2. Banking Chapter 7

3. Money Barter –Trade item for item –May not account for true value Currency –Paper money and coins used for financial transactions –Smaller payments usually Checks –Larger payments –Money transfers from bank to PAYEE

4. Banks How do banks earn their money? –Interest! –Service fees Banks provide security Protect your purchasing power –More you can buy for your money Banks are regulated –Own money put into it –Reserves

5. Banking Deposits are insured –FDIC – Federal Deposit Insurance Corporation –$100,000 max Money lent to borrowers –People: houses, cars, etc. –Business: start-up, buildings, equipment. –Credit is verified to ensure payback

6. Checks Safety –Only the payee can cash –Payer not responsible if cashed illegally Banks responsible if cashed illegally Banks request ID to cash a check –If lost, can stop payment Convenience Recorded transaction

7. Checking accounts Interest and non-interest bearing checking accounts Joint and individual accounts Various plans –Based on checks –Based on use (electronic) Fees –Maintenance fees (per month) –Service charges (per check)

8. Opening Checking Accounts Must be 18 Minimum deposit Identification Complete signature card Sometimes credit check SS# Proof of address

9. Writing a check Write in nonerasable ink Fill in every line – date, payee, aount of check –words and numbers, signature Write checks sequentially Keep documents in safe place Notify bank immediately if checks stolen

10. Important Check Terms Check register –Record all transactions Maintain an account balance Overdrawing Endorsements Third party checks Deposits/deposit forms Check clearing process

11. How can I be overdrawn when I still have checks left???

12. New Age Banking Electronic Funds Transfer (EFT) –Direct deposit –Debit cards –ATM cards –Bill payments Pay by phone Automatic withdrawals –Online banking

13. ATM’s ATM cards Pin number Deposits Withdrawals Costs Use responsibly

14. Caution! Keep your card in a safe place Memorize your ID Never give it out Never say it out loud Keep all receipts! Record transactions Notify bank immediately if card lost

15. EFTA Requires banks to inform customers of fees Requires banks to provide receipts Requires consumers to use EFT’s responsibly –Report lost cards Immediately – lose $50 max After two days – lose $500 max After 60 days – lose everything

16. Other Bank Services (7.5) Certified checks Cashier’s checks Money orders Traveler’s checks Wire transfers Safe Deposit Boxes