MONEY AND BANKINGChapter 10 Section 3

Innovations in Modern Banking

Service 1: Customer Can Store Money Banks store currency safely

Insured against failure Safety deposit boxes

Service 2: Customers Can Earn Money Paying interest on savings accounts Money market accounts and CDs pay more interest

Service 3: Customers Can Borrow Money Banks lend money through fractional reserve

banking Bank loans to approved customers Credit card purchases are loans

Banking Deregulation

Government regulated interest rates 1980’s, 1990’s, deregulation ended restrictions Led to mergers, interstate banking Advantages

More competitive More services More branches

Disadvantages Fear of larger banks

Financial Services Act of 1999 lifted remaining bank restrictions Fear of larger banks

Technology and Banking

Technology has led to electronic banking Automated teller machines (ATMs)-use special

cards Customers make transactions without bank officers Linked to bank’s computer network Need PIN

Debit Cards-used to withdraw cash or make purchases Linked to bank account Use at ATMs and stores

Stored-value cards-represent money holder has on deposit with issuer Pre-paid cards

Internet Banking

Online deposits, Direct deposits Transactions reviews Statement review