Lesson 9: Financial Institutions and Services

Mortgage

This type of loan provides opportunities to borrow for the purchase of a home, or business property. Interest rates vary and add to the cost of the purchase.

Student Loan

This type of loan provides opportunities to borrow money to pay for a college education (often at below-market rates). Interest rates cary and add to the cost of your education.

What are ways to get your money out of a bank?

Use the ATM, Debit Cards, a check, and ATM cards.

Automatic Deposit and Payment

Users can direct their employer to deposit their paychecks directly into their bank account or transfer money directly from their account to pay bills to businesses on a certain date each month. This avoids having to cash or write checks and pay postage to send payments, and bills can be paid on time. The user needs to monitor the account for accuracy and make there is enough money in the account before spending it.

List the 4 steps to opening a checking account:

a. take your identification to the bank officer who handles new checking accounts. b. Choose the type of checking account that best fits your needs. c. Complete a signature card, that is used to determine the authenticity of your signature on checks. d. Make an opening deposit.

Restrictive Endorsement

Tags a check for a specific purpose, such as "for deposit only".

What does an automated teller machine allow you to do?

The ATM machine allows you to conveniently deposit, withdraw, or transfer funds from your account and to varify your account balance.

What kind of checking account is appropriate for most highschool students?Why?

The Special Account is appropriate for most highschool students because service fees are charged low, flat rate, and it will help save money.

Deposit Insurance

The federal government reimburses depositors up to $250,000 if the financial institution fails; agencies providing this insurance are the Federal Deposit Insurance Corporation (FDIC) for banks and S&Ls or the National Credit Union Administration (NCUA) for credit unions.

Why is the signature card important when you open a checking account?

The signature card is important when open a checking account because it determines the authenticity of your signature on checks.

Debit Card

- A debit card is issued by many financial institutions and may be used to access ATMs and make payments at many stores. - A debit card also allows you to have the amount of a purchase withdrawn directly and immediately from your checking account and transferred to the seller. - Be sure to keep receipts when you use your debit card; record the transactions in your check register, including any additional charges.

ATMs

- An automated teller machine (ATM) allows you to conveniently deposit, withdraw, or transfer funds from your account and to verify your account balance. - ATMs require you to use a PIN (personal information number) when you make a transaction. You should keep your PIN private. - Deposits made using ATMs may not be immediately available. Availability of funds deposited at an ATM depends on the time of day the deposit is made and whether or not the ATM is owned by your financial institution. Depending ton these factors, it may take several days before the deposited funds are available for use. - For withdrawals, you may receive a statement like the one below, specifying the location of the transaction, the date and time, the amount of the withdrawal, any fee for the transaction, and the account balance after the transaction.

Reconciling Your Statement

- Each month, you will receive a bank statement that summarizes the activity of your checking account including deposits, checks written, service charges, debit card & ATM activity, and any interest earned. - Take time to check the statement for accuracy by reconciling it. To reconcile your bank statement, compare your checkbook register to the monthly statement. Check off deposits and withdrawals. - Record in the register any service charges or interest earned listed on the bank statement but not in the register. That is your check register balance.

Online Banking

- Online banking connects you to your account over the internet, with secure connections 24/7. - Online banking allows you to have paychecks automatically deposited, pay bills, transfer funds between accounts, or just check your balance at any time. - To pay bills online, enter the bill information and the account you want to use to pay it. - If the bill has a fixed payment each month, you can schedule a recurring payment on a certain date; if the amount changes, you can enter a new payment each month.

Online Banking

- Online banking sometimes requires that you know both your financial institution's 9-digit routing number at the bottom-left corner of your check and your 12-digit account number, which is the next group of numbers to the right. The last few digits are the check number; it is the same number as the one printed at the top right-hand corner of your check. - Online banking also requires a username and password for security purposes. Keep this information private, just like your pin. - Online banking statements show your resulting balance after each deposit, check written, debit card transaction, and any person-to-person payments or receipts. - The balance shown is not always up to date. Your account won't reflect deposits, debit & ATM transactions, or checks until they are posted to your account. You should also keep a paper record of your transactions.

