Banking How banks work along with checking accounts

Banking How banks work along with checking accounts

Banking • The term bank refers to any type of financial institution where you may deposit your money. • When you deposit funds, what do banks do with your deposits? • Interest-a fee paid for the opportunity to use someone else’s money over a period of time

Banking • Types of financial institutions: • Commercial banks- financial institutions owned by shareholders and operated for profit • Mutual Savings banks- state-chartered institutions operated by trustees • Savings and Loans- originally specialized in providing funds to home buyers. Now provide a variety of services

Banking • Credit Unions- a nonprofit institution owned by members. The members have a common bond, such as working for a certain employer or belonging to a labor union • Internet banking-exclusive online banking, No tellers, offices etc. • Benefits/Problems of this type of banking?

Banking • Financial Services Modernization Act: Eliminated restrictions among companies in securities, banking, and insurance industries • This made it possible for financial institutions to consolidate the financial services they offer

Banking • FDIC- Federal Deposit Insurance Corporation: a federal agency that insures savings, checking, and other deposit accounts in most banks. • Insures depositors up to a maximum of $250, 000

Banking • EFT-Electronic Funds Transfer: the movement of funds by electronic means Can be done by internet, telephone etc. • Reduces cost for banks, convenient for customers

Banking • ATM-Automated Teller Machine: computer terminal that gives customers electronic access to their accounts • By law the fee charged for these transactions must be disclosed before you complete the transaction

Banking • PIN-Personal identification number which protects the security of your accounts • ATM Guidelines • 1. Know where your ATM card is at all times • 2. Memorize your pin number

Banking • 3. When entering your PIN, shield your screen or keypad from the view of others • 4. Be aware of your surroundings, notice suspicious behavior • 5. Pocket cash immediately, count later in a secure place

Banking • Point of Sale Transaction-Paying for an item by making an electronic funds transfer at the place of purchase (Ex: gas pump) • Debit card: a card that allows the user to subtract money from a bank account in order to obtain cash or make a purchase • Also known as check cards

Banking • Two types of point of sale transactions can be made with a debit card • 1. Online, which requires you to enter a PIN number. Your money is deducted immediately from your account • 2. Offline, if your card carries the logo of a credit card which requires a signature, money is not taken out immediately

Banking • The quick subtraction of your money from your account is the main difference between using a debit card and writing a check • Electronic Funds Transfer Act: protects consumers using forms of electronic transfer.

Banking • The Act says that • 1. Banks must offer consumers a record or receipt for all computer transactions • 2. Banks must investigate errors and report back to the customer within 10 days of being told

Banking • 3. If you debit card is lost or stolen and you report it within two day, you may be liable for no more than $50 • 4. If you wait longer it could go up to $500 • 5. If you wait longer than two months you could be liable for the entire amount

Banking • Terms to Know: • Payee: the one to whom the check is made out • Canceled check: a check that is stamped and perforated to show it has been paid • Overdraft: “bounced check” insufficient funds in the account to cover the check

Banking • Advantages of checks • 1. More secure than cash • 2. Canceled checks provide legal proof of payment • Choosing a checking account, things to look for: minimum balance, fees, overdraft protection, interest account (usually has more restrictions)

Banking • Endorsing a check: • Endorsement: a signature on the back of the check that allows the payee to either receive payment or transfer it to someone else • Sign all check in ink and exactly as it appears on the front. If name is spelled wrong, sign it a second time correctly

Banking • Three types of endorsements we will talk about • 1. Blank endorsement-consist of only the endorsers name • 2. Special endorsement- limits payment to a particular person ex. Pay to the order of Rita Smith • Also known as a third party check

Banking • 3. Restrictive endorsement: limits the use of the check Ex. For Deposit Only above your signature • The check can only be deposited into your account

Checks • Checkbook register: the most common method used for keeping records of the checks you have written, deposits, ATM use etc. • If a check is lost or stolen you will ask your bank to stop payment on the check There usually a sizeable fee for this service

Checks • Reconcile: means to bring the bank statement and your own record into agreement • Outstanding checks: Checks that have been written but not been processed by the bank. • The checks may have also come in to late to make that months statement

Checks • Terms: • Certified checks: a personal check that has been stamped and guaranteed by the bank • Cashiers check: a check issued that is guaranteed by the bank. You pay for the check with cash or credit

Checks • Money order: Purchased certificate to pay a specified amount • Postal money order: can be domestic or international • Travelers checks: function as cash but can be replaced if lost or stolen

Checks • Wire transfer: electronically moving funds from one location to another • Prepaid cards: cards sold in specified dollar amounts that can be used to purchase products or services ex: phone cards, gift cards