Mr. Elsesser
Introduction to
Financial Management
There are many types of financial institutions
that offer banking services:


 Commercial Banks:


A for-profit institu...
There are many types of financial institutions that
offer banking services:
 Credit Unions:




A nonprofit financial i...
BANKS
As a depositor, you are a
customer.


CREDIT UNIONS
As a depositor, you are a
member (owner).


Open to the genera...
 Why Open a Savings Account?
 Savings accounts are a useful tool to help you save to meet
your short-term, intermediate ...
There are several different types of savings
accounts:


 Regular Savings Accounts:
 Allow you to make frequent deposit...


There are several different types of savings accounts:
 Money Market Accounts:


Usually a checking or savings accoun...


There are many factors to consider to help you choose a bank:
 Interest Rates and Fees:


What will they pay your acc...
You will need some identification and information
to open an account:


 Valid photo ID, proof of age and identity:
 Ex...
 When searching for a bank, ensure your

deposits will be secure:

 Federal Deposit Insurance Fund
(FDIC) - for banks
 ...


ATM Cards:




Cards that allow you to withdraw cash from your account or make
other banking transactions; wherever A...




ATM Cards:

How does its work?
 Money is accessed using a PIN Number:




4 to 6 digit code that gives you access...
 Other products that act like Cash:


Will vary from bank to bank. Use of services could also incur
fees.


Fees may be...



Electronic Transfers (Online Banking):
Over the past 10 years, the United States has adopted more of an
“online” form...
 Electronic Transfers (continued):

• Deposit Checks
using cell phones
•

Takes a picture of
front/back of check
and depo...
 Direct Deposit (Online Banking):


System where employers deposit your paycheck directly into
your account on payday, u...
ADVANTAGES
Convenience
Updated Account Balances
Easy to Maintain and get
accurate information
 Friendlier Rates
 No Fee ...
 Loans & Credit:


Banks offer loans and other types of credit lending to
customers. They make their money through the i...


Secured Loans:
 Lower Rates, higher borrowing limits, longer
repayment terms.
 Loans protected by an asset or collate...
 Other Banking Services/Products:

 College Savings Plans
 Income Producing Products:
 Certificates of Deposits
 High...



Checking Accounts:
Banks offer a variety of checking accounts all with unique features and options.
Some accounts are...



Checking Accounts FEES & CHARGES:
Accounts will be charged fees for these common occurrences:

 Inability to meet ac...
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Unit 3A: Banking

