This document provides information on various types of financial institutions and banking services. It discusses commercial banks, credit unions, savings accounts, checking accounts, loans, online banking, and other services offered by banks. The key points covered include the differences between banks and credit unions, factors to consider when choosing a bank, requirements for opening an account, and fees associated with various products and services.

1. Mr. Elsesser
Introduction to
Financial Management

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. 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. 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.  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. 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. 
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. 
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. 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.  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. 
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. 

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.  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. 

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.  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.  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. 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.  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. 
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.  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. 

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. 

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