12 Banking Transactions

EPF.12a compare types of financial institutionsEPF.12b examine how financial institutions affect personal financial planningEPF.12h explain how certain historical events have influenced the banking system and other financial institutionsEPF.10i access reliable financial info from a variety of sources

EPF.12a compare types of financial institutions

Financial institutions include credit unions, commercial banks, finance corporations, savings and loan companies, insuring agencies, and non-bank institutions.

What services do credit unions, banks, and savings and loan companies generally provide? What agencies insure each of these? Credit unions, banks, and savings and loan

companies generally offer checking accounts, savings accounts, consumer loans, certificates of deposit, and check cashing for depositors.

Banks and savings and loan companies are generally insured by the Federal Deposit Insurance Corporation (FDIC) and credit unions by the National Credit Union Share Insurance Fund (NUSIF). Consumers should be aware that not all deposits are insured.

What are the costs and benefits of using non-bank institutions such as check-cashing services and payday loan services?

Payday loan and check-cashing companies typically charge higher rates than banks for their services.

What are the consequences of being unbanked?

Some consumers do not have bank accounts and use check-cashing services when they must cash a check. Companies charge a very high fee for this service.

EPF.12b examine how financial institutions affect personal financial planning

Over time, financial institutions have expanded services that affect personal financial planning.

How have financial institutions increased their range of services?

Many banks offer brokerage and insurance services, as well as financial management advisors.

EPF.12h explain how certain historical events have influenced the banking system and other financial institutions

A series of historical events led to today's banking system in the United States.

What have been the significant developments on the path from the 1700s to today’s banking system in the United States?

18th and 19th centuries

The Industrial Revolution brought an economic shift in the United States from bartering and trading to exchange of currency for goods and services; individuals moved from being self-supporting to working for others; increased use of money allowed for purchases and the initiation of consumer credit, as well as seasonal bank loans for farmers; the period also saw high bank interest rates.

1791 — First Bank of the United States established 1816 — Second Bank of the United States

established

20th century

Transition from an agricultural economy to an industrial economy and an expansion of purchasing power and credit

World War I — War debt incurred by United States Panic of 1907 1913 — Federal Reserve System established 1920s — Stronger credit 1920–1980 — Credit made available to most Americans 1929 — Stock Market Crash 1930s — Great Depression; decade of consumer distrust of

credit and investment 1940s–1960s — Stable inflation rates; low interest rates 1970s — Rapid economic growth; overuse of credit; high

inflation rate; consumer credit protection legislation; birth of credit counseling

1990s — Credit as a major marketing tool across industries; major stock market gains; longest peace time expansion

21st Century

September 11, 2001 — Terrorist attacks on the World Trade Center, the Pentagon, and Pennsylvania led to major stock market losses. Threats of further terrorism continue to influence the financial markets.

The latter part of the first decade was marked by a significant economic recession that resulted in failed banks, foreclosures, and high unemployment.

EPF.10i access reliable financial info from a variety of sources

It is important for consumers to seek reliable financial info to assist them in making financial choices and decisions.

Financial info is available from a variety of sources, not all of which are reliable.

What are some sources of financial info?

Data may be gathered from print, electronic, and verbal sources such as

newspaper financial pages Internet sources investor services and newsletters financial magazines brokers banks credit unions financial advisors annual reports.

What are the incentives of those providing info? Is the info fact or opinion?

Financial data must be evaluated for reliability: Some information sources have an incentive to sell a

product. Statistical data can be misrepresented, for example,

to imply cause and effect. Some information sources are opinion programs, and

others are news programs. Some advisors are more skilled than others. Past performance is no guarantee of future

performance. It is the consumer’s responsibility to determine the

reliability of the information.