banking how banks work along with checking accounts
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BankingBanking
How banks work How banks work along with checking along with checking
accountsaccounts
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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
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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
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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?
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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
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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
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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
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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
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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
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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
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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
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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
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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.
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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
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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
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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
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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)
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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
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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
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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
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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
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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
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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
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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
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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