Financial Services/Basic Banking/Savings Accounts

Banking

"_______" where you shop can save you time and gas; the fees are usually much more reasonable than at a check-cashing store, etc. but they still add up fast and you could skip them altogether just by cashing checks and getting a debit card for free at your own bank.

Commercial Bank: Bank of America (Core Checking)

* best "bargain" bank because it's the most reliable and the overall cheapest compared to the thrift bank and credit union - tech-savvy services: checking and mobile -banking, app for both and account info - other services: good cash back deals, overdraft protection - min. opening deposit: $25 - monthly maintenance fees: $12, unless requirements met to receive no monthly fees (student under the age of 24, direct deposit of $250 or more, or maintain a min. daily balance of $1,500) - overdraft fees: effective if amount in account is exceeded - ATM fees: free when using the banks ATM's, $2.50 at other U.S. ATM's, $5 elsewhere - penalties and withdrawal limits: set by user

Facts About Credit Unions

*(Bank, Credit, or Thrift: FDIC podcast) choose to put my money here because it will be most secure here 1. provides money to members 2. members must have similarities 3. provides almost all of the same things as a bank 4. only has members

Financial Services: Benefits and Costs

- Checking Accounts: benefits- provides a safe place for your money; allows you to withdraw your money. costs- pays no interest or very low interest. - Savings Accounts: benefits- helps you accumulate and save money while earning a small amount of interest; interest earned. costs- interest may vary, cannot use money immediately. - Automatic deposit and payment: benefits- don't have to write or cash checks; no postage to send payments; bills can be paid on time; no need to take your pay check to the bank. costs- makes money more abstract because you never see it; need to monitor account for accuracy; must be sure you have enough money in your account before spending. - Credit Cards: benefits- allows you to buy now and pay later; safer and more convenient than carrying cash. costs- temptation to spend more than you should (going into debt increases); must track how much money you're spending, must pay interest unless you pay the full amount each month. - Debit Cards: benefits- more convenient than carrying cash; you can only spend what you have on your account; out of checking account. costs- your spending is limited to the balance in your account; if you have overdraft protection, you may be charged fees for exceeding balance. - ATMS: benefits- allows convenient access to your money almost anywhere in the world. costs- may be charged for fees or interest, so must read carefully before using; fees and interest vary depending upon the machine and situation. - online banking: benefits- safer than mailing a check; can pay all of your bills and save postage. costs- makes money more abstract because you never see it; need to monitor your account for accuracy; must be sure you have enough money in your account. - safe deposit boxes: benefits- allows you to keep valuables safe from natural disasters. costs- yearly fee; only accessible during banking hours; in case of death, box cannot be opened until inspected by the government. - money transfers: benefits_ allows you to easily move money from one account to another, e.g., from your savings to your checking account. costs- if it is a wire transfer, you will have to pay a fee; if you transfer from your savings to your checking account, you lose interest on your savings. - overdraft protection: benefits- keeps you from "bouncing a check" and paying related feed for withdrawing more money from your checking account than you have in it. costs- most financial institutions charge overdraft protection fees or interest on the amount needed, even though these fees may be less than overdraft fees.

Thrift Bank

- a bank that is a type of financial institution

Bank

- a business that performs services related to money; provides services to its customers in order to make money for those who own the ____ - you can let this hold your money and keep it safe for you; putting your money into an account is making a deposit - borrowing money from a here is considered a loan - have to let you know when your deposited funds will be available for withdrawal - required to protect your financial info; banking laws help protect your privacy - required to give you info about any updates; when you open the account and then at least once a year after that

interest

- add ex. + $1

deposit

- add ex. + $5

Passbook Accounts/Basic Savings

- allow you to make a min. deposit, beginning as low as $5 - these types of plans earn low interest rates, but you can easily withdraw or deposit funds

