1. 17 Banking and Financial Services
C H A P T E R 17
Banking and Financial Services
17-1 Banks and Other Financial Institutions
17-2 Financial Services and Electronic Banking
17-3 Checks and Payment Methods

2. THE BANKING SYSTEM
The Federal Reserve System (FED) – supervises and regulates member banks and helps bans serve the public efficiently (12 Federal Reserve Banks in the US)

3. Checkpoint  What is the main purpose of the Federal Reserve System?
The Federal Reserve System was created by the federal government to supervise and regulate member banks and to help banks serve the public efficiently by holding reserves and clearing checks.

4. TYPES OF FINANCIAL INSTITUTIONS
Deposit institutions – also called depository intermediaries, accept deposits from people and businesses and use them to finance their business
Non-deposit financial institutions – also called non-depository intermediaries, do not take or hold deposits but earn their money by selling specific services or policies

5. DEPOSIT INSTITUTIONS
Commercial banks – often called full-service banks because they offer a wide range of financial services (checking accounts, savings accounts, loans)
Savings and loan associations – specialize in savings accounts and making loans for home mortgages among other services offered
Mutual savings banks – savings bank that is owned by and operated for the benefit of its depositors
Credit unions – user-owned, not-for-profit, cooperative financial institution

6. NON-DEPOSIT FINANCIAL INSTITUTIONS
Life insurance companies – offer financial security to families of customers as well as investment services
Investment companies – offer investment opportunities for long-term growth of clients’ money (mutual funds)
Consumer finance companies – a business that specializes in making loans for long-lasting or durable goods (cars and refrigerators) and for financial emergencies

7. NON-DEPOSIT FINANCIAL INSTITUTIONS CONTINUED
Mortgage companies – provide loans for buying a home or other real estate
Check-cashing outlets – offer a wide range of services such as cashing paychecks, electronic tax filing, money orders, private postal boxes, utility bill payment, and the sale of bus and subway tokens
Pawnshops – make loans based on the value of some tangible object, such as jewelry or other valuable items

8. SELECTING A FINANCIAL INSTITUTION
Services offered
Savings accounts
Checking and payment accounts
Loans and other credit plans
Other services, such as safe-deposit boxes
Safety – be sure the institution where you keep your money is insured
Federal Deposit Insurance Corporation (FDIC) – federal agency that helps to regulate banks and other financial institutions
Convenience – could include online banking, branch offices located near your home or work, etc.
Fees and charges – possible fees for ATM use, checking accounts, or savings accounts
Restrictions – some banks have restrictions or conditions to use their services

9. TYPES OF FINANCIAL SERVICES
Savings service
Payment services
Lending services
Electronic banking
Storage of valuables
Safe-deposit box – offered by banks for storage of valuables
Investment advice
Management of trusts

10. TYPES OF CHECKING ACCOUNTS
Regular checking accounts – checking account that has no service charge as long as you maintain a certain minimum balance
Service Charge – a fee a bank charges for handling a checking account
Interest-earning – offer accounts that earn monthly interest, may require a higher monthly balance than regular checking accounts
Special checking accounts – also called an activity account, banks charge customers about 10 to 20 cents for each check written

11. COMPARING CHECKING ACCOUNTS
Minimum balance
Interest rate earned, if any
Monthly service charge
Fees for other services, such as printing checks and stop payment orders
Other restrictions

12. ELECTRONIC BANKING E-banking services
Automatic teller machines (ATMs) – allows many banking services such as withdrawing cash, getting a cash advance, check account balances, make deposits, or transfer funds
Debit Card – also called cash card, used for ATM transactions
Payments at the point-of-sale – merchant accepts a debit card to pay for purchases
Direct deposit – funds are deposited electronically and available automatically for your use
Automatic bill payments – bank deducts the payments from your account and transfers them to the appropriate companies

13. EXAMPLES OF ELECTRONIC BANKING ACTIVITIES
ATM
PRE-AUTHORIZED
ONLINE
POINT-OF-SALE
Check account balances 
Withdraw cash
Made deposits
Transfer funds
View account history
Pay bills
Apply for loans
Manage investments
Accept direct deposits
Pay bills automatically
Make debit card purchases

14. ELECTRONIC PAYMENT OPTIONS
Debit card transactions – most stores, restaurants, and other businesses accept debit cards; when processed the amount of the purchase is deducted from your checking account
Online payments – service offered by various web companies and banks
Stored-value cards – gift cards, prepaid phone cards, transit fares, highway tolls, school lunches, etc.
Smart cards – similar to ATM cards, embedded microchip stores prepaid amounts as well as account balances, transaction records, insurance information, and medical history

15. TYPES OF ENDORSEMENTS Before depositing a check, it must be endorsed:
Blank endorsement – only consists of the endorser’s name; makes a check payable to anyone who has the check
Full endorsement – allows you to transfer a check to another person (“Pay to the order of…”)
Restrictive endorsement – limits the use of the check to the purpose given in the endorsement (“For deposit only”)

16. SAMPLE ENDORSEMENTS

17. USING A CHECKING ACCOUNT
Steps to writing a check
Page 442 in textbook
Stopping payment
Stop payment order – a written notice that tells the bank not to pay a certain check

18. PARTS OF A CHECK

19. THE RECONCILIATION PROCESS
Bank statement information
Determine checks paid
Find differences
Calculate adjusted balance

20. OTHER TYPES OF PAYMENTS
Certified checks
Cashier’s checks
Traveler’s checks
Money orders

21. CERTIFIED CHECKS
Personal check for which a bank has guaranteed payment
Certification stamped on face
Signed or initialed by a bank officer

22. CASHIER’S CHECKS Check that a bank draws on its own funds
Costs the amount of the check plus a service fee
More acceptable than the personal checks

23. TRAVELER’S CHECKS
Special forms designed for making payments when away from home
Require your signature in two places
Cash a check or pay for a purchase
Commonly accepted throughout the world

24. MONEY ORDERS
Form of payment that orders the issuing agency to pay the amount printed on the form to another party
A bank money order
A postal money order
An express money order
A telegraphic money order