Writing a Check (Part 2)

- Sign your check the same way you signed the signature card when you opened your account. - You may wish to note the purpose of the check on the "MEMO" (or "FOR") line to left of the signature. You may also use this space to write the account or invoice number of the bill you are paying. - When you make a mistake, write "Void" in very large letter over the writing on the check and keep the voided check for your records. - Be sure that you have enough money in your account to cover each check transaction you make. - Record the number, date, payee, and amount of the check in your check register. Subtract the amount of the check from the balance. - make sure to maintain a record of all automatic payments and all other online debit banking, or person-to-person transactions you make using your checking account.

Opening a Checking Account

- Take your identification to the bank officer who handles new checking accounts. - Choose the type of checking account that best fits your needs. - Complete a signature card, that is used to determine the authenticity of your signature on checks. - Make an opening deposit.

Keeping Records

- The key to managing your account is writing down every withdrawal or deposit. On way to do this is use the check register, a booklet that comes with your preprinted checks. - Subtract all withdrawals (writing checks, making purchases with a debit card, or using the ATM to get cash) and fees from your balance and add all deposits so you know how much money remains in your account. - If you spend more money than you have, you have "overdrawn" your account. - Any time you are overdrawn, banks charge fees called "overdraft" or "insufficient funds" fees and automatically subtract them from your account. That leaves you with even less money. - Merchants or people to whom you gave the check may also charge you a fee for giving them a bad check. That will cost you even more money. - The same is true for overdrafts using a debit card. The bank may deny a purchase, which can be embarrassing in front of your friends. - Some banks will offer a special service called "overdraft protection". This will allow a purchase to go through even if you don't have enough money in your account. But you will be charged a fee for using this service. - Maintaining an accurate record of your transactions is the only way to protect yourself from costly mistakes with your bank account.

Writing A Check

- Use pen and write clearly. - Write the current date. - Write the name of the person or company receiving your check on the "Pay to the Order Of" line. This person or company is called the "payee". Start the name as close to the beginning of the line as possible. - Enter the amount of the check in numbers in the space that starts with a dollar sign ($), including a decimal point and cents ($100.35). Start the numbers as close to the dollar sign as possible. - Enter the amount of the check in words for the whole dollar amount and a fraction for the cents on the line ending the word "DOLLARS". Start writing from the far-left side of the line by entering the dollar amount in words, followed by the word "and" - e.g., "One Hundred and". Then write the cents amount as a fraction - e.g., 35/1000. If there are no cents, use 00/100. Draw a line from the end of your writing to the end of the line so there is no additional room to insert words or numbers.

Reconciling Your Statement

- Write down the statement balance. - Add deposits that are listed in the register but not on the statement. Subtract withdrawals listed in the register but no on the statement. - The adjusted statement balance is the current balance in your account and should equal the check register balance. - If the account does not balance , research possible explanations such as having missed checks that did not clear the account, fees charged, interest paid, calculation errors, or incorrect numbers. - You may need to contact the bank and ask someone to hep you find the problem. While it does not often happen, sometimes banks accidentally take money out of the wrong account, enter the wrong amount in their records, or make other mistakes.

Making a Deposit

- Write the current date. - Write the amount of currency and coins to be deposited in the box marked "CASH." - If checks are being deposited, write in the amount of each check in the boxes below the "CASH" box. - If you need space for more checks, use the back of the deposit slip. - Total the cash and check amounts and write that amount in the "TOTAL" box. - If you wish to receive cash back (when you are depositing only checks), write the amount in the "LESS CASH RECEIVED" box. You may have to sign the deposit slip. - Correctly enter the "NET DEPOSIT" by subtracting the cash received from the "TOTAL" box.

Check-Cashing Store

Allows customers to cash checks, send wire transfers (electronic transfers of money from one financial institution to another), and purchase money orders (pre-paid paper documents, other than checks, used for making payments). An identification card is the only requirement to obtain these services; there is usually no credit background information required. Fees for services are generally higher than those charged by a bank or credit union.

Special Endorsement

Allows you to transfer the check to another person. no one except the person named in the endorsement may cash or deposit the check. Not all banks will honor this type of endorsement.

Deposit Services

Are designed to keep your money safe and allow payments and withdrawals when needed.

Credit Unions

Are similar to banks, except they are nonprofit organizations owned by the members who use their services.

Credit Services

Are those that provide loans to borrowers.

