1. Chapter 10
Banking

2. Chapter 10.1 Comparing Financial Institutions
Objectives
Describe the services offered by financial institutions;
Distinguish among various types of financial institutions; and
Explain guidelines for choosing a financial institution.

3. How Banks Work
Bank – a financial institution where you may deposit money.
Money that you deposit is lent to borrowers who need cash for businesses or personal financial needs.

4. Interest – a fee paid for the opportunity to use someone
Interest – a fee paid for the opportunity to use someone else’s money over a period of time.
· Savings Account – bank pays you interest (low amount) for letting it use your money
· Loans – borrowers pay the bank interest (high amount) for money needed, allowing bank to make a profit.

5. Other Banking Services:
·      Checking Accounts
·      Safe Deposit Boxes
·      Investments
·      Financial Planning

6. Financial Institutions
 Types:
1.   Commercial Banks – is owned by shareholders and operated for their profit.
2.   Mutual Savings Banks – are state-chartered and are operated by trustees for the benefit of depositors.
3.   Savings and Loans – were originally specialized in providing funds to home buyers, but now provide a variety of financial service.
4.   Credit Unions – is nonprofit and owned by its members.
5.   Internet-Only Banks – saves money because it is not maintaining a branch office or employees, therefore passing the savings to customers.

7. Financial Services Modernization Act (1999)
This allowed financial institutions to consolidate the financial services they offer, which transformed the banking industry.

8. Three Factors To Consider:
Deposit Insurance – protects your account when a bank fails.
o    Federal Deposit Insurance Corporation (FDIC) – federal agency that insures savings, checking, and other deposit accounts in most commercial banks, saving banks, and saving associations.
o     National Credit Union Administration (NCUA) – deposit insurance for credit unions.

9. Services and Convenient Access
Offering:
Services You Need.
Convenient Hours.
A Location Near You.
Phone / Internet Services.
Rates and Fees
Be Aware of:
Interest Rate Fees
Special Account Requirements

10. 10.2 Banking Electronically
Objectives
Explain various electronic banking methods; and
Give consumer guidelines for using electronic banking.

11. Electronic Banking Methods
Electronic Banking Methods
electronic funds transfer (EFT) – movement of funds by electronic means

12. ATM Transactions
Automated Teller Machine (ATM) – computer terminal that gives bank customers electronic access to their account at any time through the use of a specially coded card
Personal identification number (PIN) – secret code that protects the security of your account
Know where ATM card is all the time.
Memorize PIN
When entering pin, shield key pad or screen.
Be aware of surroundings
Count cash later.

13. Point-of-Sale Transaction
Point-of-sale transaction – paying for an item by making an electronic funds transfer at the place of purchase
Debit card – allows the user to subtract money from a bank account in order to obtain cash or make a purchase
Online – must enter PIN into keypad
Offline – sign a receipt like credit card

14. Automated Services
Direct deposit
Automated transfers between your accounts
Automated loan payments
Automated payments to a third party

15. Telephone Banking
Telephone Banking – access your account by phone
find out account balance
make transfers between accounts
hear list of previous transactions

16. Online Banking
login name and password
Advantages
complete bank transactions at home any time
pay and receive bills online
save time
save postage

17. Consumer Protection
Electronic Fund Transfer Act – 1978
protects consumers using some forms of electronic banking
Stolen Card liability

18. Chapter 10.3 Managing a Checking Account
Objectives
Identify reasons for having a checking account;
Describe factors to consider in selecting a checking account; and
Explain checking account procedures and responsibilities.

19. How Checks Work
Check – is a written order that instructs a bank to pay a specific amount of money to a particular person or business.
Payee – the one to whom a check is made out to
Canceled Check – a check that is stamped and perforated to show that it’s been paid.

