BankingBanking
How banks work How banks work along with checking along with checking
accountsaccounts
BankingBanking• 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
BankingBanking• 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
BankingBanking• 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?
BankingBanking• 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
BankingBanking• 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
BankingBanking• 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
BankingBanking• 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
BankingBanking• 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
BankingBanking• 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
BankingBanking• 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
BankingBanking• 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.
BankingBanking• 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
BankingBanking• 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
BankingBanking• 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
BankingBanking• 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)
BankingBanking• 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
BankingBanking• 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
BankingBanking• 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
ChecksChecks• 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
ChecksChecks• 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
ChecksChecks• 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
ChecksChecks• 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
ChecksChecks• 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