1. BANKING

2. Bank
A financial institution that is authorized by a “charter” to perform certain money functions.

3. Banking Activities 1)protection for money & valuables 2) offer loans
3) offer checking accounts and other check services (money orders, cashier’s checks, traveler’s checks)
4) other services (trust fund maintenance)

4. Types of Banks
1) Commercial bank: “everyday bank” that offers checking accts. And savings accts.
2) Savings and Loan Associations: Primarily handles savings only and home mortgages
3) Credit Unions: Similar to Savings and Loans but are started as a co-op with members investing $ in the form of shares and then $ is loaned out to members.

5. Making Money by Lending Money
Charging INTEREST

6. Two Types of Deposits
1) demand deposit: money that is held until you call for it with a check/debit card
2) Savings deposit: money that you let the bank use and they will pay you interest

7. CASH FLOW at a BANK
Deposits and loan payments always exceed the amount of $$ loaned out at any given point of time. Banks are required to keep a minimum of cash on “reserve.”

8. How a Bank Makes Money 1) It charges more interest than it pays.
EXAMPLE: Car loan at 6% and a savings acct. at 2.25%
2) Other charges ( safety deposit box fee, checking acct. fee, money order/cashier check charges, etc.)

9. Consumer Protection
1) Federal Deposit Insurance Corporation (F.D.I.C.) – insures up to $250,000. (previously $100,000.)
2) Federal Savings and Loan Insurance Corporation (F.S.L.I.C.) – insures Savings and Loan accts. up to $250,000. (previously $100,000.)

10. How a check clears the bank
1) SMALL TOWNS – messengers deliver checks to each bank periodically during the day.
2) LARGER CITIES – a clearinghouse is established. Rep’s will meet at an appointed time to exchange

11. OUT OF TOWN
The Federal Reserve System will establish a procedure for banks.
Practically all checks are routed electronically now.