Banking System and Accounts Basic Financial Services Financial

Banking System and Accounts Basic Financial Services

Financial Institutions • 3 Main Types – Banks – Credit Unions – Savings and Loan Associations (S&L) • Advantages – Convenient access to your money – Security – Saves money – Access to knowledgeable people – Building block of credit – Earn interest

Types of Saving • Regular Savings Account – Interest paid monthly – May require a minimum deposit • Certificates of Deposit (CDs) – Money must remain in account for a term – Higher interest rate than a savings account • Electronic Transfer Account – Direct deposits for government payments • Money Market Account – Limited check writing and withdrawals – Pay higher interest than regular savings accounts – Interest rate may change • U. S. Government Securities – Often offers highest return with lowest risk

Choosing a Savings Account • How much will my savings earn? • How easy is it for me to access my money? • Is there a minimum balance to keep the account open? • Does the account have a maturity date? • What’s the minimum amount needed to open • Is the account “liquid” or “long-term”? the account?

Checking Account Basics Advantages Disadvantages • Convenient—money available • Cost of over-drafting account can be costly • Safer than carrying cash • Greater responsibility for record keeping • Proof of payment • Easier budgeting • Minimum balance or fee requirements

Choosing a Checking Account • What types of checking accounts are available? • Is a minimum balance needed on an account and is it able to earn interest? • Does the account have ATM or Debit cards available? • Are overdraft protection plans available? • What are account disclosures?

Overdrafts • “Overdrafting” or “Bouncing a check” – Spending more than you have using a check • “Overdrafting” with ATM or Debit Card Use – Spending more than you have using your card – Your ATM/Debit Card is not a Credit Card • Standard overdraft practices – Transaction covered for a flat fee-$20/$30 each time you overdraw

Overdraft Protection • Overdraft protection – Offered by some financial institutions – Moves money from savings to checking in cases of overspending • Options Include – Transfer from savings, line of credit, tied to a credit card • New Rules: – Rather than auto enrollment in overdraft plans customers must “opt in” to this coverage for ATM/debit card use

Savings and Checking Accounts • Direct Deposit and Electronic Transfer Account – Automatically deposit checks directly into a savings or checking account • Pre-Authorized Transactions – Scheduled payments automatically pulled from your account • Online banking – Manage all accounts with a secure website