Financial Institutions and Banking Services Chapter 25 Financial Institutions and Banking Services

Banks as a Business Banks offer services to its customers Checking Accounts Savings Accounts Loans Bank charters Federal charter = National Bank State charter = State Bank In order to start a bank, owners must apply for a charter from either the state or federal government.

Two Types of Banks Deposit-Type Institutions Nondeposit Institutions Accept deposits for people and businesses to use in the future. Nondeposit Institutions Do not accept deposits. FDIC – Federal Deposit Insurance Corp. Federal Agency that helps to regulate banks and other financial institutions.

FDIC Protects depositor’s money in case the bank or financial institution fails, as long as it is regulated by the FDIC Insures all accounts under the same name at each bank up to an amount of $100,000 Government Agency, but receives it’s money from the banks. Almost 99 percent of the banks are members of the FDIC

Deposit-Type Banks Commercial Banks – Full-Service Banks Offer checking accounts, provide savings accounts, make loans to individuals and businesses, and other services In larger banks, these services may be broken into different departments. Savings department Trust department Real Estate department Investment department Shopping Centers to Supermarkets….. ATMs – Loans – Safe-Deposit Boxes

Deposit Type Banks Savings and Loan Association – Mutual Savings Bank Normally, specialize in savings accounts and making loans for home mortgages Presently, they are leaning more toward offering a greater variety of services, so now they are becoming savings banks. Mutual Savings Bank Provides a variety of services Savings accounts and to make loans to homebuyers Owned by its depositors The profits of a Mutual Savings Bank go to the depositor

Deposit-Type Banks Credit Unions User-Owned, Not-For-Profit, Cooperative Institution Normally its members have something in common with one another. Services offered Savings deposits Loans for a variety of purposes Special Checking accounts Credit Cards Mortgages Home Equity loans Safe-Deposit Boxes Investment services Electronic banking services Loans to small firms Alliance – same company, government agency, labor union, profession, church, or community. Start here 11/15 5th

Nondeposit Financial Institutions Life Insurance Companies provide financial security for dependants Through careful investing in new and existing companies, life insurance companies can help to expand business in our economy. Investment Companies Allow people to choose investment opportunities for long-term growth of their money. Start 3rd hour here on 11/15

Nondeposit Financial Institutions Consumer Finance Companies Specializes in making loans for long-lasting or durable goods, such as cars and refrigerators, and for financial emergencies. Mortgage Companies Provide loans for purchasing a new home or other real estate Consumer Finance companies make loans, and therefore are part of the financial services. Do not accept savings as do banks and other financial institutions.

Nondeposit Financial Institutions Check-Cashing Outlets May cash paychecks or obtain other financial services. CCOs offer a wide variety of services such as electronic tax filing, money orders, private postal boxes, utility bill payment, and the sale of bus and subway tokens.

Types of Financial Services Accepting Deposits Transferring Funds Lending Money Storing Valuables Providing financial advice and investment services Managing trusts 5th hour 11/16

Accepting Deposits Safe storage of funds for future use is an almost universal need. One of the main services offered by financial institutions Interest – The amount that the bank pays its customers to use their money.

Transferring Funds Money can easily be transferred from one account to another through simply writing a check Electronic Funds Transfer A system through which funds are moved electronically from one account to another and from one bank to another

Other EFT Services Point – of – Sale Transaction Debit Card – use at stores, gas stations, and or restaurants to pay for purchases. Direct Deposit – your paycheck is automatically deposited in your checking or savings account. Home Banking – payments are made and loans are obtained by customers using telephones and computers.

Lending Money Many people, businesses, and governments borrow money at some time. Individuals pay for car or to pay for college tuition Business Borrow money to build a new warehouse or to buy more merchandise for resale Banks want to make loans like this…. Majority of their revenue is from the interest they charge borrowers. Banks also issue Credit Cards (Visa and MasterCard)

Storing Valuables Safe-Deposit Boxes In the bank, an area where you can pay to store your valuables. Jewelry Bond and stock certificates Birth records List of insurance policies will

Providing Financial Advice and Investment Services Many banks can advise customers about such things as whether it is wise to buy a certain house, how to manage money better, or how to exchange U.S. currency for foreign currency. Period 3 11/16

Investments Are savings that are put to work to earn more money. Money in a savings account is a type of investment because the savings account earns interest. Bonds are another form of investment which customers can make from either the federal or state government, businesses, or school districts.

Managing Trusts Trust Companies Businesses that manage people’s money and property for them. Normally used by young people and by elders. Young people who inherit money may not have the skill and experience to invest wisely. Elder people who are ill may ask the trust department of a bank to manage their money. The bank or company then invests the money and keeps the customer informed with what is going on with their money.

The Federal Reserve System Federal Reserve Bank – is a bank where individuals cannot make deposits or open an account at. Only other banks can do that. This is a bank for banks, its relationship to other banks is similar to that or your bank to you. Federal Reserve System – supervise and regulate member banks in order to help the banks serve the public efficiently.

Financial Institutions and Economic Growth Bank Services are commonly used to: Build homes Start new businesses Plant crops Finance educations Buy goods Pave streets Build hospitals Buy new business equipment

“Banking services are made possible through the savings you and others deposit. Deposits into banks to not sit idle in bank vaults. They are put to work. When you and others deposit money into a bank, you are create jobs and economic growth that benefit your community and society.”