BANKING What are the benefits to balancing a checking account? Why should the Federal Reserve oversee financial institutions and the money circulation in the economy? What are the benefits to comparing financial institutions and the services they provide?

Financial Institutions Depository Institutions: Businesses which accept deposits and offer multiple services in banking and finance. Bank: A for-profit financial institution owned by investors in its stock that provides financial services to any customers. Credit Union: A not-for-profit financial institution owned by its members that provides services to its members at low fees. Others Savings and Loan Association Brokerage Firm 5-A-2

Depository Institutions Why consumers may not use them: Why consumers may use them: Safety Interest Cheap Loans Fees are Required minimum balances Privacy Automated Teller Machine: Electronic machine that customers/members can use to withdraw cash and make other financial transactions.

Commercial Bank Credit Union Largest financial institutions Services: Checking/savings accounts, credit cards, safe-deposit boxes, CDs, loans, investments, debit cards FDIC insured $100K/$250K Examples – US BANK, BANK OF AMERICA Credit Union Not-for-profit, member owned Services: Share account, share draft account, safe-deposit box share draft certificate, credit card, investing, loans, insurance NCUA insured Usually lower fees/loan rates and higher interest rates Examples: First Community, American Eagle

Interest Earning Accounts Savings Account: An account that helps you save money and earn a small amount of interest at the same time (Share Account @ Credit Union) 2. Checking Account (sometimes): An account that allows withdrawals by means of check, debit card, etc. (Share draft account @ Credit Union) 3. Certificate of deposit (also known as a Share Certificate account at a credit union) Insured interest-earning savings account w/ restricted access to the funds 4. Money market account: A deposit account, which has a relatively high rate of interest, typically requires a higher minimum balance to earn interest or avoid monthly fees, and has a restricted # of transactions Higher interest rates than savings, may have limited check writing

Credit Unions and Banks For-profit companies owned by shareholders Not-for-profit institutions owned and controlled by their own customers, who are known as members Managed by a paid board of directors elected by the bank’s shareholders Managed by a member and volunteer board of directors, who are elected by other members Offer their services to everyone; anyone can become a customer Offer their services to special groups of people and may be employer-, church-, community-, or alumni-sponsored (among others); customers must qualify for credit union membership through their membership with these special groups of people 5-A-1

Credit Unions and Banks Owned by shareholders; customers do not have ownership or voting privileges unless they also own stock in the bank Owned by each credit union member, who has equal ownership and one vote, regardless of how much money a member has on deposit Profits benefit a small group of stockholders Profits are returned to members in the form of lower fees and loan rates and higher interest on deposits Accounts are federally insured up to $100,000 by the Federal Deposit Insurance Corporation (FDIC) Accounts are federally insured up to $100,000 by the National Credit Union Administration (NCUA) 5-A-2

Savings and Loan Association (S&Ls) Loans and mortgages to customers w/ savings account Generally higher interest rate than commercial banks Offer interest-earning checking accounts Also insured Example: Pioneer Federal Savings & Loan Services: Checking/savings/retirement accounts, CDs, loans, investing

Financial Services All of these services can be found in most banks or credit unions Online Banking, Online Brokerage, Checking Accounts, Savings Accounts, Certificates of Deposit (CDs), Individual Retirement Accounts (IRAs), Savings Bonds, Credit Cards, Check Cards, Gift Cards, Payroll Cards, Commercial Prepaid Cards, Auto Loans, Boat Loans, RV Loans, Student Loans, Other Loans, Home Mortgages, Mortgage Refinance Loans, Home Equity Loans, Military Bank, Student Centers, Accessible Banking, Small Business Banking Services, Merchant Services , Home Buying, Investment Services, IRAs, Mutual Funds, 529 College Savings Plans, Life Insurance (various types), Long-Term Care Insurance, Homeowner’s Insurance, Renter’s Insurance, Condo Insurance, Auto Insurance, Supplemental Income Insurance, Foreign Currency Exchange, Traveler’s Checks, International Wire Transfers, and More 5-B

Types of Insurance Federal Deposit Insurance Corporation (FDIC) Protects depository institution accounts Insures commercial banks and savings and loan National Credit Union Administration (NCUA) Provides insurance for credit unions Federal Savings and Loan Insurance Corporation (FSLIC) Provides insurance for savings and loan

Methods of Payment Cash: Money in the form of paper currency or coin Personal Check: Written order to a financial institution directing the financial institution to pay stated amount of money, from the customer’s account. Credit Card: Specially coded plastic card issued by banks & businesses authorizing the holder to purchase goods & services on credit. Debit Card: Specially coded plastic card issued by a financial institution that allows the cardholder to transfer funds electronically and immediately from his/her checking account. As if were paying w/ check

Methods of Payment Point-of-sale (POS) terminals: are located at stores and allows the consumer to use a debit card to make purchases. Personal Identification Number: Pass-code # you use to get access to your savings and/or checking account Money Order: A written order for the payment of a sum to a named individual; obtainable and payable at a bank, post office, or convenient store. For a fee usually $.99-$5 Usually smaller amounts of $. Less than $1,000

Methods of Payment Cashier’s Check: A check drawn by a bank (for a fee) on its own funds and signed by the bank's cashier. Guaranteed funds (larger amounts) Traveler’s Check: An internationally redeemable draft (check) purchased in various denominations from a bank or traveler's aid company and payable only upon the purchaser's endorsement against the original signature on the draft. Smart Card: A prepaid smart card contains stored value which the person holding it can spend at retailers. As well as personal info and other data Contactless Payment: Swiping in front of sensor, (RF). May require signature if purchase is over $25.

