Chapter © 2010 South-Western, Cengage Learning Checking Accounts Savings Accounts and Banking Services 9.1 9.1 Checking Accounts 9.2 9.2 Banking Services

Chapter

© 2010 South-Western, Cengage Learning

Checking AccountsSavings Accounts and Banking Services

9.19.1 Checking Accounts

9.29.2 Banking Services and Fees

10.110.1Growing Money: Why, Where, and How

10.210.2Savings Options, Features, and Plans

9 &10

© 2010 South-Western, Cengage Learning SLIDE 2

Chapter 9

Checking Account Basics Checks follow a process through the banking

system. The payee cashes your check. The bank that cashed the check returns it to your

bank. Your bank withdraws the money from your account

and sends it to the other bank. Your bank then stamps the back of your check,

indicating that it has cleared.


Chapter 9

Checking Account Basics You must also maintain enough money in your

account to cover all the checks you write. A check written for more money than your

account contains is called an overdraft. A bank that does not honor a check usually stamps the

check with the words “not sufficient funds” (NSF) and returns the check to the payee’s bank.

When this occurs, the check has bounced.

Your bank can charge you a fee for each NSF check processed.

(continued)


Chapter 9

Checking Account Basics

Floating a check is writing a check and hoping to deposit money to cover it before the check clears.

Floating a check is very risky because today’s electronic systems allow checks to process very quickly and is illegal in most states.

(continued)


Chapter 9

Types of Checking Accounts

Joint accountsSpecial accountsStandard accountsInterest-bearing accountsShare accounts


Opening a Checking Account

Signature authorization form

Initial deposit

SLIDE 6

Chapter 9


Chapter 9

Using Your Checking Account

Writing checksPaying bills onlineMaking depositsUsing a checkbook register

A checkbook register is a booklet used to record checking account transactions.


Making a Deposit

teens – lesson 6 - slide 6-D


Check Details

11 22 33 44 55 99887766 1010

This is the Routing Number for your bank (used for electronic This is the Routing Number for your bank (used for electronic transfers of funds from your account to the payee’s account)transfers of funds from your account to the payee’s account)This is your Account Number. (Note that sometimes these two This is your Account Number. (Note that sometimes these two numbers are the reverse of what is shown here.)numbers are the reverse of what is shown here.)This is just your check number again (see above right).This is just your check number again (see above right).Here is where you write the name of the party you are writing your Here is where you write the name of the party you are writing your check to (the payee). Be sure to write or print legibly!check to (the payee). Be sure to write or print legibly!On the lower line, write out the amount like this.On the lower line, write out the amount like this.Legibly print the amount of money this check is for. Legibly print the amount of money this check is for. Enter the date you write each check.Enter the date you write each check.Place to add any information you want to related to this check.Place to add any information you want to related to this check.Put your personal signature here.Put your personal signature here.Make sure your personal information on the check is correct.Make sure your personal information on the check is correct.Here is the number of this Check.Here is the number of this Check.

1111

Click the numbers

John M. Smith


EN

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Endorsed checkJo

hn M

. Smith


Chapter 9

Bank Reconciliation

The process of matching your checkbook register with the bank statement is known as bank reconciliation.


Chapter 9

Endorsing Checks

A check generally cannot be cashed until it is endorsed.

To endorse a check, the payee signs the top part of the back of the check in ink.

There are three major types of endorsements. Blank endorsement Special endorsement Restrictive endorsement


Chapter 9

Blank Endorsement

A blank endorsement is the signature of the payee written exactly as his or her name appears on the front of the check.


Chapter 9

Special Endorsement

A special endorsement, or an endorsement in full, is an endorsement that transfers the right to cash the check to someone else.


Chapter 9

Restrictive Endorsement

A restrictive endorsement restricts or limits the use of a check.


Let’s Practice

SLIDE 16

Chapter 10


Chapter 10

Why You Should Save

The best reason to save money is to provide for future needs, both expected and unexpected.

