1.7.6.G1
Online Banking
Take Charge of your Finances
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.7.6.G1
Checks – Demand Deposits
What Does Demand Deposit Mean?
An account from which deposited funds can be
withdrawn at any time without any notice to the
depository institution.
• This account allows you to "demand" your money at
any time, unlike a term deposit, which cannot be
accessed for a predetermined period (the loan's
term).
• Most checking and savings accounts are demand
deposits, accessible by the account holder at any
time.
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.7.6.G1
FORMAL
FINANCIAL
SERVICES
•
•
•
•
•
•
Accounts
Credit cards
Loans
Investment vehicles
Direct deposit
Wire transfers/ remittances
INFORMAL
FINANCIAL
SERVICES
•
•
•
•
•
•
•
•
Payday lenders
Check cashing services
Rent-to-own stores
Pawn shops
Title lenders
Loans from family/friends
Cultural savings clubs
Remittances offered through
nonfinancial institutions
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
3
Slide 1 – Formal and Informal Financial Services
Lesson Reference: Introduction to Financial Services, Activity 2 – Overhead 1
1.7.6.G1
PLACES TO SAVE MONEY
Would you save your money in any of these
places? Why? Why not? Can you think of other
places to save money?
•
•
•
•
•
•
4
Bed & Mattress
Cookie Jar
Pillow
Wallet
Money Belt
Small House Safe
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Slide 1 - Placesto Save Money
Lesson Reference: Introduction to Financial Services, Activity 2 – Overhead 1
1.7.6.G1
ALTERNATIVE FINANCIAL SERVICES
• Check-Cashing Services
• Check-Deferrals, Cash Advances, Payday Loans
• Pawn Shops
• Rapid Tax Refunds
• Rent-to-Own
• Other Financial Services
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
5
Slide 2 - Alternative Financial Services
Lesson Reference: Introduction to Financial Services, Activity 1 – Handout 1
Check-Cashing Services
1.7.6.G1
• To cash a paycheck or government check, these businesses charge
a percentage of the amount of the check as a fee.
• For example, cashing a $200 paycheck could cost as much as $8
each week. In a year, that adds up to $416.
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Check-Deferrals, Cash
Advances, Payday Loans
1.7.6.G1
• Whichever name is used, these are considered short-term, high interest-rate
loans.
• The customer writes a personal check, including a fee (interest rate). The
lender cashes the check for the customer and agrees to hold the check until the
next payday.
• Oftentimes, the borrower will need to take out additional loans to cover the
fees and to make it through to the next payday. This can lead to a vicious cycle
of debt that can be difficult to pay off.
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Pawn Shops
1.7.6.G1
• Here you can get loans at very high interest for the
value of goods, including electronics and jewelry.
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Rapid Tax Refunds
1.7.6.G1
• To get your tax refund early from someone you pay
to prepare and receive your tax return, you may have
to pay a significant portion of your refund for the
service.
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Rent-to-Own
1.7.6.G1
• Renting items such as home appliances or
entertainment systems before buying them from the
same business can add up to fees much higher than
the cost of using credit to pay for the same items.
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
The Cost of Alternative Financial Services
1.7.6.G1
If you wanted to purchase a television set that cost $500 with sales tax, it could end up costing you
much more depending on the financial service you use to pay for it. Consider the following options.
Cash
Rent-to-Own Store
Payday Lenders
If you purchase
the television with
cash, it will cost
you $500.
Pay $13.99 per week for 18
months, it would cost you a
total of $1,091.22.
If you get a $500
loan at a payday
lender with a
biweekly interest
rate of 20%, you
would pay $100.07
every two weeks
for 21 months,
costing you a total
of $4,425.01
$500
$1,091.22
$4,425.01
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.7.6.G1
HOW A BANK CAN SAVE YOU MONEY
Monthly Fees without a Bank
Monthly Fees with a Bank*
• $80 to cash paychecks
• $3.81 on money orders and
stamps to pay bills
• $15 to send money to family with
a wire transfer company
• $0 to directly deposit paycheck
• $0 to get cash from bank's
ATMs or make debit card
purchase
• $0 to pay monthly bills using
electronic bill payment
• $5 to send money to family
Monthly cost:
$98.81
Annual cost: $1,185.72
Monthly cost: $5.00
Annual cost: $60.00
Annual© Family
Savings
by Using a Bank: $1,125.72
Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
12
Slide 2 – How a Bank Can Save You Money
Lesson Reference: Introduction to Financial Services, Activity 2 – Handout 2
Cashier’s Check
1.7.6.G1
• a check written by a bank on its own funds
• Check over 6 months old may not be honored by a
bank
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Certified Check
• A personal check that the bank guarantees to be
good.