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Unit 3A: Banking

  1. 1. Mr. Elsesser Introduction to Financial Management
  2. 2. There are many types of financial institutions that offer banking services:   Commercial Banks:  A for-profit institution that offers a full range of financial services, including checking, savings, and lending. Serves both individuals and businesses.   Examples: Chase, Bank of America, Citi Bank, TD North, Capital One, People’s Choice.
  3. 3. There are many types of financial institutions that offer banking services:  Credit Unions:   A nonprofit financial institution that is owned by its members and organized for their benefit.  Members may be linked by same union, employer, group.  Offers full range of services (like commercial banks) but with lower fees and loan rates.  Required to report deposits of $10,000 or more to IRS.  Examples: Teachers Federal Credit Union, NEFCU
  4. 4. BANKS As a depositor, you are a customer.  CREDIT UNIONS As a depositor, you are a member (owner).  Open to the general public.  Earnings are paid directly to stockholders. Rates and fees are higher than credit unions.  Focus is on commercial loans and accounts that generate most income.   Serve the interests of its membership.  Earnings are paid back to members in the form of higher savings rates and lower loan rates.  Competition between banks prohibit sharing of resources (ATM’s, service centers).  Focus is on consumer accounts & member savings. Credit unions cooperate wit other unions to share ATM’s and service centers. 
  5. 5.  Why Open a Savings Account?  Savings accounts are a useful tool to help you save to meet your short-term, intermediate and long-term goals.  Requires low (or no) minimum balance and allows you to withdraw money quickly.  Savings accounts pay interest on the money you deposit, which increases the amount of money in your account over time.  Called the TIME VALUE OF MONEY.  “A dollar today is worth more than a dollar tomorrow!”  “A penny saved, is a penny earned.”  All savings accounts may require you to pay taxes on any interest earned.
  6. 6. There are several different types of savings accounts:   Regular Savings Accounts:  Allow you to make frequent deposits and withdrawals, and requires little or no balance restrictions. Convenience of access trades off with low paying interest rates.  Online Regular Savings Accounts:  Same as a regular savings account, only you “bank” online only. Deposits are made with EFT’s, ATM deposits, or mail in payments. Will pay higher interest rates than regular savings accounts.
  7. 7.  There are several different types of savings accounts:  Money Market Accounts:  Usually a checking or savings account that earns a higher interest rate than regular accounts, but requires you to keep high minimum balances ($2500 $5000). Has restrictions on the monthly number of transactions.  Certificate of Deposit (CDs) Accounts:  Savings account that requires you to keep a certain amount of money in the bank for a fixed period of time. You are paid a higher rate to keep money deposited longer. You pay a penalty to withdraw money earlier.
  8. 8.  There are many factors to consider to help you choose a bank:  Interest Rates and Fees:  What will they pay your accounts in interest? What are the fees for making transactions, failing to keep any required balance or any other service charges?   Credit Unions will usually charge lower interest rates on loans, pay higher on savings account interest. Availability of Products and Services:   Free checking or savings (without minimum balances), online banking and bill pay, ATM availability, daily/weekend/night bank hours, safe deposit boxes, drive-up window, mobile apps, interest rate on CD’s, mortgages, personal loans. What Questions should you Ask?  What type of accounts pay interest? How long does it take for a check deposited to clear to have access to the money?
  9. 9. You will need some identification and information to open an account:   Valid photo ID, proof of age and identity:  Ex: Driver’s license/permit, utility bill, passport, birth certificate.  Most banks require a Social Security (FICA) #:  Do you need a co-signor?  Some banks will only let you open an account if you have a parent or guardian co-sign the account.  Some kind of opening deposit:  Banks – approx $20 min. Credit Unions - $1
  10. 10.  When searching for a bank, ensure your deposits will be secure:  Federal Deposit Insurance Fund (FDIC) - for banks  National Credit Union Admin. (NCUA) – for credit unions   The nation’s bank, The Federal Reserve Bank (The FED)insures each account at a federally chartered bank up to $250,000. The FED pay depositors this amount of money if the bank was to suddenly close or go out of business.
  11. 11.  ATM Cards:   Cards that allow you to withdraw cash from your account or make other banking transactions; wherever ATM’s are located. Your bank may issue you a Cash Card or Debit Card:  Cash Card:  Card that allows you to withdraw cash from your account at an ATM.  Debit Card:     Card that allows you to pay for a purchase directly at the point of sale using money from your account. Card is backed by VISA or MASTERCARD and can be used wherever these types of cards are accepted. Can get “Cash Back” Protected against fraudulent charges.
  12. 12.   ATM Cards: How does its work?  Money is accessed using a PIN Number:   4 to 6 digit code that gives you access to your account in stores and at ATMs.  PIN should be kept secret. ATM Card users can be charged fees:  When cash is drawn or a purchase is made that is more than the current account balance.  When you use an out-of-network ATM machine.   ATM at another bank or establishment. AVOID THIS! PLAN AHEAD! DO YOUR RESEARCH BEFORE OPENING AN ACCOUNT!!
  13. 13.  Other products that act like Cash:  Will vary from bank to bank. Use of services could also incur fees.  Fees may be able to be waived if certain account types and/balances are met.  Cashier/Bank Checks:  Checks guaranteed by the bank.  Will not “bounce” (insufficient funds).  Certified Check:  Personal check stamped because funds are set aside to pay this form of check  Travelers Checks
  14. 14.   Electronic Transfers (Online Banking): Over the past 10 years, the United States has adopted more of an “online” form of banking. Services include:  Automatic Transfers:  Allows you to move money between your accounts and also build savings.  Follow your budget plan!  Online Bill and Credit Payments:  Yields the ability to directly wire money to bill collectors and have the bank send checks on your behalf.  Ex: Online Bill Pay, “POP Cash”—only need name/email  Allows for faster and more efficient payments.
  15. 15.  Electronic Transfers (continued): • Deposit Checks using cell phones • Takes a picture of front/back of check and deposits. • You hold the actual check for 14 days until it clears (money available) in your account. • Need to get bank’s app
  16. 16.  Direct Deposit (Online Banking):  System where employers deposit your paycheck directly into your account on payday, using your bank account information.  Advantages:  Employee has availability of their money on payday.  Most checking accounts are free when you use this service.  Disadvantage:  Employee’s responsibility to verify check was deposited and correct.
  17. 17. ADVANTAGES Convenience Updated Account Balances Easy to Maintain and get accurate information  Friendlier Rates  No Fee Services     Capital One 360 Banking    Transfer Services Easy Transactions Easy Monitoring DISADVANTAGES  Loss of Banking Relationship  Personal Customer Service  Security Matters  Not always insured Complex Encryption Software  Big Learning Curves  Transaction problems  Do not forget to notify your bank when your email address or other information changes!
  18. 18.  Loans & Credit:  Banks offer loans and other types of credit lending to customers. They make their money through the interest rates and other fees.  Banks issue loans because they know Americans like to spend and don’t mind making monthly payments to have the things they like.  Common Loans Offered:  Student loans, car loans, mortgages, home equity loans
  19. 19.  Secured Loans:  Lower Rates, higher borrowing limits, longer repayment terms.  Loans protected by an asset or collateral. A lien is placed on the title. Don’t pay, lose property.   Ex: Car, boat, mortgage, home equity loan, etc. Unsecured Loans:  Higher Rates, variable borrowing limits and repayment terms.  Ex: Credit Cards, Educational Loan, Personal Loan  Repayment determined on your financial resources.  5c’s of Credit:  Character, Capacity, Capital, Collateral, Conditions
  20. 20.  Other Banking Services/Products:  College Savings Plans  Income Producing Products:  Certificates of Deposits  High paying interest rates & predictable income.  Less liquidity & more penalties  Safe Deposit Boxes:  Safe place to keep irreplaceable items
  21. 21.   Checking Accounts: Banks offer a variety of checking accounts all with unique features and options. Some accounts are free and some charge fees.  Types of Checking Accounts:  Student (High School or College) Accounts:  No balance requirement, fees or monthly charge.  Regular Checking:  Generally a free account as long as you make some kind of direct deposit monthly.  Using Direct Deposit can also avoid balance requirements.  High Yield Checking:  Requires you to maintain a balance of $2500 -$5000 and pays a higher interest rate to depositors.  Usually makes all of bank services that you would normally be charged for or incur fees on absolutely FREE.
  22. 22.   Checking Accounts FEES & CHARGES: Accounts will be charged fees for these common occurrences:  Inability to meet account requirements:  Balance requirements, transaction allotments, insufficient funds, withdrawals made at out-of-network ATMs.  Stop Payment Order:  Account holder asks the bank to put a stop payment on a written check. Will incur a fee (approx. $25)   Reasons why: Check is lost, transaction/purchase issues. Other Privileges of Account Holders:  FREE Services:  Cashing Checks & Money Orders

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