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