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Banking and Credit Unit 3 – Mrs. Gray

Keeping your Money Safe & Secure. Banking and Credit Unit 3 – Mrs. Gray. FINANCIAL SERVICES. Three primary types: Savings Payment Services Borrowing. Financial Services & Institutions. Banking in America began in 1791 , soon after the United States declared independence.

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Banking and Credit Unit 3 – Mrs. Gray

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  1. Keeping your Money Safe & Secure Banking and CreditUnit 3 – Mrs. Gray

  2. FINANCIAL SERVICES • Three primary types: • Savings • Payment Services • Borrowing

  3. Financial Services & Institutions • Banking in America began in 1791, soon after the United States declared independence. • Today there are more than: • Banks – 5,847 • Thrifts (Savings & Loans) – 929 • Credit Unions – 6,554

  4. SAFETY FIRST! • Most savings plans at banks, savings and loan associations and credit unions are insured by a government agency. Each agency insures each account up to $250,000. • FDIC – Federal Deposit Insurance Corporation • NCUA – National Credit Union Administration

  5. COMMERICAL BANKS • For-profitinstitution that offers a full range of financial services, including checking, savings and lending. • These banks serve individuals and businesses. • Commercial banks are organized as corporations with individual investors, or stockholders, contributing the capital banks need to operate. • Examples: Chase, TD, Bank of America

  6. THRIFT / SAVINGS & LOAN ASSOCATIONS • A financial institution that traditionally specialized in savings accounts and mortgage loans but now offers many of the same services as commercial banks. • Services include checking accounts, business loans, and investment services. • Examples: USAA , Windsor Federal Savings & Loan

  7. CREDIT UNIONS • A nonprofit financial institution owned by its members and organized for their benefit. • A credit union’s members have some common bond, such as membership in a labor union, college alumni association or employment by the same company.

  8. CREDIT UNION CONTINUED…. • Most Credit Unions offer a full range of services, including checking accounts, loans, credit cards, ATMs, safe-deposit boxes and investment services. • Credit unions usually offer lower fees and lower loan rates than those at commercial banks. • Examples: Fairfield County Federal Credit Union, Teachers Credit Union, Stamford Hospital Credit Union

  9. NON-DEPOSITORY INSTITUTIONS • Life Insurance Companies • Investment Companies • Finance Companies Regardless of how well you plan, you may sometimes need more cash than you have available.

  10. NEED MONEY??? • Two options: • Use your savings • Borrow the money • Types of Financial Services • Savings • Payment Services • Borrowing • Other Financial Services

  11. SAVINGS • Safe storage of funds for future use is a basic need for everyone • Savings plan selection is commonly based on: • Interest Rates • Liquidity • Safety • Convenience

  12. Electronic Banking Services • Direct Deposit – An automatic deposit of net pay to an employee’s designated bank account. • Instead of a paper paycheck, employees received a printed statement that lists deductions and information about their earnings. • Direct Deposit saves time, money and effort – and offers a safe say to transfer funds.

  13. Electronic Banking Services • Automatic Payments– With your authorization, or permission, your bank will withdraw the amount of your monthly payment or bill from your bank account. • Examples: Utility companies, lenders, health clubs.

  14. Electronic Banking Services • Automatic Teller Machine (ATM)– Computer terminal that allow a withdrawal of cash from an account. You can make deposits and transfer money from one account to another. • Locations: Banks, Shopping Malls, Grocery Stores, Sports Areas, Convenience Stores.

  15. DEBIT CARD • To use an ATM for banking, consumers must apply for a debit card from their financial institution. • A debit card allows you to withdraw money or pay for purchases from your checking or savings account along with access to ATM for other purposes such as: • Deposit • Transfers • Balance Inquiry

  16. Electronic Banking Services • ATM Fees: Some financial institutions charge for the convenience and some companies charge for use of their ATM. • Compare ATM fees before opening an account. Get a list of fees in writing. • Use you bank’s ATM machines to avoid the additional fees that other banks charge when you use their machines. • Use traveler’s checks, credit cards, personal checks and prepaid cash cards when you are away from home.

  17. LOST DEBIT CARDS • Notify your bank IMMEDIATELY • Most card issuers, or providers, will not hold you responsible for stolen funds yet check with your card issuer • Some institutions require you to notify them within two days of losing your card. • If you wait longer, you may be held responsible for up to $500 for its unauthorized use for up to 60 days. Beyond that time, your liability may be unlimited.

