Banking Notes
The riskier the loan, the __________ the interest rate the bank will charge you
higher
Credit Unions
provide loans for only its members, which are usually employees of certain companies or professions
Savings & Loan Associations (S&L) and Mutual Saving Banks
take deposits and make loans primarily for buying homes, which require larger loans
Commercial banks
take deposits and make loans to individuals and businesses (BB&T, Bank of America, Wells Fargo, etc.)
6 ways that the bank can make money for themselves
1. ATM fees: if you use an ATM for a bank other than your own, you must pay a fee 2. Checking: checking accounts charge a monthly fee 3. Overdraft (protection): when your spending exceeds the amount of money in your checking account 4. loan fees 5. Investments 6. securities
What happens when you first deposit your money (where does it go)?
It goes into a big pool of money along with everyone else's money, and your account is credited with the amount of your deposit
Check
a written order directing a bank to pay a specified sum from one person's account to another person or to a business
What are the requirements for opening a bank account? How do you get a bank account?
eighteen years of age OR with a signature from one of your parents. You are given an account number in which you can make credits (deposits) or debits (withdrawals) of your money
EFT: Electronic Funds Transfer
electronic funds credited/debited to/from your account and can be used immediately instead of waiting
Deposit (credit)
adding money to your account
How do banks "create money"?
by making loans (giving money to people) so people who wouldn't normally have the money they need for something can get it
What is the Federal Reserve Requirement? (what does this make banks have to do?)
it requires that banks have to keep three to ten percent of a deposit in the bank's total deposit and that money cannot be lent out
What accounts for over half of the nation's money supply?
checks
What are you given after opening a bank/checking account?
checks associated with your bank account and a debit card that can be used at stores that directly takes the money out of your account when used
Ifa bank were ever to fail how much is your money protected up to? Which corporation is responsible for this?
$250,000 is protect by the FDIC, or Federal Deposit Insurance Corporation
What are banks also known as?
Depository Institutions
What is a "run on the bank?"
When everyone goes to the bank at the same time and demands their money, causing the bank to run out of money to loan; this happened during the Great Depression on the morning of the Stock Market crash
Interest
extra money you pay the bank for giving you the money up front
What is the primary function of a bank?
They put their account holders' money to use by lending it out to others who can then use it to buy houses, businesses, and send kids to college.
What fact is hard to grasp about what about are doing with your money?
WHile people are putting money into the bank every day, the bank is lending that same money and mrs to other people.
What is a bank?
an institution (independent business) that deals in money and its substitutes; they provide safeplaces to keep money and other financial services in order to make a profit
Currency can be easily be lost or stolen, so people keep their money in __________ __________ at banks.
checking accounts
What is another form of banking that is new?
online banking bill pay
ATM: Automatic Teller Machine
people used to have to go into banks to credit or debit their account
Withdrawal (debit)
taking money out of your account
Borrow (loan)
the bank gives you money which you have to pay back over a certain period of time with INTEREST
Why is loaning money risky for banks?
they cannot guarantee that they will get their money paid back
How do banks make money for themselves?
they make money on the interest they charge on loans. For example, a $1000 loan with 10 percent interest will require a payment of $1100 in the end
What is banking all about?
trust