Banking Institutions, Accounts, and Checks

By the end of the lesson, you should: 1.Be able to identify all 4 types of banking institutions. 2.Fully understand the difference between these institutions. 3.Know the different bank accounts available and how they work. 4.Be able properly use and write a check on your own.

Institutions: Savings and Loan Associations (s&L) All institutions usu. offer basic banking service (checking and savings accounts, consumer loans etc.) Insured by the FDIC (up to $250,000) S&Ls= Focus on real-estate financing Most = mutual associations Interest slightly > Commercial Banks

Institutions: Savings banks  They are like Savings and Loan Associations.  Primarily found in the New England States  Term often used interchangeably with S&L

Learning Check! What is the focus of Savings and Loan Associations? Up to how much is insured by the FDIC? Is this amount per account or per depositor? Where are Savings Banks primarily found?

Institutions: Commercial Banks  Depository financial institution.  Insured by the FDIC. (Up to $250,000)  Open to the general public.  Many financial products and services.  Offers non-interest paying demand deposits.

Institutions: Credit Unions ◊Depository financial institution. ◊Insured by the NCUA. (Up to $250,000) ◊Not open to to everyone. ◊Member-owned. ◊Not-for-profit. ◊Higher interest rates.

Accounts: CHecking Demand Deposit Check, debit card, or ATM withdraw Regular checking is the most common account Only offered by commercial banks  Savings Banks, S&Ls, and Credit Union’s offer interest-bearing NOW (negotiable order of withdrawal), or in the case of credit unions, share draft account

Accounts: savings  Easily transferrable to cash  Time Deposits- expected to remain on deposit for longer periods of time.  Goal- Accumulate money for future expenditures.  Check the stated interest rate and the method of calculating interest when choosing your account.  Lowest interest rates besides checking accounts.

Accounts: Money Markets (MMDAs & MMMF) Money Market Deposit Accounts (MMDAs) ○ Min. balance= $1,000 or more ○ Deposits are federally insured ○ Checks & ATMs ○ Limited # of free monthly checks & transfers ○ Highest interest rate of any bank account dealing with checks ●Money Market Mutual Funds (MMMF) ○ Pools the funds of small investors & purchases high-return, short-term marketable securities. ■ Can write checks - Min. balance= $500 ■ Interest rates 1% - 3% above regular savings account

Accounts: Certificate Of Deposit (CD) Time Deposit Must pay penalty if taken out pre-maturely. Denominations ususally start at $1000. Generally issued by commercial banks and are insured by the FDIC. The term generally ranges from one month to five years. Longer term = more interest earned

Accounts: ASSET MANAGEMENT account (AMA)  Central Asset Account  Combines checking, investing, and borrowing activities.  Offered mainly by mutual funds and brokerage houses.  Includes MMDA with unlimited free checking, ATM use, and brokerage and loan accounts.  Annual fees and account charges; a per-transaction charge for ATM withdrawals.  “Sweeps” excess balances.  Deposits protected by Securities Investor Corp.

Activity Take another look at your cards... From what we just learned, who thinks they will get the most return?

Activity What is your account earning? Checkings Account0 Smarties Savings Account1 Smarties Money Market Deposit Account2 Smarties Certificate of Deposit(CD)3 Smarties

How to Fill Out a Check!

What the Lines Mean 1.Your or your business’s Address 2.Date Line 3.Payee Line 4.The Dollar Box 5.The Amount of Your Check 6.Memo Line 7.Signature Line 8.Endorsement Line

Overdraft A deficit in a bank account caused by over withdrawal Your check will bounce Typical fee: between $20 to $30

example: Last week, you went out to lunch with some friends. They insisted on paying for your food. However, today you have your checkbook with you, so you pay your friend back. Your lunch was $12.65, including tax. Now, fill out the check that was given to you.

Banking ball! 1.Throw the ball to a friend. 2.Look to see what color your right hand lands on. (Green=Easy, Yellow=Moderate, Red=Hard). 3.Pick one question from the color that your hand landed on. 4.If you answer correctly, pass the ball and continue the game. 5.If you answer incorrectly, pass the ball to someone, who then has to try to answer that question correctly. 6.If no one answers correctly after 3 tries, your instructor will tell the class the answer, and then continue on with the game.