Where can I go to develop a financial history without being a member-owner of a financial institutions?

Bank

Where can I get a long-term home or auto loan?

Bank or Credit Union

Where can I go to cash a check without needing a credit background check?

Check-Cashing Store

Where would I pay the highest fees to purchase a money order?

Check-Cashing Store

Where can I go to cash a check if I don't have a checking account?

Check-cashing store

Where can I go to develop a financial history and be a member-owner of the financial institution?

Credit Union

Where can I safely save my money, knowing that it is insured by the federal government if the financial institution fails?

Credit Union or Bank

What are items that need to be included on a deposit slip?

Current Date, the amount of currency and coins to be deposited in the box marked "Cash" the amount of each check in the boxes below the "cash" box, total cash and check amounts, enter the net deposit, and the amount received cash back.

Endorsing a Check

Endorsement, Blank Endorsement, Restrictive Endorsement, and a Special Endorsement.

Bank

Is a for-profit company chartered (licensed) by either the state where it is headquartered or by the federal government.

An Endorsement

Is a signature on the back of a check instructing the bank as to how the check may be cashed.

Financial Institution

Is a type of business that provides services to help people manage their money.

Blank Endorsement

Is simply your signature on the back of the check. it is a good idea to wait until you are at the bank before endorsing a check, since an endorsed check can be cashed by any person who is holding it.

What is a bank reconciliation?

It is a statement that you receive at the end of each month telling you the summary of your checking account.

Why is it important to reconcile your bak statement to your checkbook register?

It is important because you can find a problem that wasn't your fault and to find a mistake that you made. It is like double checking your account.

What is required when using an ATM?

It requires you to use a PIN when you make a transaction. You should keep your PIN private.

Payday Loan Store

Offer Customers loans for small amounts of money that must be repaid by the borrower's next payday. The borrower can obtain the loan immediately, and there is usually no credit background information required. However, borrowers must be 18, need proof of employment, and having a checking account. In addition, the interest rate charged on the loan may be 300-400%, far greater than that charged by banks and credit unions. If a borrower does not have enough money to pay off a loan by the next payday, they may need to take out another loan.

Bank

Offer customers checking & savings accounts that are insured by the federal government; longer-term loans; home mortgages; credit cards; and retirement and investment accounts. The interest rate charged on loans is lower than that charged by payday lenders, and customers can develop a financial history by records of their transactions at the bank. Usually, banks will only cash checks for customers who have an account, and banks may not offer small or short-term loans. There are credit and background checks for loans, so the money may not be available immediately.

Where can I get a loan immediately?

Payday Loan Store

Where might I have to pay interest rates of over 300 percent for a short-term loan?

Payday Loan Store

A Savings and Loan (S&L)

Specializes in savings accounts and home mortgage and other loans, with special limitations that banks do not have.

Choosing a Checking Account

There are three main types of checking accounts: - Special Account: Service fees are charged at a low, flat rate, with an additional fee for each check written. This account is often appropriate for a highschool student. - Standard Account: There may be a fee for checks and maintenance of the account, but customers may sometimes avoid the maintenance fee by keeping a minimum balance. - Interest-bearing Account: Interest is paid if you maintain a minimum daily balance in your account during the month.

Person-to-Person Account (P2P)

These are payments sent directly to another person via a mobile device or any home computer with access o the internet; the account is linked to one or more of the user's bank accounts. Users must pay a fee and monitor the account to make sure they have enough money in the account to make the payments.

Installment Loan & Line of Credit

These types of loans provide opportunities to borrow money for major items such as a new or used automobile,home improvement, and other personal or household items. Interest rates vary and add to the cost of the purchases.

What services do payday lenders and check-cashing firms provide that are NOT provided by banks and credit unions?

They are short, Check-cashing wihtout an account and shot term loans wihtou a credit background information.

Online Banking

This allows customers to use their phone, tablet, or home computer to make financial transactions on a secure web site operated by their financial institution. They may transfer money between accounts and make deposit or pay bills 24 hours a day. Users need to monitor their account, so they have enough money to pay their bills.

