Depository Institutions. Take Charge of Your Finances. Depository Institutions. Depository Institutions – businesses which offer multiple services in banking and finance These institutions include: Banks Savings and Loans Credit Unions
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Depository Institutions Take Charge of Your Finances
Depository Institutions • Depository Institutions – businesses which offer multiple services in banking and finance • These institutions include: • Banks • Savings and Loans • Credit Unions • Institutions are regulated by various state and federal agencies
Depository Institutions Why consumers may not use them: Why consumers may use them: To keep money safe To receive the advantages of interest earning accounts To have the opportunity to receive lower cost loan • Fees are too high • Minimum balances required are too high • They wish to keep their financial information private
Federal Reserve Bank • Federal Reserve Bank – is part of the central banking system in the United States • Services provided to depository institutions include: • Collecting checks • Electronically transferring funds • Distributing and receiving cash and coin
Federal Reserve Bank • Which federal reserve bank located in your region?
Life of a Deposited Check • Look closely at steps 2-4 to see how the Federal Reserve bank plays an integral role in how a check transaction works
Depository Institutions • Commercial Bank • Credit Union • Savings and Loan Association
Commercial Bank • Commercial Banks • Usually the largest depository institutions • Considered full-service depository institutions because offer a wide variety of services and products • Available to a variety of consumers • Examples – Wells Fargo, US Bank, Chase Bank
Credit Union • Credit Unions • Non-profit cooperative depository institution • Owned by members who share a common bond • Examples – Rocky Mountain Credit Union, Teachers Federal Credit Union
Savings and Loan Association (S&Ls) • Savings and Loan Association • Focus on providing loans and mortgages • Customers must have a savings account with them • Examples – American Federal Savings Bank, Pioneer Federal Savings & Loan.
Types of Insurance • Federal Deposit Insurance Corporation (FDIC) • Federal government agency which protects depository institution accounts • Insures commercial banks and savings and loan associations • National Credit Union Administration (NCUA) • Provides insurance for credit unions
Insurance Protection • Insurance protection • Each depositor is insured up to $100,000 for money deposited in a regular account • Each depositor is insured up to $250,000 for qualified retirement deposits • The same protection is available from both FDIC and NCUA • Insurance is important because the risk of loss. • Risk of Loss is used to determine which party should be responsible for damage occurring to products after a service transaction has been completed but prior to delivery.
Interest • Interest – the amount of money that is either gained or lost when accessing services offered by a depository institution • Two types of interest include: • Interest earning - Money earned from an investment instrument • Interest bearing - The charge for money that a consumer borrows from a depository institution
Interest Rates • Interest rate – the percentage used annually to calculate the total interest either gained or lost
Common Services Offered • Checking account (also known as a Share Draft Account at a credit union) • Paper checks or debit cards that are used to withdraw money • May or may not be interest bearing • Savings account(also known as a Share Account at a credit union) • An account in which money is typically deposited to earn interest • Interest bearing
Interest Earning Accounts • Stock • Ownership, represented by shares in a corporation • Certificate of deposit (also known as a Share Certificate account at a credit union) • An insured interest-earning savings instrument with restricted access to the funds • Money market account • An account which offers higher interest rates than a savings account and may offer limited check writing privileges • Bond • A debt instrument issued by an organization, such as a business or the government • Designed as an investment for the purchasers to earn interest
Interest Bearing Accounts • Credit card • A card used to make a purchase now and repay later • If the balance is paid before the grace period ends, interest is not added • If the balance is paid after the grace period, the payment of interest is required • Loan • Money borrowed and paid back with interest • Mortgage – loan for a home • Personal – interest rates vary depending upon type of loan • Loan types can include vehicle, school, etc.
Additional Services Which May Be Offered • Safe-deposit box • A secured box in a bank to be used for valuable and important personal items • Financial counseling • Information and advice is given to customers to help make financial decisions