Opening an Account Photo Id: driver’s license, passport, etc… Social Security Number Signature Card Deposit May be charged for checks

Deposit Slip Today’s date goes here Print Your Name Here x Today’s date goes here 4 7 5 2 5 Print Your Name Here Print Your Address Here 4 7 5 2 5 Sign Your Name Here 5 3 3 3 3 3 3 3 4 2 5 2 5 Click the numbers 5-E-1

Completing a Deposit Slip Checks If more checks are being deposited than number of spaces on the front, use the back List each check Add the total, enter it on the front

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Check Details Click the numbers 1 2 3 4 5 6 7 8 9 10 11 Here is where you write the name of the party you are writing your check to (the payee). Be sure to write or print legibly! On the lower line, write out the amount like this. Make sure your personal information on the check is correct. Here is the number of this Check. Put your personal signature here. This is your Account Number. (Note that sometimes these two numbers are the reverse of what is shown here.) This is the Routing Number for your bank (used for electronic transfers of funds from your account to the payee’s account) This is just your check number again (see above right). Legibly print the amount of money this check is for. Place to add any information you want to related to this check. Enter the date you write each check. 5-F

For Deposit Only—Acct. # 987654321 Endorsements Endorse: To sign the back of a check to make it payable to the specified payee. Student Name X Endorse Here Blank Endorsement: Signature of payee Restrictive Endorsement: Signature of payee w/ words “For Deposit Only” & account number X For Deposit Only—Acct. # 987654321 Students Name Endorse Here

Pay to the Order of Jonathon Smith Endorsements Pay to the Order of Jonathon Smith Student Name X Endorse Here Special Endorsement: Forwarding a check to someone by writing “pay to the order of” + their name and then putting your blank endorsement John Doe Jane Doe X Endorse Here Joint Endorsement: Multiple payees endorsing the same check

How Check 21 Works Prior to Check 21 After Check 21 Paper checks physically moved from customer to business to various banks and the transfer of money from customer’s bank to business’ bank took days After Check 21 Paper checks are scanned into a computer system at the place of business and immediately returned to the customer. This electronic copy of the check is called a substitute check. The substitute check is then transferred electronically to various banks and the transfer of money customer’s bank to business’ bank takes hours

Overdraft Overdraft: A deficit in a bank account caused by drawing more money than the account holds(debit card, ATM withdrawal, or check) Overdraft charge typically between $20-$35 Over 50 million Americans overdraw annually costing 24 billion in overdraft fees Overdraft protection: which draws from a savings account, credit card, or another checking account This usually costs $5-$10 New regulation will decline transaction unless specified otherwise Stop payment order: request to not fulfill payment on a check you have written. Typically costs between $20-$30

Reading a Bank Statement Teens – Lesson 6 - Slide 6-H

Check Register Date The date the check was written or transaction was made (B&PF p.142)

Check Register Check Number The number of the written check; if a debit card or ATM was used, write DC or ATM

Check Register Description of Transaction The person/business the check was written to or where the debit card was used Gray line can be used to write the memo

Check Register Payment/Debit(-) Amount of the transaction Deducted from the balance

Check Register Deposit/Credit(+) Amount of the transaction Added to the balance

Check Register √ T A box used to track whether the check has cleared on the monthly bank statement when reconciling at the end of each month

Check Register Fee (if any) Any extra fees charged to the account Listed on the bank statement

Check Register Balance The running total of the checking account Calculated by adding or subtracting each transaction Keep this updated

Keep a Record Click Here 5-G 1 2 3 Deposit 1/11 Deposit to Checking 200 00 200 00 200 00 Auto 1/11 Charge for Personalized Checks 20 00 20 00 WD 180 00 100 1/15 Fine Foods 23 11 23 11 Groceries 156 89 5-G

Reconciling a Checking Account Reconcile: Comparing the bank statement to your checkbook register and accounting for any differences. Step 1: Obtain the current balance from your bank statement. Step 2: Add any deposits that you have recorded in your check register but that are not on this statement. Step 3: Subtract any outstanding checks (checks you have written but that have not yet cleared the banking system). step 4: Compare result with the current balance in your check register * Helps you avoid bouncing checks * Lets you know how much is in your account * Keeps you in control of your finances (B&PF p.145)

Steps for Reconciling View the monthly bank statement and check register $275.00 $275.00 $74.94

Place a check mark in the √ T column for all transactions that have been cleared and are shown on the bank statement $275.00 √  

Determine the current account balance from the bank statement $275.00

Calculate the Subtotal Add any outstanding deposits – transactions that have not cleared the bank Calculate the Subtotal

Subtract any outstanding withdrawals and calculate Compare the total with the checkbook register. If the totals are different, double check the math and make sure all service fees and bank charges are recorded in the check register.