Saving regularly will help you meet your short-term and long-term needs.


Chapter 10

Short-term Needs

Short-term needs are expenses beyond your regular monthly items.

Usually you will have to pay for these things out of savings.

Examples of short-term needs include the following: Emergencies Vacations Social events Repairs Major purchases


Chapter 10

Long-term Needs

Long-term needs are expenses that are costly and require years of planning and saving.

Examples:Home ownershipEducationRetirementInvesting


Chapter 10

Financial Security

Peace of mind comes from knowing that when needs arise, you will have adequate money to pay for them.

The amount of money you save depends on: The amount of your discretionary or disposable

income The importance you attach to savings Your anticipated needs and wants Your willpower


Chapter 10

How Money Grows

The amount of money you deposit into a savings account is called the principal.

For the use of your money, the financial institution pays you money called interest.

Interest represents earnings on principal. As principal and interest grow, more interest

accumulates. This is known as compound interest, or interest paid

on the original principal plus accumulated interest.


Chapter 10

Annual Percentage Yield (APY)

Annual percentage yield (APY) is the actual interest rate an account pays, stated on a yearly basis with the compounding included.


Chapter 10

YearBeginning Balance

InterestEarned (6%)

EndingBalance

1 $100.00 $6.00 $106.00

2 $106.00 $6.36 $112.36

3 $112.36 $6.74 $119.10

Compounding Interest Annually

The Year 1 ending balance is the Year 2 beginning balance.

The Year 2 ending balance is the Year 3 beginning balance.

The 6% interest rate stays the same, but the interest earned increases each year.


Chapter 10

$205.00 + 10.25 = $215.25

$205.00 × 0.05 = $10.25

$105.00 + $100.00 = $205.00

Compounding with Additional Deposits

YearBeginning Balance Deposit

InterestEarned (5%)

EndingBalance

1 $0.00 $100.00 $5.00 $105.00

2 $105.00 $100.00 $10.25 $215.25

3 $215.25 $100.00 $15.76 $331.01

4 $331.01 $100.00 $21.55 $452.56


Where to put your money so it can grow??

SLIDE 25

Chapter 10


Regular Saving Account Basics

SLIDE 26

Chapter 9

A savings account (at a bank) or share account (at a credit union) is a place to deposit money you don’t plan to spend right away.

You can add or take out money at any time, without penalty.

A savings account a good place for short- to medium-term financial goals.

Many banks and credit unions make saving easy by allowing you to set up an automatic savings plan, where money is transferred automatically from your checking to your savings account every month.


Regular Saving Account Basics

SLIDE 27

Chapter 9

The savings institution is allowed to use your money to invest and earn a profit.

You are paid a small amount of interest for depositing your money.

Your money is insured against loss. Deposits in banks, no matter what type, are almost always safer than other investments because of the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Association (NCUA).


Savings Deposit

Today’s date goes herePrint Your Name HerePrint Your Address Here

Sign Your Name Here33 3 3 3 3 3

x

1 2 5 0 9

3 75 2 5

7 5 0 0

4 2 5 3 4

11

22

33

44

55

77

66

5 00 3 4

Click the numbers


Chapter 9

Checking Account Advantages

ConvenienceSafetyBuilt-in record keeping systemAccess to bank services


Chapter 10

Regular Savings Account Advantages A savings account has a major advantage—

high liquidity. Liquidity is a measure of how quickly you can

get your cash without loss of value.

ConvenienceSafetyBuilt-in record keeping systemAccess to bank services


Chapter 10

Liquidity

Liquidity is how quickly you can turn savings into cash when you want it.

The need for liquidity will vary, based on your age, health, family situation, and overall wealth.


Chapter 10

Safety

Safety of principal means that you are guaranteed not to lose your savings deposit, even if the bank or other financial institution fails and goes out of business.

(FDIC)

(NCUA).


