Chapter 4: Financial Services- Savings Plans and Payment Accounts
if you're a victim of identity theft take the following actions
-file a police report immediately in the area where the item was stolen. This proves you were diligent and is a first step toward an investigation -call the three national credit reporting organizations to place a fraud alert on your name and social security number -contact the social security administration
Types of Financial Services
-savings -payment services -borrowing - insurance, investments, tax assistance, and financial planning
things that could be assessed when you need funds
-savings account -mutual fund -investments -credit card cash advance -personal loan
Deposit type institutions that serve as financial intermediaries
-savings and loans -credit unions -commercial banks
basic questions to ask when selecting a financial service provider
-where can I get the best return on my savings? -how can I minimize the cost of checking, payments services, and other fees? -will I be able to borrow money if I need to?
failure to reconcile your bank account can result it
-your exact spending habits for wise money management -if the correct deposit amounts have been credited to your account -any unauthorized ATM withdrawals -if your bank is overcharging you for fees -errors that your bank may have made in your account
frequent mistakes when managing current cash needs
1. overspending due to impulse buying and overusing credit 2. having insufficient liquid assets to pay current bills 3. using savings or borrowing to pay for current expenses 4. failing to place funds not needed for current expenses in a savings account or investment plan
proper procedure for check writing
1. record the date 2. write the name of the person or organization receiving payment 3. record the amount of the check in numerals 4. write the amount of the check in words; checks for less than a dollar should be written as "only 79 cents" 5. sign the check 6. note the reason for payment
money market fund
a combination savings-investment plan
compounding
a process that calculates interest based on previously earned interest
deposit ticket
adding to your checking account, On this document, you list the amounts of cash and checks being deposited
debit card
aka cash card activates ATM transactions also used for purchases
automatic teller machine (ATM)
aka cash machine, a computer terminal that can facilitate various types of transactions
asset management account
aka cash management account provides a complete financial services program for a single fee
investment companies
aka mutual funds, offer a money market fund
rate of return
aka yield, is the percentage of increase in the value of savings as a result of interest earned
each check you deposit requires
an endorsement
overdraft protection
automatic loan made to checking account customers for checks written in excess of their balance
opening a checking account
both an individual account and joint account require a signature card. This document is a record of the official signatures of the person or persons authorized to write checks on the account
expanded financial services are available from
brokerage organizations, including checking accounts and online banking
effective cash management plan is needed for
buying groceries, paying the rent, and other routine spending
influences on financial services
changing interest rates, rising consumer prices, and other economic factors
check cashing outlets (currency exchanges)
charge anywhere from 1-20 percent of the face value of a check; for a low income family that can be a significant portion of the household budget. They also offer electronic tax filing, money orders, private postal boxes, utility bill payments, and the slae of transit tokens
demand deposits
checking accounts and other payment methods
most common deposit institutions
commercial banks savings and loan associations (S&Ls) mutual savings banks credit unions
mobile and online banking benefits
convenience and saving time along worth instant information access
a customer has more security in case of fraudulent transactions when a debit card is processed like a
credit card
time deposits do not include
credit card and cash loans and checking accounts
benefits of CDs
guaranteed rate of return for the time of the CD insured (when purchased from bank or comparable financial institutions)
credit card companies that specialize in funding short-term retail lending
have also expanded into other banking and investing services
Credit alternatives include:
home mortgages credit cards cash loans checking account
when are debit card amounts deducted from your account?
immediately
expanded activities of life insurance companies
investment and retirement planning services
a trust
legal agreement that provides for the management and control of assets by one party for the benefit of another
non deposit institutions
life insurance companies, investment companies, brokerage firms, credit card companies, finance companies, mortgage companies
two basic choices when you need cash
liquidate savings or borrow
pawnshops
loans through pawnshops are based on the value of tangible possessions such as jewelry. Many low income families use these organizations to obtain cash loans quickly. They charge higher fees than other financial institutions.
payday loan companies
many consumer organizations caution against using them. Desperate borrowers pay annual interest rates as much as 780%. Frequent users of payday loans are workers who have been trapped by debts or poor financial decisions
specific stop payment order
may be necessary if a check is lost or stolen. Most banks do not honor checks with "stale dates" usually six months old or older. The fee for a stop payment ranges from $20 to more than $30
selecting a savings plan
most often influenced by the rate of return, inflation, tax considerations, liquidity, safety, restrictions, and fees
debit card transactions
nearly every store and online retailer processes debit card transactions, with the amount of the purchase deducted from your checking or other banking account
E trade banks operate
online while also providing customers with access to ATMs. They provide payments, savings, and credit services
mortgage companies
organized primarily to provide loans for home purchases
mutual savings banks
owned by depositors, also specialize in savings accounts and mortgages
credit alternatives are for
people of all different levels of financial ability
certified check
personal check with guaranteed payment. The amount of the check is deducted from your balance when the financial institution certifies the check
regular savings accounts
previously called passbook or statement accounts, usually involve a low to no minimum balance and allow you to withdraw money as needed. Banks, savings and loan associations, and other financial institutions offer regular savings accounts. At credit unions these are called share accounts
mobile and online banking concerns
privacy, security of data, ease of overspending, costly fees, and online scams
life insurance companies
provide financial security for dependents with various life insurance policies, some containing savings and investment features
finance companies
provide loans to consumers and small businesses. These loans have short and intermediate terms with higher rates than most other lenders charge. They also offer other financial planning services
interest earning checking
require a minimum balance. If the account balance goes below this amount you may not earn interest and will likely incur a service charge. Called share draft accounts at credit unions
what do savings funds provide?
safe storage of funds for use. Commonly referred to as time deposits, money in savings accounts and certificates of deposit are examples of savings plans
services offered by savings and loans associations (S&Ls)
savings accounts and mortgages. They have recently expanded to offer financial services comparable to those of a bank
certificate of deposit (CDs)
savings plan requiring that a certain amount be left on deposit for a stated time period
brokerage firms
serve as an agent between the buyer and seller for stocks, bonds, and other investment securities. They obtain their earnings from commissions and fees.
deposit institutions
serve as intermediaries between suppliers and users of funds
rent to own centers
stores that lease products to consumers who can own the item if they complete a certain number of monthly payments. Interest rates can be over 300%
annual percentage yield (APY)
the percentage rate expressing the total amount of interest that would be received on a $100 deposit based on the annual rate and frequency of compounding for a 365 day period
small loans
thousands of consumers are increasingly in need of small loans. Pawnshops have become the "neighborhood bankers" since they provide both lending and retail shopping services
report fraud within 60 days of receiving your statement
to protect your right not to be charged for the transaction
The main purpose of life insurance
to provide financial security for dependents
credit unions
user owned, nonprofit, cooperative organizations. Although members traditionally had a common bond such as work. Credit union membership today is more flexible today.
to learn about economic trends by reading
wall street journal financial times business section of daily newspapers
endorsement
your signature on the back of the check to authorize the transfer of the funds into your account