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.7.6.G1
Safe deposit box
• Important papers –
–
–
–
–
–
Mortgage
Insurance Policies
Stocks and Bonds
Deed
Birth certificates
– Do NOT keep cash
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.7.6.G1
1.7.6.G1
FINANCIAL SERVICES
MODERNIZATION ACT (1999)
Transformed the banking industry. Eliminated many
restrictions among companies in the securities,
banking, and insurance industries.
Results?
• Banks may offer some insurance and investment
services.
• Investment and insurance companies may offer
some traditional banking services. Investments are
not insured by FDIC.
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
16
Slide 3 - Financial Services Modernization Act
Lesson Reference: Introduction to Financial Services, Activity 3 – Overhead 3
Click the numbers
1
2
3
4
5
Check Details
6
7
8
9
10
11
Enter
Put
Here
your
just
the
personal
date
number
you
check
signature
write
ofNumber.
this
number
each
Check.
here.
check.
again
(see
above
right).
On
Here
This
Legibly
Place
Make
the
isisthe
sure
to
lower
where
the
your
print
add
Routing
your
Account
line,
the
any
you
personal
amount
information
write
write
Number
out
the
of
information
the
money
name
for
you
(Note
amount
your
want
ofthis
the
that
bank
on
like
check
toparty
the
sometimes
related
(used
this.
check
is
you
for.
for
to
are
iselectronic
this
these
correct.
writing
check.
twoyour
check
transfers
numbers
to (the
of
arefunds
payee).
the reverse
from
Beyour
sure
of what
account
to write
is shown
to
orthe
print
here.)
payee’s
legibly!account)
John M. Smith
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
5-F
1.7.6.G1
1.7.6.G1
Parts of a Check
ABA Number
Payee
Drawee
Drawer
ARDYS JOHNSON
Phone: 555-0100
4250 West 18th Avenue
Chicago, IL 60601-2190
581
DATE
Food Mart
Thirty-six and 12/100
PAY TO THE
ORDER OF
SKY CENTRAL BANK
Chicago, Illinois
MEMO
groceries
071000741 08 40 856
July 1, 20-$ 36.12
2-74
710
DOLLARS
For Classroom Use Only
0581
Ardys Johnson
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Checking Account
1.7.6.G1
• Check - A written order to a bank to pay a stated amount to the person or
business named on it.
• Demand deposit -Money on deposit in a bank that can be withdrawn at
any time
• Canceled check -A check that bears the bank’s stamp, indicating that it has
cleared
• Overdraft - A check written for more money than the writer’s account
contains
• Floating a check - Intentionally writing a check on an account without
sufficient funds in the hope of making a deposit before the check is cashed.