20. Overdraft (Bounce) – is a lack of sufficient funds to cover
Overdraft (Bounce) – is a lack of sufficient funds to cover the full amount of a check, marked “NOT SUFFICIENT FUNDS”
Both you and the payee will be charged a substantial fee
Overdrafts are used to penalize because they cost time, money, and effort
Repeatedly writing bad checks is a criminal behavior

21. Advantage of Checks
More secure than cash.
Useable only by payee
Legal proof of payment
Deposit Slip – form that is used to put money into an account
Usually takes one or more days to access those funds

22. Choosing a Checking Account
Minimum Balance
Usually given a penalty when below minimum amount
Fees
Monthly service charge
Check fee
ATM and Debit card fees

23. Transaction Limits
Limited number of withdrawals
Limited number of teller-assisted transactions
Interest
Accounts that collect interest my have more restrictions
Overdraft Protection
Bank will transfer fund prior to overdraft

24. Using a Checking Account
Must be 18 years old (as stated in the book)
Signature Card – verifies your signature
Starter Checks
Making Deposits
Mail
ATM
Drive-up Window
Teller Transaction

25.  Endorsing a Check
You Can:
Deposit
Cash It
Transfer It To Another Payee
Endorsement – a signature that entitles the payee to either receives payment or transfers it to someone else.

26. Three Ways to Endorse a Check
Blank Endorsement – Only endorsers name
Special Endorsement – Limits payment to a particular payee
Restrictive Endorsement – write “For deposit only” above name and it can only be deposited in your account.

27. Recording Transactions
Ways to Record Transactions
Pressure Sensitive Copies (Carbon Copies)
Check Stubs
Check Register

28. Writing a Check
Use ink (Black or Blue)
If you make a mistake tear up check and write “VOID” in check registry
Have picture identification
You can have a stop payment on check if stolen or lost

29. Receiving Your Bank Statement
Sent by bank once a month
Gives balance at beginning and end of month
Service charges
Reconciling Your Account
Reconcile – to bring the bank statement and your own record of transactions into agreement

30. Steps for Reconciling Your Account
Check to see if all transactions are listed in registry are same as statement
Place a check mark on those that match
Outstanding – ones that were received by the bank after the closing date of your statement
All transactions should
add up with
outstanding subtracted

31. Using Other Payment Methods
Chapter 10.4
Using Other Payment Methods
Objectives
Describe alternatives to cash, personal checks, and credit cards; and
Explain possible reasons for using each form of payment.

32. Guaranteed Checks
Types:
Certified Check – is from a personal checking account that has been stamped by the bank to guarantee that there are sufficient funds in the account to cover it, by putting a hold on the money. (a fee is usually charged)
Cashier’s Check – is issued and guaranteed by a bank, by using a bank check that is addressed to the payee. (a fee is usually charged)

33. Money Orders
– is a purchased certificate that is a safe and convenient way to pay a specified amount to a particular payee
Postal Money Order – is issued and backed by the U.S. Postal Service
Types:
Domestic – can be cashed at post offices and banks in the U.S. (a fixed fee is charged)
International – Sent and cashed outside the U.S. (a higher fee is charged)

34. Traveler’s Checks
– are documents that function as cash but can be replaced if lost or stolen.
Used on vacations and trips.
Amounts - $25, $50, or $100.
Service charge fee is a percentage of the face amount.
Must be signed 2 times: once in front of the selling agent and again in front of the payee.
Return change will be given back in cash.
Must record the serial numbers in a separate location.
If they are lost or stolen then report the serial numbers.

35. Money Transfer Services
Worldwide
Sent and delivered at designated locations.
Service fees are expensive.
Wire Transfer
– a financial transaction that electronically moves funds from one bank to another. (Service fees for sending, receiving or both)

36. Prepaid Cards (Stored-value cards)
– cards sold in specified dollar amounts that can be purchased for products or services.
Types:
Phone cards
Gift cards
Merchandise credits
Public transit cards

37. Online Payment Services
Goal is to make quick and easy payments
Safer by reducing the need to share personal information or credit cards
Deductions/payments are usually deducted directly from an account.