Government Savings Bonds

- backed by the US government; little to no default risk - EE/E or I bonds - designed to be help for a min. number of years before you cash them in to get your money and interest - because of the length of maturity, these bonds have higher rate of return than savings accounts or CDs - low risk, which reduces the potential earnings

Checking Accounts

- basic purpose of this account is NOT saving money - provides a convenient way to handle personal and business transactions - many accounts earn a very small percentage of interest - before opening this account, or another, always ask about the rate of interest your money will earn

Opening a Savings Account

- compare rates and services at different banks before opening this account to decide which account best meets your needs 1. visit the financial institution of your choice, and speak to a customer service agent about opening this account 2. bring- two forms of identification, including one with a picture, your social security number, and money for your first deposit, which can be cash or check 3. be prepared to fill out info on a signature card that will remain on file at the bank; the bank uses the card to verify the signature on checks that bear your name; signature cards typically include- your name, current address and length of time at that address, previous address and length of time at that address, the type of account, such as single of joint, and your signature 4. once your account is approved, you can make your first deposit

Money Market Mutual Funds

- designed to provide higher rates of return than savings accounts because the money is actually invested in a very short term investments with a low risk - these funds/accounts are available at many banks and credit unions, but may also be offered by other financial service providers - the accounts at banks and credit unions are covered by federal insurance, while those offered by other financial service providers aren't - to cover the additional risk of no insurance, these accounts offered by other financial providers tend to pay higher interest rates on your savings - high min. balance of $5,000 to $10,000 - limit on number of withdrawals

Special Endorsement

- do this when you want to give someone else the money - write "pay to the order of" and that person's name below it - then sign your name underneath - now only that person can cash the check

Stores

- duplicate many functions of a bank, but don't offer savings account options - aren't subject to the same regulations as financial institutions; fewer laws protecting you

Money Market Accounts

- earn a higher interest rate than traditional savings accounts, but you must make a larger min. deposit (between $500 and $2,500) - limit on the number of monthly withdrawals from this type of account

Check-Cashing Stores

- gets a cut of your check; if you're paying a $4 fee for every $100 you cash, the store keeps $20 of a $500 check - safety is an issue; muggers know customers leaving one of these stores carry a lot of cash - deal with check cashing and lending money BUT don't operate by same laws as banks, aren't FDIC insured, and can charge you much more for financial transactions

financial services

- groceries and big box retailers offer these such as money orders, check cashing, bill paying, overseas wire transfers, and prepaid debit cards at their service counters

liquid

- how quickly turned into cash

deposit accounts

- include checking, Negotiable Order of Withdrawal accounts (NOW), savings accounts, money market deposit accounts, and certificates of deposit (CDs)

Federal Deposit Insurance Corporation (FDIC)

- independent agency of the federal government - insures' customers money; certain types of accounts at banks are insured by this corporation - only available to FDIC member banks and saving associations, covers deposit accounts; even if FDIC bank, insurance won't cover non-deposit accounts like mutual funds, annuities, stocks, and bonds - if the bank can't afford to give you the money you're supposed to have in your account, this will replace the money - your account is secured to at least $250,000 per depositor per insured bank, so if the bank goes out of business and you have $5,000 in your account, this will give you that money (they will reimburse the value of your account in full, up to $250,000, if the bank ever fails)

Restrictive Endorsement

- most safe - when you want your check to be very safe, such as when you send it to your financial institution in the mail, use this kind of endorsement - write "for deposit only" and sign underneath - now the check can only be deposited into your account, not cashed

Credit Unions

- not for profit organizations offering the same financial services as banks, including savings and checking accounts, loans, online and mobile banking, and ATM's - owned by their customers, who are called members; these members elect a volunteer board of directors to manage the credit union - provides money related services to its members - members must share a common bond to open an account; profession, location, association

Blank Endorsement

- not safe - sign your name the same way it's written on the front of the check - only sign it when you're ready to cash it or deposit the money into your account - once the check is signed on the back (endorsed), someone else could get your money if you lose the check

