Chapter 17 Banking and Financial Services 17-1 Banks and Other Financial Institutions 17-2 Financial Services and Electronic Banking 17-3 Checks and Payment Methods Introduction to Business © Thomson South-Western LESSON 17-1 Banks and Other Financial Institutions Goals Explain the purpose of the Federal Reserve System. List the types of financial institutions. Discuss factors for selecting a financial institution. Chapter 17 Slide 2 Introduction to Business © Thomson South-Western Key Terms Federal Reserve System (Fed) commercial bank credit union Federal Deposit Insurance Corporation (FDIC) Chapter 17 Slide 3 Introduction to Business © Thomson South-Western THE BANKING SYSTEM The Federal Reserve System (Fed) Main purpose is to supervise and regulate member banks and to help banks serve the public efficiently All national banks are required to join – becoming member banks. United States divided into 12 districts with a central Federal Reserve Bank in each district. Chapter 17 Slide 4 Introduction to Business © Thomson South-Western Chapter 17 Slide 5 Introduction to Business © Thomson South-Western THE BANKING SYSTEM Federal Reserve activities Supervise banks Holding of reserves – banks are required to keep a part of the money they receive from customers on deposit in case the banks need additional funds to meet the daily customer demand As a clearinghouse Uses electronic funds transfer (EFT) to pay checks among different banks in different cities Chapter 17 Slide 6 Introduction to Business © Thomson South-Western THE BANKING SYSTEM Banking and the Economy The savings you and others deposit make banking services possible. Deposits do not remain idle in the bank, they are put to work. Chapter 17 Slide 7 Introduction to Business © Thomson South-Western Some of the activities for which banking services are used include: Building homes Starting new businesses Planting crops Financing educations Buying goods Paving streets Investing for retirement Building hospitals These activities create jobs and economic growth. Chapter 17 Slide 8 Introduction to Business © Thomson South-Western TYPES OF FINANCIAL INSTITUTIONS Chapter 17 Slide 9 Introduction to Business © Thomson South-Western Deposit Institutions Commercial banks Most common bank organization Also known as full-service bank because they offer services such as: Checking accounts Savings accounts Loans to businesses and individuals May find branches in shopping centers and grocery stores Chapter 17 Slide 10 Introduction to Business © Thomson South-Western Deposit Institutions Savings and loan associations Traditionally specialized in savings accounts and making loans for home mortgages Recently have expanded to offer a wider variety of services Chapter 17 Slide 11 Introduction to Business © Thomson South-Western Deposit Institutions Mutual savings banks A savings bank that is owned by, and operated for the benefit of, its depositors. Profits are distributed in proportion to the amount of business each participant does with the company. Organized mainly for savings and home loans. Located mainly in the northeastern United States. Chapter 17 Slide 12 Introduction to Business © Thomson South-Western Deposit Institutions Credit unions User-owned, not-for-profit, cooperative financial institution Comprised of people in the same company, government agency, or profession Accept savings deposits and make loans Regulated by NCUA, the National Credit Union Administration Chapter 17 Slide 13 Introduction to Business © Thomson South-Western TYPES OF FINANCIAL (continued) INSTITUTIONS Non-deposit financial institutions Life insurance companies Investment companies Consumer finance companies Mortgage companies Check-cashing outlets Pawnshops Chapter 17 Slide 14 Introduction to Business © Thomson South-Western >> C H E C K P O I N T What are some examples of non-deposit financial institutions? Chapter 17 Slide 15 Introduction to Business © Thomson South-Western SELECTING A FINANCIAL INSTITUTION Services offered Savings accounts Checking and payment accounts Loans and other credit plans Other services, such as safe deposit boxes Chapter 17 Slide 16 Introduction to Business © Thomson South-Western SELECTING A FINANCIAL INSTITUTION Safety Federal Deposit Insurance Corporation (FDIC) helps to regulate banks and protects depositors’ money in case of the failure of a bank Insures all accounts in the same name at each bank up to an amount of $100,000 (temporarily increased by the government to $250,000 per depositor through December 31, 2009) Chapter 17 Slide 17 Introduction to Business © Thomson South-Western SELECTING A FINANCIAL INSTITUTION Convenience 24-hour banking Branch offices in convenient locations ATMs in convenient locations On-line banking Chapter 17 Slide 18 Introduction to Business © Thomson South-Western SELECTING A FINANCIAL INSTITUTION Fees and charges Compare your needs with the price you pay Watch for hidden fees such as ATM fees Restrictions Minimum deposit requirements Amount Time Chapter 17 Slide 19 Introduction to Business © Thomson South-Western >> C H E C K P O I N T What factors should be considered when selecting a financial institution? Chapter 17 Slide 20 Introduction to Business © Thomson South-Western LESSON 17-2 Financial Services and Electronic Banking Goals Identify the financial services used by consumers. Explain types of checking accounts. Describe electronic banking activities. Chapter 17 Slide 21 Introduction