Chapter 10

Convenience

LocationsServices offered


Chapter 10

Interest-Earning Potential (Yield)

You want to earn as much interest as you can on your deposit, while maintaining the degree of liquidity, safety, and convenience you want.

Shop around for the best Annual percentage yield (APY) in your area for the type of account you want.


Chapter 10

Selecting a Savings Plan

LiquiditySafetyConvenience

Interest-earning potential (yield)Fees and restrictions

Generally are advantages if you do your homework


Additional Savings Options

SLIDE 36

Chapter 10


Chapter 10

Certificate of Deposit

A certificate of deposit (CD), or time deposit, is a deposit that earns a fixed interest rate for a specified length of time.

A CD requires a minimum deposit. You must leave the money in the CD for the full

time period. If you take out any part of your money early, you will

pay an early withdrawal penalty. A CD has a set maturity date, which is the date on

which an investment becomes due for payment.


Early CD Withdrawal Penalizes Principal

SLIDE 38

Chapter 9


Chapter 10

Money Market Account

A money market account is a type of savings account that offers a more competitive interest rate than a regular savings account.

There are two different kinds of money market accounts: Money market deposit account Money market fund

On average, money market funds will pay a higher interest rate than money market deposit accounts.


All banks and Credit Unions Offer

Checking Accounts

Savings Accounts

Money market Accounts

Certificate of Deposits

SLIDE 40

Chapter 9


Chapter 10

Where to Save

Commercial banksSavings banksSavings and loan associationsCredit unionsBrokerage firmsOnline accounts

Chapter


Credit Unions and Banks

Managed by a paid board of directors elected by the bank’s shareholders

Managed by a member and volunteer board of directors, who are elected by other members

Offer their services to everyone; anyone can become a customer

Offer their services to special groups of people and may be employer-, church-, community-, or alumni-sponsored (among others); customers must qualify for credit union membership through their membership with these special groups of people

For-profit companies owned by shareholders

Not-for-profit institutions owned and controlled by their own customers, who are known as members

Banks Credit Unions

321

Chapter


Profits benefit a small group of stockholders

Profits are returned to members in the form of lower fees and loan rates and higher interest on deposits

Accounts are federally insured up to $100,000 by the Federal Deposit Insurance Corp (FDIC)

Accounts are federally insured up to $100,000 by the National Credit Union Administration (NCUA)

Owned by shareholders; customers do not have ownership or voting privileges unless they also own stock in the bank

Owned by each credit union member, who has equal ownership and one vote, regardless of how much money a member has on deposit

Banks Credit Unions

321

Credit Unions and Banks


Chapter 9

Online & Telephone Banking

Most banks also allow and encourage electronic transfers of money. An electronic funds transfer (EFT) uses a

computer-based system that enables you to move money from one account to another without writing a check or exchanging cash.

(continued)


Chapter 9


Chapter 10

Direct Deposit

With direct deposit, your net pay is deposited electronically into your bank account.

You receive a nonnegotiable copy of your check and stub, notifying you of the amount deposited directly into your account

You can have your automatic deposit split between accounts, with some going into savings and some going into checking to cover your bills.


Chapter 10

Automatic Deductions

Automatic deductions represent money you have authorized your bank or other organization to move from one account to another at regular intervals.

With a payroll savings plan, you authorize your employer to make automatic deductions from your paycheck each pay period.


Chapter 9

Debit Cards

A debit card is a card that deducts money from a checking account almost immediately to pay for purchases.

When a debit card is used, the amount of the purchase is quickly deducted from the customer’s checking account and paid to the merchant.


How to Use a Debit CardSwipe the debit card in the card

reader

Choose the “Debit” option.

Enter your PIN number*

Enter the amount of cash back, if desired.

Money is taken directly out of your checking account, so enter the amount spent into your checking ledger and/or keep track of it through your online banking account.


About Your PIN

PIN stands for personal identification number. This number gives you access to your account, so keeping it secret is important.

Memorize your PIN number. Do not write it down and keep it somewhere in your wallet (where someone could find and use it).


