Services Checks Certified Cashier’s Money Orders Traveler’s Checks Why Accepting personal checks can be risky for businesses No guarantee check will clear (i.e. will there will be enough money in person’s account to cover check?)

Checks… Certified Checks Cashier’s Checks Personal check that has been stamped and signed by a bank officer Bank withdraws the $ from your account to cover the check and any fees; sets it aside for the payee Fees - $5 to $20 Cashier’s Checks Bank’s own check signed by the bank’s cashier Banks name on check, NOT yours You pay the bank the amount that the check is being written for plus the fee ($25) Cash or automatic withdrawal from account

Checks Money Orders Traveler’s Check Like a cashier’s/certified check 1 main differences Can get other places than a bank Post office, check-cashing business, Western Union, bank Traveler’s Check For travel purposes; denominations of $20, $50, $100 Pay for in advance (including small fee 1%) Replaced if lost or stolen

Other Services Wire Transfers Safe Deposit Boxes Large transfers of money between distant locations Moves $ from an account in one bank to an account in another Fee of $20-$40 Safe Deposit Boxes Locked boxes that are rented from a bank Keep valuable items Costs $30 to $50/year