Certificates of Deposit (CD)

- offered by most banks and credit unions, covered by federal insurance - when bought, you usually have to wait a certain amount of time until it "matures" to get your money; this can happen in 30 days or many years, depending on which you use - longer the term, higher the rate of interest you receive - less liquid than savings accounts, but tend to earn higher interest than typical savings accounts - accounts earn a higher interest rate than tradition savings accounts, but you must make a larger min. deposit (between $1,000 and $5,000) - you also must keep your money here for a specified period of time; penalty for early withdrawal

Pawnshops

- pawnbroker provides on the spot, short term loans for up to 50% of an item's estimated value - the cash is fast and easy - pawnbrokers also will buy some items outright, but for too much less than their full value - you pay interest fees on the loan; if you don't repay the loan in full within 30 to 90 days, these places take full ownership of your item and can sell it and keep the profit - risk of losing possession of your item - only get a fraction of its value in return - should be one of your last options for getting cash

Savings Account

- purpose is to SAVE money - interest bearing accounts at banks and credit unions - low interest rates - are used to deposit small amount of money - are used to meet short term goals - great tool for establishing an emergency fund - be sure the bank you have money in this account with has FDIC insurance / credit union has NCUA insurance - having this account in a bank or other financial institution allows you to keep your money in a safe place and earn interest on it - recommended that you save 10% of your income each month; before you decide how much to save, review your budget, financial goals, and objectives - once you decide on a savings plan, consider the three main types of accounts: passbook accounts, CDs, money market accounts

Truth in Savings Act

- requires banks to give you certain info about their checking and savings accounts; this info helps you compare the features of different accounts -- can decide which one's best for you -- can compare the fees of one account to the fees of another -- can compare the balance requirements of a certain account with the balance requirements of a different account -- if the account is a deposit account that gives you interest, it'll give you the Annual Percentage Yield (APY) -- makes sure that the bank lets you know on a regular basis what's happening with you accounts, usually about once a month

Electronic Funds Transfer Act

- requires banks to limit what you're responsible for when there are errors on your statement or also if your debit or ATM card is lost or stolen; similar protections with credit cards

Endorsing a Check (written to you)

- signature included on the front and back of the check acknowledges that both parties have agreed to exchange the specified amount on the document - the signature or account info included on the back of the check acknowledges that the intended recipient received the document and deposited it - sign your name on the back of the check ( if written to you) the same way it's written on the check; if it's spelled wrong, also sign your name the correct way on the next line - multiple ways to endorse a check: blank, special, and restrictive endorsements

withdrawal

- subtract ex. - $2

Credit Union: SunTrust Bank (Essential Checking)

- tech-savvy services: mobile, online, and text message banking - other services: mastercard debit card with 0 liability - min. opening deposit: $100 - monthly maintenance fees: $7 if requirements aren't met - overdraft fees: $36 per item, other options available - ATM fees: free for banks ATM's - penalties and withdrawal limits: set by user

Thrift Bank: Fifth Third Bank (Essential Checking)

- tech-savvy services: online bill payment, mobile banking and deposits, phone alerts - other services: overdraft and identity theft protection, service charges waived for savings accounts, Fifth Third debit card - min. opening deposit: n/a, must be funded within 45 days of opening - monthly maintenance fees: $11 if requirements aren't met, reduced to $8 with a monthly direct deposit of $500 or more - overdraft fees: $12 per transfer - ATM fees: n/a - penalties and withdrawal limits: limited by user

default risk

- the potential that a bond issuer will not pay the interest or return your money when it matures

Expedited Funds Availability Act (EFA)

- there can be some time between when you deposit a check into your checking account and when that money is available to you; banks are required to make the checks available to you quickly (part of this act)

These factors affect the growth of savings:

- time (T): the earlier or longer you save, the more total savings (wealth) you will have - investment size (P--> principal): the more you save each year from your income, the more total savings (wealth) you will have - rate of return (R--> interest rate): the higher interest rate or rate of return, the more total savings (wealth) you will have -- Annual Percentage Rate (APR)

Payday Loans

- very costly - a clerk will advance you cash if you leave a check the store can cash when you get paid, but the fee hides a high interest rate - can trigger a cycle of debt - many borrowers end up taking out another loan or extending their loans 10 to 30 plus time a year, paying interest of up to an annual percentage rate of 365% (based on the typical loan term of 10 days) each time - deal with check cashing and lending money BUT don't operate by same laws as banks, aren't FDIC insured, and can charge you much more for financial transactions

1st step: make a list of everything you want in a bank. questions to think about:

- will you make deposits in person or online? - where will you withdraw cash? ATM? stores? - how will you pay for things with your money? checks? debit card? online? - is mobile banking a must have or a nice to have? - what other services might you need in the next few years? - will you be able to access your accounts if you are in another city or country?

National Credit Union Administration (NCUA)

- your deposits are insured up to $250,000 by this federal agency under credit unions

Facts About Thrifts

1. federal institution 2. used to be very different 3. technical differences from banks and credit unions 4. helps save money

Facts About Banks

1. provides money to customers insured financially 2. business with services 3. provides loans 4. helps keep money secure

You need to watch for mistakes on your bank account statements. If there's an error, you have __ ____ from when the statement was sent to report that to the bank. Then you won't be responsible for the error.

60 days

If your ATM or debit card is lost or stolen you should notify that bank ____. Call the bank that issued your card ____ you notice you've lost it or find another problem with your account, like an unauthorized charge.

asap

Choices range from

big national banks, to small community banks, to online only banks.

When your bank statement arrives, compare it with your passbook, Determine the amount of money you _________, the amount you ________, and the amount you have left. If you bank online, you can also access and track your savings account info online.

deposited; withdrew

Almost anyone with a _______ _______ or other photo identification and money to deposit can enter a bank and open an account.

driver's license

Save money regularly so that you will be better prepared to deal with an ________ and achieve your _________ _____.

emergency; financial goals

A _________ _______ bank covers banks, credit unions, and thrifts- it gives you many more protections you can't get when you keep your money somewhere else.

federally insured

Get a head start on building _________ _____________ by choosing a bank or credit union to call home. Then as you get older, you'll have a trusted place to turn to when you're ready for a credit card or loan.

financial relationships

A bank is owned by its _________, and a paid board of directors run the bank.

investors

Banks sell financial services such as

loans, checking accounts, credit cards, and safe deposit boxes.

To earn the ___ interest on your savings, limit the amount of withdrawals you make from your savings account.

max.

To help you keep a current record of your savings account, some banks issue a _______.

passbook

You can switch banks at any time, but you might not want the paperwork hassle. So, it ____ __ ______ the time in making a good choice now.

pays to invest

Once you know how you'll use a bank, you can figure out the ________ you need and how often you'll need them. Then, use that insight to see which _______ give you the biggest bank for your buck.

services; options

As you withdraw or make deposits, keep track of the amount of money remaining in your savings account. Your bank or financial institution will send you a monthly _________ or list of the various withdrawals and deposits made on your account. If you have an ATM card, you can also access this type of info at an ATM.

statement

Deposit Slip

to fill out: 1. write your name and account number on the slip 2. list the amount of money you want to deposit; cash and checks are usually listed separately, then totaled 3. take the slip to a teller at your bank, or withdraw money using an ATM - checks: list the amount of each item that you are depositing - subtotal: sum of all the items deposited - less cash: amount of cash you want back - total: total amount of deposit

If you notify the bank within ___ ________ ____ of when you discovered a lost or stolen ATM/debit card, the most you might be responsible for is $50, after that you might be responsible for paying up to $500 of the unauthorized charges or even more.

two business days