Chapter 9

Automated Teller Machines

An Automated Teller Machine is often called an ATM.

To use ATMs, you must Have a card that is electronically coded (usually

your debit card) Know your personal identification number (PIN)


How to Use a Credit Card

Swipe the credit card in the card reader or give it to the clerk to swipe.

Choose the “Credit” option.

Sign the receipt.

Keep and save your copy of the receipt to record later so you can keep track of what you have spent.


Chapter 9

Money Orders

Banks sell money orders to people who do not wish to use cash, or do not have a checking account. Also, money order can be requested by businesses.

A money order is like a check, except that it can never bounce.

There is a charge for purchasing a money order.


Chapter 9

Stop Payment Orders

A stop-payment order is a request that the bank not honor a specific check.

The usual reason for stopping payment is that the check has been lost or stolen.

Most banks charge a fee for stopping payment on a check.


Chapter 9

Safety Deposit Boxes

Financial institutions offer customers a safe deposit box to store valuable items or documents.

They charge a yearly fee based on the size of the box.

Keeping important documents and other items in a safe deposit box ensures that the items won’t be stolen, lost, or destroyed.


Chapter 9

Safety Deposit Boxes

Examples of items commonly kept in a safe deposit box includeBirth, marriage, and death certificatesDeeds and mortgage papersStocks and bondsJewelryCoin collections

(continued)


Chapter 9

Loans and Trusts

Financial institutions also make loans to finance the purchase of cars, homes, home improvements, vacations, and other items.

Banks can also provide advice for estate planning and trusts.

Banks can act as trustees of estates for minors and others. A trustee is a person or an institution that manages

property for the benefit of someone else under a special agreement.


Chapter 9

Notary Public

A notary public verifies a person’s identity, witnesses the person’s signature on a legal document, and then “notarizes” the signature as valid.

Financial institutions typically have a person on their staff who is a notary public. This person provides notary services for account

holders, usually without charge. For noncustomers, however, there is typically a

small fee.


Chapter 9

Bank Fees

Banks charge fees to their customers to help cover their operating costs.

The best way to avoid fees is to choose the right kind of account. Shop around and find the account that is

right for you. Be aware of the rules of your account, so

that you don’t violate them and be required to pay high fees.


Chapter 10

Fees and Restrictions

Different accounts and institutions have different rules.

Before you open an account, be sure to understand the withdrawal restrictions, minimum balances, service charges, fees, and any other requirements.


Chapter 9

Examples of Bank Fees

Loan fees Trustee fees Check cashing fees Per-check fees Monthly service fees Overdraft fees NSF check charges ATM transaction fees

Safe deposit box fees Teller service fees Minimum balance fees Fees for guaranteed-

payment checks Notary service fees Online bill payment fees Fees to return canceled

checks


All Financial ServicesAll of these services can be found in most banks or credit unions

Online Banking, Online Brokerage, Checking Accounts, Savings Accounts, Certificates of Deposit (CDs),

Individual Retirement Accounts (IRAs), Savings Bonds, Credit Cards, Check Cards, Gift Cards, Payroll Cards,

Commercial Prepaid Cards, Auto Loans, Boat Loans, RV Loans, Student Loans, Other Loans, Home Mortgages,

Mortgage Refinance Loans, Home Equity Loans, Military Bank, Student Centers, Accessible Banking,

Small-business Banking Services, Merchant Services , Home Buying, Investment Services, IRAs, Mutual Funds,

529 College Savings Plans, Life Insurance (various types), Long-term Care Insurance, Homeowners Insurance,

Renters Insurance, Condo Insurance, Auto Insurance, Supplemental Income Insurance, Foreign Currency Exchange, Travelers Checks,

International Wire Transfers

Documents

Chapter © 2010 South-Western, Cengage Learning Checking Accounts Savings Accounts and Banking Services 9.1 9.1 Checking Accounts 9.2 9.2 Banking Services