 Direct
deposit
 Automated teller machine (ATM)
 Debit card
 Point of sale transaction
 Commercial bank
 Savings and loan association (S&L)
 Credit union
 Consider
pros and cons of different methods
of payment (cash, debit, credit)
 Remember your long term goals and avoid
debt (easy with credit cards)
 Sources of cash—FAST!


Use your savings and make withdrawal
Get a loan/borrow money

BOTH CAN DELAY YOUR OTHER FINANCIAL GOALS
 SAVINGS


SAFE STORAGE OF FUNDS FOR FUTURE USE
TIME DEPOSIT—IF YOU LEAVE IN FOR A LONG TIME
 PAYMENT



SERVICES
TRANSFERRING MONEY FROM ACCOUNTS
CHECKING ACCOUNT IS MOST COMMON PMT SVC
DEMAND DEPOSIT—MONEY YOU DEPOSIT INTO CHK
 BORROWING



CREDIT CARD
CASH LOAN
MORTGAGE / CAR LOAN
 DIRECT



DEPOSIT
AUTOMATIC DEPOSIT OF PAYCHECK INTO ACCOUNT
RECEIVE STUB INSTEAD OF ACTUAL CHECK
SAVES TIME AND EFFORT
 AUTOMATIC


PAYMENTS
PAY BILLS ONLINE
BANK TAKES MONEY FROM ACCOUNT YOU CHOOSE
 ATMS








(AUTOMATED TELLER MACHINE)
A COMPUTER TERMINAL THAT ALLOWS
WITHDRAWLS OF CASH FROM AN ACCOUNT
CAN ALSO MAKE DEPOSITS, TRANSFERS.
LOCATED ALL OVER (BANKS, MALLS, STADIUMS)
YOU MUST APPLY FOR A CARD TO USE
CALLED A DEBIT CARD —CARD THAT ALLOWS YOU
TO MAKE PURCHASES OR WITHDRAWLS FROM
CHECKING (VISA/MASTERCARD LOGO)
MUST HAVE A PIN (PERSONAL IDENTIFICATION #)
SOME BANKS MAY CHARGE A FEE IF USE ANOTHER
IF LOST, NOTIFY BANK IMMEDIATELY
 PLASTIC

POINT OF SALE TRANSACTIONS


DEBIT CARD TRANSACTIONS AT STORES OR RESTAURANT
STORE VALUE CARDS


PAYMENTS
PREPAID CARDS (SUBWAYS, PHONE CARDS, GIFTCARDS)
ELECTRONIC CASH

IN THE WORKS FOR ELECTRIC MONEY, COINS, CHECKS
 SHOULD
I PUT MONEY IN A SAVINGS OR KEEP
IN CASH? WHAT IF IT LOOSES VALUE?
 WHAT IF NO ATM NEAR HOME? HIGH FEES?
 IS IT WORTH OPENING A CHECKING ACCOUNT
IF I HAVE TO KEEP AT LEAST $500 IN THERE?
 FDIC



( FEDERAL DEPOSIT INSURANCE CO)
MAKES SURE EACH ACCOUNT IN A BANK DOES NOT
LOSE ITS MONEY
INSURES DEPOSITS UP TO $100,000
ALL BANKS MUST PARTICIPATE IN FDIC PROGRAM
 DEPOSIT

COMMERCIAL BANKS





INSTITUTIONS
GOAL IS TO MAKE MONEY (FOR-PROFIT)
OFFERS CHECKING, SAVINGS, LENDING
SERVE INDIVIDUALS AND BUSINESSES
NEED A LISCENSE TO OPERATE
SAVINGS AND LOAN ASSOCIATIONS (S&L)


SPECIALIZES IN SAVINGS ACCTS AND MORTAGE LOANS
OFFER OTHER SERVICES (CHECKING, INVESTMENTS)

MUTUAL SAVINGS BANK





SPECIALIZE IN SAVINGS ACCTS AND MORTGAGE LOANS
PERSONAL AND AUTO LOANS AS WELL
INTEREST MAY BE LOWER
PAYS HIGHER INTEREST ON SAVINGS ACCOUNTS
CREDIT UNIONS



NON-PROFIT FINANCIAL INSTITUTION OWNED BY
MEMBERS AND WORK FOR THEIR BENEFIT
MOST OFFER FULL RANGE OF SERVICES (CHEKING,
SAVINGS, LOANS, CREDIT CARDS, INVESTMENTS)
FEES AND INTEREST MIGHT BE LOWER
 NON-DEPOSIT

LIFE INSURANCE COMPANIES


MAKE HIGH-INTEREST LOANS TO CONSUMERS AND
SMALL BUSINESSES THAT HAVE BAD CREDIT
MORTGAGE COMPANIES


PROVIDE FINANCIAL SECURITY FOR DEPENDANTS
FINANCE COMPANIES


INSTITUTIONS
SPECIALIZE IN LOANS FOR HOMES
INVESTMENT COMPANIES


BUYS STOCKS, BONDS AND OTHER TYPES
MANAGES THESE INVESTMENTS CALLED MUTUAL FUNDS
 WHERE
CAN YOU GET BEST INTEREST RATE?
 WHERE CAN YOU GET FREE CHECKING?
 IS THE BANK FDIC INSURED?
 ARE THERE CONVIENIENT LOCATIONS?
 ARE THERE ONLINE BANKING SERVICES?
 5.1
ASSESSMENT 1-3, 5
 REGULAR





SAVINGS ACCOUNTS (PASSBOOK)
REQUIRE NO MINIMUM BALANCE
WITHDRAWL AS MUCH AS YOU NEED
LOW INTEREST—DOESN’T MAKE MUCH
RECEIVE A LEDGER TO KEEP TRACK OF ACTIVITY
CREDIT UNIONS MAY BE CALLED SHARE ACCOUTS
 CERTIFICATES