  18. Comparing Financial Institutions Ask yourself these questions to help choose the best Financial Institution for you: • Where can you get the highest rate of interest on your savings? • Where can you obtain a checking account with low (or no) fees? • Will you be able to borrow money from the institution – with a credit card or another type of loan – when you need it? • Do you need an institution that offers free financial advice? • Is the institution FDIC or NCUA insured? • Does the institution have convenient locations? • Does it have online banking services? • Does it have any special banking services that you might need?

  19. Truth in Savings Law Financial Institutions have to inform you of the following information: • Fees on deposit accounts • Interest Rate • Terms and conditions of the savings plan • Annual percentage yield

  20. SAVINGS PLANS

  21. SAVINGS PLANS

  22. BORROWING Credit Cards And Loans

  23. Answer the questions using prior knowledge of credit cards?

  24. What is a Credit Card? • Credit cards are a form of open-end credit. • It is pre-approved credit which can be used for the purchase of good & services now and payment of them later. • Individuals can borrow as long as they do not exceed their credit limit. • WHAT IS A CREDIT LIMIT? • MAXIMUM DOLLAR AMOUNT THAT CAN BE CHARGED

  25. What is a Credit Card? • Amount of credit limit varies based upon an individual’s creditworthiness. • Card Interest is charged to the account each month the balance is not paid in full. • The rate at which interest is charged on a credit card account each month is usually expressed in terms of the annual percentage rate (APR) – the cost of credit expressed as a yearly interest rate.

  26. WHAT IS THE DIFFERENCE BETWEEN A DEBIT CARD AND A CREDIT CARD? • Debit cards allow you to make purchases with funds from your checking account • Credit cards are a form of open-end credit – a LOAN. • Close-end credit are loans such as a mortgage that have an end date for the loan.

  27. What do you believe are the advantages to using a credit card? • Convenient payment tool • Useful for emergencies • Often required to hold a reservation • Able to purchase “big ticket” items and spread out payments • Protection against fraud • Opportunity to establish a positive credit rating • Online shopping is safer than using a debit card • Possibility of receiving bonuses or rewards

  28. What do you believe are the disadvantages to using a credit card? • Interest can be costly when a balance is revolved or carried over to the next month • Additional penalty fees may apply • Tempting to overspend • Risk of identity theft • Responsible for lost/stolen cards • Applying for multiple accounts in a short period of time can lower your credit score.

  29. Can credit cards positively affect an individual financially? • When used properly, it can help consumers develop a positive credit history and therefore, earn a high credit score. • WHAT IS A CREDIT REPORT? • A record of a consumer’s credit history that includes information about credit card use as well as the use of other types of credit (Car, home and student loans) • WHAT IS A CREDIT SCORE? • A number that summarizes an individual’s credit record and history. • It is a numeric “grade” of a consumer’s financial reliability. • Using credit properly assists consumers with increasing their score.

  30. How can credit card information be kept safe? • When using a credit card, sign the back with a signature and “Ask for ID” • Do not leave credit cards lying around home or office • Close unwanted cards in writing and by phone then cut up the credit card • Never give out the card number unless making a purchase • Keep a list of all cards account numbers and phone numbers separate from cards • Report lost or stolen cards IMMEDIATELY • If a pre-approved credit card, application or solicitation is delivered, shred unwanted documents.

  31. If credit cards are not used properly, how can the negatively affect an individual? • Making late credit card payments • Penalty Fees • High Penalty Interest Rate • May hurt individual’s credit score • Paying only the minimum payment increases the total amount paid for a purchase • Exceeding the card’s credit limit usually triggers a penalty fee • Charging items that can’t be paid off immediately increases total debt • Owning too many credit cards may affect an individual’s credit score

  32. Pay your credit cards off quickly!!!!

  33. Credit Card Statement Example • Summary of Account Activity • Payment Information • Late Payment Warning • Minimum Payment Warning • Notice of Changes to your Interest Rates • Other Changes to your Account Terms • Transactions • Fees and Interest Changes • Year to Date Total • Interest Charge Calculation

  34. Class Assignment • Understanding a Credit Card Statement • Worth 30 points • You can work with a partner yet each student turns in their own worksheet

  35. Bonus points • Define the “RULE of 72” • Give three examples

  36. Keeping your Money Safe & Secure Banking and Credit

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