Day 1
Introduction to Depository Institutions
Presented by
Introductions
• Rachel Martini –
Customer Relations Specialist
• Lindsey Bamba –
Westside Branch Manager
Overview of 2 Days
• Types of depository institutions
• Deposit Insurance
• Factors to consider when choosing a
depository institution
• Types of accounts
• Types of services
• Interest
• Credit
• Worksheets/Homework/Quiz
What do
you know
about
banks?
Fill out the left
side, labeled
‘Before,’ only.
Take notes:
What is a
Depository/Financial
Institution?
Depository institution –
businesses that provide
financial services
What is the name of one
depository institution in your
community?
Types of Depository Institutions
Three types of depository institutions are:
Commercial Banks
Community Banks
Credit Unions
For-profit
For-profit (may be owned by
their members, or they may be
publicly held
Not-for-profit –
owned by members
Open to anyone
who wants to utilize
a depository
institution
Open to individuals
or small local
businesses who want
a local depository
institution
Have membership
qualifications –
members must share
a “common bond”
Offer numerous
financial services
Offer numerous
financial services
Offer many services
but usually not as
many as a bank
Usually the largest
depository
institutions
nationwide
Local or regional Range in size but
usually found in
local communities
Are often able to
pay higher interest
rates and charge
lower fees
Each type is unique – choose what is best for you
Types of Depository Institutions
Which one should you choose?
BANKS
•
•
•
•
Investment
Commercial
Community
Savings & Loan
CREDIT UNIONS (MEMBERS ONLY)
•
•
•
Employer
Community
Military
Location
Can be an important factor when
choosing a depository institution
Physical
location or
only online?
Multiple
locations or
just one?
Locations all
across the U.S.
or only in your
state or
city/town?
Do you have
transportation
to get to a
location?
Do you know how many locations your financial
institution has?
Depository institutions keep your
money safe
Federal Deposit
National Credit
•
Offer a safe and
secure place to store
your money
•
•
Security (safes,
secure networks,
etc.)
Insurance
How can insurance play a
role in choosing a
depository institution?
Insurance
Corporation
(FDIC)
Union
Administration
(NCUA)
Insures banks and
other types of
institutions other
than credit unions
Insures
credit
unions
$250,000 per
depositor, per
insured institution,
for each account
ownership type
Same as FDIC
Businesses offer services to the
public
Grocery store
Gas station
What services do these
businesses offer?
Restaurant
Clothing store
Transaction
and Savings
Tools
What are three
services a
depository
institution might
offer to entice you
to choose them
over another?
(free checking, high interest
rate, etc.)
Special
Needs
Payment
Instruments
Services
offered by
depository
institutions
Safe-Deposit
Box
Credit
Financial
Advice
Savings
Tools
Accounts that
help you
manage your
money
May or may
not earn
interest
The 2 most
common
accounts:
Checking
Account
Does anyone have a checking or savings account?
Savings
Account
Account Purposes
Checking Account
Savings Account
Provides quick access to funds An account for money not intended
to be used for daily expenses
for transactions
Use deposited money
anytime by:
• Writing checks
• Using a debit card
• Withdrawing cash
• Electronically transferring
money
Access to money is more
limited than a checking
account
Some earn interest but
most do not
Earn interest
Should you look for a
low or high interest rate
on a savings account?
Depository institutions offer the
ability to earn interest
Interest - the price paid for
using someone else’s money
You can earn interest or be
charged interest
The amount of interest earned or charged is
determined by the interest rate (percentage rate
used to calculate interest, usually an annual rate)
Interest Explained
What is Interest?
• An amount of money banks or other financial
institution pay you for keeping money on deposit
with them or to use their money. Expressed as a
percentage.
What is Annual Percentage Yield? (APY)
• The amount of interest you will earn on a yearly
basis, expressed as a percentage.
• The more often your money compounds, the
higher the APY, and the more interest you will
receive.
• Compare the APYs of different accounts, not the
interest rate.
Interest Rate View
Simple Interest
$100 deposited in
an account
earning 2% interest
$100
.02
Look for high
interest rates when
earning interest
Look for low
interest rates when
paying interest
$2
per year
No Interest
2% Rate of
Return
Year 1
$1,825
$1,844
Year 5
$9,125
$9,595
Year 10
$18,250
$20,188
Credit
What is it?
• Borrowing
money
What can
you do?
• Loans
•
•
•
Auto
Home
Student
• Credit cards
Other
Information
• You will pay
back the
money
borrowed
plus interest
Loan Services:
When should I get a loan?
•
Car Loan (Installment Loan)
•
•
Home Loan (Mortgage Loan)
•
•
Repaid over time with a set number of scheduled
payments for a certain term (i.e. 48 months)
Home ownership - a long-term living commitment to
be over the next 15 to 30 years. An investment that is
much more reliable than anything the stock market
can offer.
Credit Card
•
Variable interest rate. May include additional fees
and finance charges.
Read the fine print. It may include more details that can cost you more
than expected in the long run. (Annual fees, early termination fees, etc.)
How long would it take to pay
off my credit card balance?
Balance
$250
Interest Rate
1.58
$39.85 int.
18%
1.67
$48.18 int.
21%
1.67
$57.18 int.
24%
$1,000
Years to pay off at 2%
Minimum Payment*
$32.09 int.
15%
$500
1.75
$150.87 int.
$851.03 int.
3.67
$198.34 int.
3.92
$257.01 int.
4.25
9.83
$1,396.77 int.
12.58
$2,797.55 int.
19.58
$332.22 int.
4.67
?
Do I really need to buy those shoes?
*2% is the typical minimum payment requirement or $10, whichever is higher
Which option is better?
Saving?
OR
Credit Card?
$19 earned
$470 earned
$1,938 earned
Saving is well worth the money. Remember to
create a budget and stick to it.
Today’s good saving habits will pay off tomorrow!
What is a credit score?
A credit score is a three digit number used by lenders to
determine your creditworthiness for a mortgage, loan or
credit card. Your score can affect whether or not you are
approved as well as what interest rate you are charged.
How is my credit score calculated?
Use Credit Wisely
Obtaining a loan or credit card…
•
Advantages
•
•
•
•
•
•
Build credit
Rent a car
Available for emergencies
Bonuses/Frequent flyer miles
Online purchases
Convenience
•
Disadvantages
•
•
•
•
•
Negatively affect credit
Debt accumulation
Years to repay debt
High interest rates
Repayment could be 3 to 5
times the original purchase
price
Meet Josie
Senior in high school
Has been accepted to a
university 3 hours from home
Making important decisions
about her future, especially
regarding money
Looking for a safe place to
store her money and pay her
bills while at college
Help Josie manage her money by choosing
a depository institution
Found two depository
institutions in her
hometown that also
have branches near her
college
She has summarized
their information on the
“Josie’s Depository
Institution Comparison
Chart”
Your mission:
Learn more about Josie and depository institutions
to help her make the best choice
Josie’s Depository Institution
Comparison Chart (Homework)
Josie’s Depository Institution
Scavenger Hunt Cards
Josie’s Depository Institution
(Page 3)