to Business © Thomson South-Western Key Terms safe-deposit box service charge debit card Chapter 17 Slide 22 Introduction to Business © Thomson South-Western TYPES OF FINANCIAL SERVICES Savings services Payment services Lending services Electronic banking Storage of valuables Investment advice Management of trusts Chapter 17 Slide 23 Introduction to Business © Thomson South-Western >> C H E C K P O I N T What are the main financial services used by consumers? Chapter 17 Slide 24 Introduction to Business © Thomson South-Western TYPES OF CHECKING ACCOUNTS Regular checking accounts Interest-earning Checking accounts Special checking accounts Chapter 17 Slide 25 Introduction to Business © Thomson South-Western COMPARING CHECKING ACCOUNTS Minimum balance Interest rate earned, if any Monthly service charge Fees for other services, such as printing checks and stop payment orders Other restrictions Chapter 17 Slide 26 Introduction to Business © Thomson South-Western >> C H E C K P O I N T What are three main types of checking accounts? Chapter 17 Slide 27 Introduction to Business © Thomson South-Western ELECTRONIC BANKING E-banking services Automatic teller machines Payments at the point-of-sale Direct deposit Automatic bill payments Chapter 17 Slide 28 Introduction to Business © Thomson South-Western ELECTRONIC PAYMENT OPTIONS Debit card transactions Online payments Stored-value cards Smart cards Chapter 17 Slide 29 Introduction to Business © Thomson South-Western BANKING IN THE FUTURE Financial services combined with wireless technology Personalized systems for obtaining, transferring, and using funds Chapter 17 Slide 30 Introduction to Business © Thomson South-Western >> C H E C K P O I N T What are common electronic banking services? Chapter 17 Slide 31 Introduction to Business © Thomson South-Western LESSON 17-3 Checks and Payment Methods Goals Describe three main types of endorsements. Describe proper check-writing procedures. Explain the bank reconciliation process. Identify other payment methods. Chapter 17 Slide 32 Introduction to Business © Thomson South-Western Key Terms endorsement check register stop payment order bank statement bank reconciliation outstanding checks Chapter 17 Slide 33 Introduction to Business © Thomson South-Western OPENING A CHECKING ACCOUNT Benefits of checking accounts Convenience and ease of making payments Safety to make payments with less risk than using cash Proof of payment A record of finances for managing your money Chapter 17 Slide 34 Introduction to Business © Thomson South-Western THE FIRST DEPOSIT Signature card Joint account Deposit slip Chapter 17 Slide 35 Introduction to Business © Thomson South-Western SIGNATURE CARD Chapter 17 Slide 36 Introduction to Business © Thomson South-Western TYPES OF ENDORSEMENTS Blank endorsement Full endorsement Restrictive endorsement Special endorsement Two signatures required Restrictive endorsement Chapter 17 Slide 37 Introduction to Business © Thomson South-Western SAMPLE ENDORSEMENTS Chapter 17 Slide 38 Introduction to Business © Thomson South-Western >> C H E C K P O I N T What are the three types of endorsements? Chapter 17 Slide 39 Introduction to Business © Thomson South-Western USING A CHECKING ACCOUNT Check-writing procedures Elements of a check The check register Writing a check Proper check writing Stopping payment Chapter 17 Slide 40 Introduction to Business © Thomson South-Western PARTS OF A CHECK Chapter 17 Slide 41 Introduction to Business © Thomson South-Western >> C H E C K P O I N T What is the purpose of a check register? Chapter 17 Slide 42 Introduction to Business © Thomson South-Western THE RECONCILIATION PROCESS Bank statement information Determine checks paid Find differences Calculate adjusted balance Chapter 17 Slide 43 Introduction to Business © Thomson South-Western MONTHLY ACCOUNT STATEMENT Chapter 17 Slide 44 Introduction to Business © Thomson South-Western RECONCILIATION FORM Chapter 17 Slide 45 Introduction to Business © Thomson South-Western >> C H E C K P O I N T What are causes of differences between the bank statement balance and a person’s check register? Chapter 17 Slide 46 Introduction to Business © Thomson South-Western OTHER TYPES OF PAYMENTS Certified checks Cashier’s checks Traveler’s checks Money orders Chapter 17 Slide 47 Introduction to Business © Thomson South-Western CERTIFIED CHECKS Personal check for which a bank has guaranteed payment Certification stamped on face Signed or initialed by a bank officer Chapter 17 Slide 48 Introduction to Business © Thomson South-Western CASHIER’S CHECKS Check that a bank draws on its own funds Costs the amount of the check plus a service fee More acceptable than the personal checks Chapter 17 Slide 49 Introduction to Business © Thomson South-Western TRAVELER’S CHECKS Special forms designed for making payments when away from home Require your signature in two places Cash a check or pay for a purchase Commonly accepted throughout the world Chapter 17 Slide 50 Introduction to Business © Thomson South-Western MONEY ORDERS Form of payment that orders the issuing agency to pay the amount printed on the form to another party A bank money order A postal money order An express money order A telegraphic money order Chapter 17 Slide 51 Introduction to Business © Thomson South-Western >> C H E C K P O I N T How does a certified check differ from a cashier’s check? Chapter 17 Slide 52 Introduction to Business © Thomson South-Western