© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Depository Institution Essentials – Slide 1

© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Depository Institution Essentials – Slide 1

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona

7.2.2.G1

Depository Institution Essentials



7.2.2.G1

What is the name of a depository institution in your community?

?

What is a Depository Institution?

Commercial Banks

Credit Unions

These are the two most common types of depository institutions.



7.2.2.G1

Types of Depository Institutions

Commercial Bank

Credit Union

Description

Full service institutions- may offer all of the

services provided by depository institutions

Non-profit cooperative institution that is

owned by the members and often

provides more customer friendly interest rates than commercial banks

Used by?

Open to anyone who wants to utilize a

depository institution

Members must possess a common bond

Type of Insuran

ce Coverag

e

Federal Deposit Insurance Corporation

(FDIC)

National Credit Union Administration (NCUA)

Insurance

Protects

Will restore the lost funds in savings tool

accounts up to $250,000 per account

Will restore the lost funds in savings tool

accounts up to $250,000 per account



7.2.2.G1

Choosing a Depository InstitutionAll depository institutions differ from one another in regards to locations, services offered, interest rates offered, and specific features provided

Choose the correct depository institution to meet individual needs

Individuals may choose to use one depository institution or multiple depository institutions

Individuals may have more than one type of account at the same depository institution



7.2.2.G1

Financial Goals

A goal is defined as the end result of something a person intends to acquire, achieve, do, reach, or accomplish

Financial goals are specific objectives to be accomplished through financial planning

Choose a depository institution that will help meet financial goals



7.2.2.G1

Advantages and Disadvantages of Using a Depository Institution

• May have to pay fees

• May have required minimum balances

• Sharing financial information

• Assists in managing finances and reaching financial goals

• Protection from loss (insurance)

• Opportunity to earn interest

Do you use a depository institution?

?



7.2.2.G1

Individual depository institutions may offer all or some of these services.



7.2.2.G1

Services

Interest - the price of money

Interest bearing

accounts either charge the consumer

interest for money

borrowed or earn interest

for the consumer

Interest rate - percentage

rate used annually to

calculate the total interest either gained

or lost from an accountLook for high interest rates on

interest-earning accounts and low interest rates when borrowing money.



7.2.2.G1

Savings Tools Savings tools are secure, easily

accessible accounts that assist in money management May be interest or non-interest

earning As long as the depository institution

is insured, savings tools are insured against lost



7.2.2.G1

Savings Tools

Checking Account Used to transfer

funds deposited into the account to make a cash purchase

Interest or non-interest earning

Savings Account Hold money not

spent on current consumption

Interest earning

At a credit union a checking account is known as a share draft account and a savings account is known as a share account.



7.2.2.G1

Savings Tools

Money Market Deposit Account

Offers higher interest rates than a savings account

Have a minimum balance requirement

Limited to a certain number of transactions each month

Certificate of Deposit

Interest earning Restricted

access to the funds



7.2.2.G1

Investment Tools

Earn higher interest rates than savings tools but the funds are not as easily accessible

Not insured against lossStocks

Bonds



7.2.2.G1

Credit

Credit is when goods, services, or money is received in exchange for a promise to pay a definite sum of money at a future date

Consumer is charged interest

Loans

Credit Cards

What might a person need a loan to purchase?

?



7.2.2.G1

Other Services

Safe-Deposit Boxes

A secured box to store valuable and important personal items

Financial Counseling

Information and advice is given to customers to help them make financial decisions

What services offered by depository institutions would you use?

?



7.2.2.G1

Depository Institution Features

Made possible by electronic

funds transfers (EFTs)- utilize

computer networks to

transfer funds electronically

(rather than by check or cash)

among depository institution accounts

Adds to the convenience and money

management tools of certain

depository institution services

Allows 24-hour access to move

money electronically in a fast and

paperless way



7.2.2.G1

Advantages and Disadvantages of E-Banking

• Increased risk of fraud and identity theft if consumers are not careful with their personal information

• 24-hour access• Fast transactions• Paperless

transactions• Convenience• Worldwide

access Regulation E was established to combat the security issues of electronic banking Covers all EFT’s including transfers occurring

through an electronic terminal, computer, telephone, or magnetic tape



7.2.2.G1

E-Banking Safety

If a consumer feels his or her funds have been accessed without

permission

Report the problem

immediately to the

depository institution involved

To take full advantage of

e-banking: Keep personal security as your first priority Know how to protect your personal information



7.2.2.G1

Types of E-Banking

Will vary among depository institutions Will vary between services and

accounts at the same depository institution

Debit Cards

ATM’s

Direct Deposit & Direct Payment

Online Banking



7.2.2.G1

Debit Cards

Plastic card which looks like a credit card but is electronically connected to the cardholder’s depository institution account

Functions like a check but electronically Usually used for savings tools,

especially checking, savings, and money market deposit accounts

Require using a personal identification number (PIN) or signature to perform transactions



7.2.2.G1

Debit Card Safety Tips



7.2.2.G1

Fraudulent Debit Card Charges

If reported within 2 days, the consumer is held responsible for no more than $50 in fraudulent

charges

If reported within 60 days, the consumer is held responsible for no more than $500 in fraudulent

charges

After 60 days, the consumer is held liable for no more than the amount of

unauthorized transfers



7.2.2.G1

Automated Teller Machines (ATMs) Electronic computer terminals which

offer automated, computerized banking Usually used for savings tools, especially

checking and savings accounts Accessed with ATM and/or debit cards Allow customers to make deposits,

withdrawal cash, make account transfers, and check account balances

May be offered in many different locations or few (if any) locations



7.2.2.G1

Direct Deposit & Direct Payment



7.2.2.G1

Online Banking Complete transactions with a depository

institution from a personal computer (PC) or through other wireless technology (personal digital assistant (PDA) or cellular phone)

May access account information and statements, transfer funds, manage and pay bills, and apply for loans and mortgages

May be used for savings tools, investment tools, and credit accounts

Online banking is also known as internet banking.



7.2.2.G1

Online Banking Safety Tips

What features offered by depository institutions would you use?

?



7.2.2.G1

Researching Depository Institutions



7.2.2.G1

Summary

• Businesses which offer multiple services in banking and finance

• Location• Services

offered• Interest rates

offered• Features offered

• Research depository institutions and choose the one(s) that best fits needs and helps reach personal financial goals

• Type



7.2.2.G1

Summary

Find the depository institution that best fits your

needs and helps you reach financial goals!

• Savings tools

Electronic banking-

• Investment tools

• Credit • Safe-deposit boxes

• Financial counseling

• Debit cards • ATMs

• Direct deposit• Direct payment • Online banking

Documents

© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Depository Institution Essentials – Slide 1