Automated Teller Machines (ATMs)

This electronic banking outlet allows customers to complete basic transactions without the aid of a bank teller; anyone with a credit card or debit card can access their account to make deposits & withdrawals, transfer money between accounts, and check account balances. Access to money is a variable from multiple locations, 24 hours a day, but the user-may be charged fees, which vary depending on the type of machine and situation.

Overdraft Protection

This feature provides an automatic loan from the financial institution to cover an overdraft, which happens when a withdrawal is greater than the amount of money in a checking account. the user must pay a fee.

Money Order

This is a paper document used for making paymens without having a checking account, issued only after a buyer pays for it with cash or other funds; widely available; and fees cary by location and by the amount.

Pre-paid Debit Card

This is a plastic card that can be "loaded" with cash, and users can add more to the card when they run out. They are not a credit card, users can't run up debt on them, but the user pays activation fees, reload charges, and ATM fees that vary widely.

Wire Transfer

This is an electronic movement of money from one financial institution to another. It allows people to quickly and safely transfer money around the world, but the user will pay a fee.

Savings Account

This is insured by the federal government. Interest is earned on deposits, but interest rates vary depending on the account balance. Funds may be withdrawn via withdrawal slips and ATMs but the number of withdrawals per month is limited; interest rates earned are typically lower than the rate of inflation.

Money Market Deposit Account

This is insured by the federal government. It earns interest rates higher than regular savings accounts but may require a larger minimum deposit and monthly balance. Interest rates vary on the account balance, and users are allowed a limited number of withdrawals without as service charge.

Certificate of Deposit (CD)

This is insured by the federal government. It requires you to leave your money in the account for a set amount of time (usually from 3 months to 5 years), during which time you receive a fixed rate of interest that is usually higher than savings accounts. They may require a minimum deposit, and if you withdraw your money before the end of the agreed-upon time you will lose interest earnings.

Debit Card

This plastic card is used to deduct a purchase amount directly from a checking account. It is safer and more convenient than carrying cash; the user is not responsible for all purchases made with a stole card, provided the theft is promptly reported to the financial institution; and the user can only spend what they have in their account ( unless they have over drafted protection, which charges fees for exceeding your balance). The card can also also be used at ATMs to make deposits, withdrawals, and transfers and to the check account balances, but the use r may be charged fees.

Checking Account

This type of account is convenient and insured by the federal government. You can make transactions using checks, debit cards, or online banking instead of cash, and records or transactions are provided. There may be a fee for checks; the account pays low or no interest; and it may require a minimum balance to avoid a monthly maintenance fee.

Stock & Bond Accounts

This type of account provides a way for people to buy ownership of a corporation ( a stock) or lend money to corporations and governments (bonds) to make money for future financial wants. These accounts usually offer a higher return than savings accounts and CDs, but also involve varying amounts of risk and are not insured.

Individual Retirement Account (IRA)

This type of account provides a way for people to save a certain amount of money for their non-working years at a lower tax rate. The holder may pay penalties for early withdrawal of duns.

Credit Card

This type of loan allows the cardholder to "buy no and pay later" up to an approved credit limit. The user is not responsible for all purchases made with stolen card, provided the theft is promptly reported to the financial institution. The user must pay a fees for late payments; interest is charged on any unpaid balance each month; and there are fees for charging more than your credit limit.

Payday Loan

This type of loan is easy to obtain, even for someone with bad credit, it is usually the loan must be paid back within two weeks. Borrowers need proof of employment, a checking account, and be 18 years old. If the borrower does not have enough money to pay off the loan by the next pay day, they may need another loan. The annual interest rate may be 300-400%.

Credit Union

Unlike banks, credit unions are non-for-profit financial institutions offered to their member-owners who meet certain requirements. Credit Unions offer most of the same services as banks, including checking and savings accounts that are insured by the federal government; longer-term loans; homemortgages; gredit cards; and retirement adn investment accounts. the interest rate is also lower than payday lenders, and customers can develop a financial history by records of their transactions at the credit union. Usually, credit unions will only cash checks for customers who have an account and many not offer small or short-term loans. There are credit checks and other requirements for loans, so the money may not be available immediately.

How might you pay for goods and services without using cash?

You can use a credit card, write a check, use a debit card, gift cards, money order, online banking, check, pre paid debit card online payments P2P Accounts.

Investment Services

help people meet their financial needs for the future.