Banking

What does the banker do?

Banking Financial Institution permitted to – hold savings deposits – offer loans and mortgages – issue credit rating – exchange currency – offer stocks and bonds for sale

Banks Big Five Banks – Scotia, TD Canada Trust, RBC, Montreal, CIBC – Hold 90% of the money in Canada ($1.3 Trillion) Virtual Banks – No branches but operates electronically or by phone – Example: ING Direct

Banks Trust Company – Similar to banks – Operate pension funds – Transfer stocks and bonds – Administer Estates and Trusts Credit Union – Non for Profit – Act Similar to banks and trust companies

Chequing Account Used for your day to day money spending needs Write Cheques, Pay Bills, Debit Payments Direct Deposit Employers will put your pay cheque directly into your bank account Pre-Authorized Payments Some bills can come right out of your account

Chequing Account Interest – No interest earned on your money – Best to keep the minimum they need in a chequing account Expenses – Generally banks charge a transaction fee – Charged for writing cheques that are in excess of your chequing account (NSF)

Saving Account Money that stays in the bank to accumulate interest The bank gives you more interest to lend that money out and to invest with – Banks make their money by using your money to make investments in things like stocks 0.4% - 1.1% Interest

Savings Account Very important account is called a “Tax Free Savings Account” – Initiative by the government of Canada to get people to save money – No fees – Earns interest of 1.05% (Earn $10.05, for investing $1000 for one year) – Only Restriction: $5000 per year & have to be 19 years old to have one

Mortgages Loans that are given to people in order to buy property Most of your parents would have a mortgage on your house They don’t own the house fully – the bank owns a percentage of it People will “promise” to pay back the mortgage over a period of time – Pay back the mortgage + Interest – Usually 25 years

Investment Services Guaranteed Investment Certificates (GIC’s) – An investment of a principal that may not be withdrawn for a certain amount of time – After a fixed term you receive your money back plus an agreed interest rate The interest rate will be higher than your saving account Mutual Funds – A combination of stocks and bonds that we talked about previously

Currency Exchange

“The Dollar is at American” – What does that mean? If I have $150 Canadian, how much would I get in American Dollars? If I want $200 American how much do I need to exchange in Canadian Money?

Credit Cards Issue credit cards – Buy Now – Pay Later You promise to pay later and the bank pays for your purchase If payment is on time – there is usually no fee If the payment is late their is a large interest charge – 19% interest on $130 pair of shoes – If not paid after a year – you are paying an extra $25 for those shoes

Today’s Assignment Open “Comparing Bank Accounts”