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.7.6.G1
Keep a Record
Click Here
1
2
3
Deposit 1/11
Auto
WD
100
1/11
Deposit to Checking
Charge for Personalized Checks
1/15 Fine Foods
Groceries
200 00
20 00
23 11
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
5-G
200 00
200 00
20 00
180 00
23 11
156 89
1.7.6.G1
MAKING A DEPOSIT COMPLETING A DEPOSIT SLIP
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
21
Slide 4 - Making a Deposit - Completing a Deposit Slip
Lesson Reference: Basic Banking Services, Activity 6 – Handout 2
Reading a Bank Statement
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.7.6.G1
1.7.6.G1
MAKING A DEPOSIT - ENDORSING A CHECK
The Back Side of a Check
Restrictive
Endorsement
(most secure)
Blank Endorsement
(least secure)
Endorsement to
a third party
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
23
Slide 3 - Making a Deposit - Endorsing a Check
Lesson Reference: Basic Banking Services, Activity 6 – Handout 2
Online Banking
• In the year 2006, 63 million Americans
reported that they used online banking
• 43% of internet users in the United States
bank online
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.7.6.G1
Online Banking
• Online banking – also known as internet banking,
allows consumers to complete transactions with
wireless technology. Wireless technology includes:
– Personal Computers (PCs)
– Personal Digital Assistants (PDAs)
– Cellular phones
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.7.6.G1
Online Banking
• Consumers can access account information and
statements
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.7.6.G1
Online Banking
• Consumers can transfer funds
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.7.6.G1
Online Banking
• Consumers can manage bills and apply for credit
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.7.6.G1
Online Banking
• Advantages of online banking include:
–
–
–
–
–
–
Decreased cost of paper and postage
Storing all statements online instead of keeping a paper copy
Convenience
Paying bills online
Ability to access account anytime
No waiting for a monthly statement
• Disadvantages of online banking include:
–
–
–
–
Not as personal
Not able to access without technology
Decrease in safety features
Increase in risk for fraud
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.7.6.G1
Online Banking
1.7.6.G1
Advantages
Disadvantages
• Decreased cost of paper and
postage
• Storing all statements online
instead of keeping a paper
copy
• Convenience
• Paying bills online
• Ability to access account
anytime
• No waiting for a monthly
statement
• Not as personal
• Not able to access without
technology
• Decrease in safety features
• Increase in risk for fraud
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Online Bill Payment
• Online bill payment – allows consumers to send
money from one account to a vendor
– Usually occurs automatically
– Consumers need to check with the vendors regarding
their policy of when the payment will be processed
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.7.6.G1
Online Bill Payment
1.7.6.G1
• Examples of companies that use online bill payment include:
–
–
–
–
–
–
–
Retailer banks
Credit card companies
Insurance companies
Energy and utility companies
Health care
Transportation companies
Education expenses
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Online Bill Payment
1.7.6.G1
Occurs in two ways
Consumer works directly
with the depository
institution to pay the
company that is owed
Consumer works directly
with the company in
which the money is owed
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Online Bill Payment
1.7.6.G1
• Important financial aspects include:
– Checking with the vendor or company to understand their
policy of when transactions are complete
– Confirming there are enough funds in the account to
cover the expense of the bill
– Confirming bill will be paid, money will be taken out of
the account, and the transaction will be completed
– Their financial information is secure and it is safe to make
online transactions
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Determine Security
1.7.6.G1
• The Uniform Resource Locator (URL) ends in “s”
which stands for secure
• A closed lock to the right of the URL or in the
bottom right hand corner of the web browser to
indicate a secure site
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Insecure Practices
• Email accounts are not secure
– Do not send important information such as:
• Social security numbers
• Bank account numbers
• PIN numbers
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.7.6.G1
Consumer Protection
1.7.6.G1
• The Federal Bank of Chicago suggests the following:
–
–
–
–
Passwords are a combination of letters and numbers
Change passwords once a month
Keep all receipts and compare them to bank statements monthly
Log out of depository institution Web sites immediately after you
finish working
– Contact the depository institution directly with any questions or
concerns
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Recurring Payment
1.7.6.G1
• Recurring payment – bills are set to be paid on the
due date or a previous date set by the consumer
– Payment will happen automatically electronically
• Advantages of recurring payment include:
– Save money on postage
– Saves time for the consumer
– Bills are paid on time
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Regulation E
1.7.6.G1
• Regulation E – covers all electronic fund transfers
including transfers occurring through an electronic
terminal, computer, telephone, or magnetic tape
– The transfer must be conducted with the purpose of
authorizing a depository institution to debit or credit a
consumer's account
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Consumer Protection
1.7.6.G1
• Privacy Policy outlines how a consumer’s
information will be used and protected
• Opting out of a financial policy allows a consumer
to request a depository institution to share only a
limited amount of personal information
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Conclusion
1.7.6.G1
• Review
– Define online banking
– Review what transactions can be completed through
online banking
– Discuss advantages and disadvantages of online banking
– Discuss online bill payment
– What are secure and insecure online banking practices?
• Any questions?
© Family Economics & Financial Education –March 2008 – Financial Institutions – Online Banking
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona