PFCH4

Online Banking Benefits

- Time and money savings - Convenience for transactions, comparing for transactions, comparing rates - No paper trail for identity thieves - Transfer access for loans, investments - E-mail notices of due dates

Online Banking Concerns

- potential privacy, security violations - ATM fees can become costly - difficulty depositing cash, checks - overspending due to ease of access - online scams, "phishing", and e-mail spam

When interest rates are rising

- use long-term loans to take advantage of current low rates. - select short-term savings instruments to take advantage of higher rater when they mature.

Types of Financial Institutions 1. Deposit Institutions

1. Deposit Institutions (Intermediaries between suppliers/savers and users/borrowers of funds) •Commercial banks ◦ Organized as corporations ◦ Offer a full range of services including checking, savings, lending, and other services ◦ National banks, regional banks, community banks, online banks. ◦ Organized as corporations with investors - stockholders, contributing capital to operate. • Savings and loan associations ◦ Checking accounts, specialized savings plans, loans, and financial planning and investment services. • Mutual savings banks ◦ Specialize in savings accounts and mortgage loans ◦ Owned by their depositors, with profits going back to depositors by paying a higher rate on savings ◦ Located mainly in northeastern US • Credit unions ◦ User-owned, nonprofit, and provide comprehensive financial services ◦ Lower fees and lower loan rates ◦ Affiliated by work locations, community, profession, etc.

Online Banking

Traditional and web-only banks Services provided: Direct deposit ◦ Paychecks and other regular income Automatic payments transfer funds ◦ Recurring payments such as for utilities ATM access ◦ Obtain cash, check account balances, and transfer funds ◦ Check out the fees Debit card ◦ Deducts money directly and immediately out of your account ◦ Lost card liability $50-$500

Debit Card or Cash Card

◦ Activates ATM transactions and is also used for purchases. ◦ You are spending your own funds, as opposed to borrowing additional money (credit card) ◦ A lost or stolen debit card can be expensive ◦ If you notify the bank within two days of the lost card, your liability for unauthorized use is $50 ◦ If not, It can be up to $500 (if calling before 60 days) ◦ After 60 days, you liability can be the total amount in your account, even more if your card is linked to other bank accounts (overdraft protection) ◦ There are exceptions - some card issuers use same rules are credit cards=maximum $50, if called within 60 days.

Managing Daily Money Needs Common mistakes:

◦ Overspending (impulse buying, using/overusing credit) ◦ Insufficient liquid assets to pay current bills ◦ Using savings or borrowing to pay for current expenses ◦ Failing to put unneeded funds in an interest bearing savings or investment account

When interest rates are falling

- use short-term loans to take advantage of lower rates when you refinance the loans. - select long-term savings instruments to "lock in" earnings at current high rates.

Types of Financial Institutions 2. Non-Deposit Institutions

2. Non-Deposit Institutions • Life insurance companies ◦ Insurance plus savings and investments ◦ Some offer financial planning and investing services • Investment companies ◦ Mutual funds ◦ Money market fund - Combination savings and investment plan - Not covered by FDIC • Brokerage firms ◦ Act as agent for buyers and sellers of financial products ◦ Earnings from commissions and fees • Credit card companies ◦ Specialize in short term loans ◦ Visa, MasterCard, Discover • Finance companies ◦ Make short and medium term loans to consumers ◦ Higher rates •Mortgage companies ◦ Provide home mortgage loans.

Types of Financial Services

Savings (safe storage of funds for future use) ◦ Time deposits ◦ Savings and certificates of deposit Payment services (ability to transfer money to others) ◦ Checking accounts = demand deposits ◦ Automatic payments Borrowing ◦ Credit alternatives, Short-term (credit cards, cash loans) or long-term (home mortgages) Other financial services ◦ Insurance, investment, real estate purchases, tax assistance, trusts, and financial planning. ◦ Trust is Legal agreement that provides for the management and control of assets by one party for the benefit of another. ◦ Usually created through commercial bank or lawyer. ◦ Parents who want to set aside certain funds for their children's education may use a trust. Asset management account Also called a cash management account ◦ Offered by investment companies and others to provide a complete line of financial services program (for a fee), which include: - Checking account and ATM card - Credit card Online banking - Line of credit for quick cash loans - Access for buying a variety of investments (stocks, bonds, mutual funds, etc. )

Mobile Banking

• Text banking • Mobile web banking • Banking apps • Potential drawbacks: o Privacy o Security o Fees

Prepaid Debit Cards

◦ Fastest growing payment method ◦ Issued by financial institutions and retailers ◦ Loading - adding funds to prepaid debit cards may occur by cash, check, direct deposit, online transfer, credit card cash advance, etc. ◦ Major issue, extensive number of fees due to few current regulations for these products (e.g. activation fee, monthly fee, transaction fee, ATM fee, balance-inquiry fee, fee to add funds, dormancy fee, etc). ◦ With credit cards you pay later, debit cards you pay now, prepaid cards you pay before spending. ◦ Celebrity endorsements don't mean better deals.