OF DEPOSIT (CDS)
MONEY IS PUT IN AN ACCOUNT FOR A PERIOD OF
TIME TO EARN A SPECIFIC RATE OF RETURN
TERM: AMOUNT OF TIME YOU LEAVE IT IN
MATURITY DATE: DATE MONEY IS AVAILABLE TO
YOU
LOW-RISK, HIGHER INTEREST THAN SAVINGS



LEAVE MONEY IN FOR 1 MONTH-5+ YEARS
WILL PAY A PENALTY FOR TAKING OUT EARLY
MINIMUM DEPOSIT REQUIRED
 SHOP
RATES (CAN GET FROM ANYWHERE)
 CHOOSE MATURITY DATE WISELY
 NEVER LET A BANK “ROLL OVER” A CD
 CONSIDER WHEN YOU NEED THE MONEY
 MIGHT WANT TO CREATE SEVERAL ACCOUNTS
CALLED A CD PORTFOLIO
 MONEY




MARKET ACCOUNTS
SAVINGS ACCOUNT THAT REQUIRES A MINIMUM
BALANCE AND EARNS INTEREST THAT CHANGES
EVERY MONTH
DEPENDS ON MARKET RATES/ECONOMY
YOU PAY A PENALTY IF IT DROPS BELOW $1000
LIMITED NUMBER OF CHECKS
 SAVINGS







BONDS
YOU PURCHASE FROM GOVERNMENT FOR HALF OF
FACE VALUE (WHAT PERSON GETS AT MATURITY)
PAY $250, HAS FACE VALUE OF $500
GOVERNMENT LIMITS PURCHASES TO $15000
BUY AT BANKS
MATURITY DATE DEPENDS ON WHEN PURCHASED
PENALTY IF CASHED EARLY
YOU PAY TAXES ON SAVINGS BONDS WHEN CASHED
 RATE



HOW MUCH YOU ARE EARNING/MAKING ON
DEPOSITS
PERCENTAGE INCREASE IN THE AMOUNT FROM
EARNED INTEREST
Ex: WHEN EMMA PUT $75 BABYSITTING MONEY
INTO REGULAR SAVINGS ACCOUNT, SHE EARNED $3
INTEREST. WHAT WAS HER RATE OF RETURN?



OF RETURN
INTEREST AMOUNT/DEPOSITED AMOUNT (CHANGE TO PERCENT)
 3/75=.04 = 4% ROR
PRACTICE PROBLEMS
LIQUIDITY: HOW EASY TO CHANGE INTO CASH (HOW
EASY TO WITHDRAWL CASH FROM ACCOUNT)
 What
does ATM stand for?
 If a bank is FDIC insured, what does that
mean?
 Name 1 difference between a Credit Union
and a Commercial Bank
 What is a CD?
 What is a Bond?
 Find the Rate of Return if you deposit $350
into an account and you earn $18.75 interest
 If your ROR is 15.5% on a $1200 deposit, how
much interest did you earn?
 REGULAR

NO MIN BALANCE (OR PAY A FEE)
 ACTIVITY




ACCOUNTS
BANK CHARGES A FEE FOR EVERY CHECK YOU
WRITE AND YOU ALSO PAY MONTHLY FEE
NEVER A MINIMUM BALANCE REQUIRED
GOOD IF UNABLE TO KEEP MINIMUM BALANCE
 INTEREST

CHECKING ACCOUNTS
EARNING CHECKING
COMBO OF SAVINGS AND CHECKING
PAY INTEREST IF MAINTAIN A MINIMUM BALANCE
 RESTRICTIONS?
 FEES/CHARGES?
 INTEREST?
 SPECIAL

SERVICES?
OVERDRAFT PROTECTION

AN AUTOMATIC LOAN TO YOUR ACCOUNT IF IT DROPS
BELOW ZERO. YOU WILL PAY INTEREST BUT NO FEES
 OPENING
AN ACCOUNT
 WRITING CHECKS
 CHECK REGISTERS
 STOP-PAYMENT ORDER


REQUEST SENT IN FOR BANK NOT TO CASH CHECK
FEE $10-$20
 MAKING




ENDORSING A CHECK: SIGNATURE OF WHO IT IS WRITTEN
TO
BLANK ENDORSEMENT: CHECK HOLDER SIGNS BACK
RESTRICTIVE ENDORSEMENT: REQUIRES CHECKHOLDER
SIGNATURE AND INSTRUCTIONS “FOR DEPOSIT ONLY”
SPECIAL ENDORSEMENT: TRANSFER CHECK TO SOMEONE
ELSE





DEPOSITS
“PAY TO ORDER OF” WRITTEN ON BACK
DO NOT ENDORSE UNTIL READY TO CASH/DEPOSIT IT
SIGN THE BACK
SIGN EXACTLY HOW WRITTEN ON FRONT
USE A PEN
 BANK





DEPOSITS
CHECKS WRITTEN
WITHDRAWALS
DEBIT CARD CHARGES
INTEREST EARNED
 BANK

WILL SEND A STATEMENT EACH MONTH
RECONCILIATION
REPORT THAT SHOWS DIFFERENCE BETWEEN
STATEMENT AND YOUR CHECKBOOK BALANCE
 5.2
ASSESSMENT 1-3
 CHAPTER


5 REVIEW & ACTIVITIES
1-6
BANKING QUIZ 1-8
 ADDITIONAL
 CHECKING
CLASS CHECKING PACKET
SIMULATION