Financial Institutions, Checking Accounts, and Credit Lesson 3

The “Unbanked” Individual Someone who has no direct relationship with a mainstream bank 10 million Americans African Americans & Hispanics Often depend on alternative financial services: Check-cashing outlets: locations to cash checks Providers of payday and title loans: people that give small, short loans Rent - to - own stores: stores with product for rent

Financial Institutions Institutions including commercial banks, savings and loan associations, credit unions, consumer credit companies Safety Federal Government insures your money Competition

Financial Scams Identity theft: using your personal information to make transactions Loan scam: paying a fee for a loan you never receive Credit-repair scam: paying a fee for a company to ‘fix’ your bad credit Pyramid scam: business centered on illegal recruiting Payday loan: short-term loans, difficult to pay back Rent-to-own: products for rent that cost you more in the end

Multiple Choice Question 11 ____ 11.) Which of the following statements is NOT correct about most ATM cards? a) You can get cash anywhere in the world no fee b) You must have a bank account to have an ATM card c) You can generally get cash 24 hours a day d) You can generally obtain information concerning your bank balance at an ATM machine

Multiple Choice Question 15 ____ 15.) Lindsey has saved $12,000 for her college expenses by working part-time. Her plan is to start college next year and she needs all the money she saved. Which of the following is the safest place for her college money? a) Corporate bonds b) A bank savings account c) Locked in her closet at home d) Stocks

Financial Accounts Checking account Account in which account owners deposit funds Account owners can write checks on their accounts and use ATM/debit cards to access funds Savings account Account in which account owners deposit funds Receive interest Can withdraw funds, can’t write checks Limited withdrawals

Keeping track Keep track of money in your account Deposits, withdrawals Why? Avoid paying fees for overdrafts Make certain the records are accurate and show the correct balance Know where your money is going Bank account registers- Table in which the account holder records transactions Found in check books

Multiple Choice Question 6 ____ 6.) If you had a savings account at a bank, which of the following would be correct concerning the interest that you would earn on the account? a) Sales tax may be charged on the interest that you can earn b) You cannot earn interest until you pass your 18th birthday c) Earnings from savings account interest may not be taxed d) Income tax may be charged on the interest if your income is high enough

Checks Date, name, amount, signature line Unique number shown as the final set of digits along the bottom of the check Routing number First nine digits at the bottom of the check Indicates the financial institution responsible for payment Account number Second set of numbers along the bottom of the check

Credit Credit- The ability to obtain goods or services now while paying for them in the future Interest- Price of using someone else’s money (+fee) Credit Cards- Used to buy on credit

Maintaining Good Credit Establish a good credit history: Open a bank account Make payments and pay bills on time Avoid expensive late fees and notes on your credit report Don’t open too many credit card accounts Monitor your credit usage Identity theft Create a plan to pay off your cards in full each month

Multiple Choice Question 5 ____ 5.) If you are behind on your debt payments and go to a responsible credit counseling service such as the Consumer Credit Counseling Services, what help can they give you? a) They can work with those who loaned you money to set up a payment schedule that you can meet b) They can force those who loaned you money to forgive all your debts c) They can cancel and cut up your credit cards without your permission d) They can get the federal government to apply your income taxes to pay off your debts

Multiple Choice Question 10 ____ 10.) Which of the following credit card users is likely to pay the GREATEST dollar amount in finance charges per year, if they all charge the same amount per year on their cards? a) Vera, who always pays off her credit card bill in full shortly after she receives it b) Jessica, who only pays the minimum amount each month c) Mega, who pays at least the minimum amount each month and more, when she has the money d) Erin, who generally pays off her credit car in full, but occasionally will pay the minimum if she’s short of cash

Multiple Choice Question 12 ____ 13.) If your credit card is stolen and the thief runs up a total debt of $1,000, but you notify the issuer of the card as soon as you discover it is missing, what is the maximum that you have to pay according to Federal Law? a) Nothing b) $50 c) $500 d) $1000