Banks Help You Move Your Money 71 How Banks Work Bell Ringer1 Why do we have banks What do banks do Who uses and benefits from banks Why not just keep your money in your mattressshoe box ID: 776140
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Slide1
Chapter 7
Banking Services
Banks Help You Move Your Money
Slide27.1 How Banks Work
Slide3Bell Ringer-1
Why do we have banks?
What do banks do?
Who uses and benefits from banks?
Why not just keep your money in your mattress/shoe box?
Slide4Banks Purpose Earn Profit
Banks are a private businessThey earn money by selling financial servicesIncome comes from interest they charge when they lend moneyMoney they lend mostly comes from deposits made by consumers and businesses
Slide5How It Works…
Banks pay depositors interest on accounts they have…
The interest rates that depositors receive are lower than what banks will charge borrowers
The difference between the rates is the banks profit
Slide6How It Works…
Example: You deposit $100 into your bank account- Bank pays you 2% interest on your account ($2)The bank lends $100 to a business and charges them 6% interest ($6)The bank will earn $4
Slide7Other Sources of Income
Credit card fees
Checking account fees
Financial planning fees
Overdraft fees
ATM fees
Slide8Inflation
Sustained
increase
in the average level of prices
Example:
You save for a year for a TV that cost
$800
… when you go to buy that same TV a year later you notice it is now
$850
.
The price of the TV may have increased due to the general state of inflation in the economy.
Slide9Security
Banks provide securityIf money is stolen or a bank is robbed, a bank has insurance to cover the lossIf you keep your money in a shoe box in your closet and someone either... steals your money, you lose it, or mishap occurs, your money is gone.
Slide10Bell Ringer-2
What does is mean when a bank is member FDIC?
Up to what amount are your deposits insured?
Slide11Federal Deposit Insurance Corporation (FDIC)
An organization created by the federal government that insures deposits in most banks up to a maximum of
$250,000
If a bank fails and is not able to pay its depositors, the FDIC will pay instead
There is
no chance of losing money
that you deposit up to the maximum in an
FDIC insured bank
Your Bank Has Failed
Bank Run
Slide12Money and Financial Transactions
BarteringTrading goods and services without using moneyExample… Your parents will let you use their car on Saturday if you babysit your sister on Friday night… CurrencyPaper money and coins used for financial transactionsCheckAn order to a bank to pay a specified sum to the person or business named on the check–
Slide13Money and Financial Transactions
PayeePerson the check is made out to… “Pay to the order of…”
Slide14Advantages of using a check
Safety
If check gets lost or stolen, no one else can legally cash it
If someone does cash it illegally, you are not responsible, the money will not come out of your account… the bank or business that cashed the check will take the loss
Convenience
Making large purchases
Safer to send through mail than cash
Records your transactions
Bank statement-
a written record of all your transactions
Slide15Parts Of A Check
Using the word bank identify the parts of a check. Write your answers next to the arrow.
Parts Of A Check
Slide16Parts of a Check
Slide17Chapter 7.2 Use Your Checking Account
Slide18Checking Account
A bank account that allows depositors to write checks to make payments
Banks offer different features and aspects of various types of checking accounts, but they all work the same way!
Joint account-
when 2 or more people have access to the same bank account
Mother and Son
Husband and Wife
Slide19Opening a check account
Complete application
Sign a signature card
Provide valid identification
Make an initial deposit
Slide20Deposit Slips
Used to deposit cash and checks into your bank accountFirst thing you need to do after opening your account Deposit slips are often found at the back of your checkbook, if you run out, you can always get more at the bank when you go to deposit your money
Slide21Opening a Checking Account
Safest and easiest ways to manage your money
Allows you to write checks for bills and pay them by mail
Allows you to avoid carrying a large amounts of cash
Statement is given to you each month to summarize your spending
Slide22Writing A Check
1. Date- Write in the date 2. Pay to the order of- who is the check going to? (person or company)3. Amount- numerical amount written in small box4. Amount- written out in words5. Memo- what is the check for?6. From- Your signature
Slide23Check Register
Booklet used to record your transactions including deposits!
Slide24Check Register
Record Fees
For writing a certain amount of checks
Record interest
Credit you receive
Calculate New Balance
Account Balance- total amount in the account at a specific date
Make sure to always record new balance when you write checks or use your debit card!
Record Check Number
This helps you know what each check was written for
Also helps you know if you have forgotten to record a check
Slide25Check Writing/Check Register
Go to Page 3 in your packet.
Read the 3 transactions listed
Write the checks for the bills listed
Record the transactions in your check register!
Slide26Slide27Slide28Slide29Account Balance
The total amount in your bank account at a specific date
Slide30Overdrawing
Writing a check for more than you have in your account.This will result in “Insufficient Funds”You may be charged $35 or more (depending on your bank) each day your account is negative!
Slide31Check Register
Go to page
5
in your packet.
Practice filling in your check register!
Slide32Slide33Endorsement
Signing
the back of a check
When you sign the back of a check, you are acknowledging you received the money or transferred your right to someone else.
DO NOT sign back until you get to the bank, otherwise someone else can deposit it!
Slide343 Types Of Endorsements
BlankJust your signature andAccount numberRestrictive“For Deposit Only” include your name and your account number. This ensures it only gets deposited into your account!
Slide35Endorsement in Full
Used to transfer a check to another person.No one except the person whose name is stated on the endorsement can cash the check. “Pay To The Order Of...”This type of check is called a Third Party Check.Signing your check over to someone else
#123456789
Slide36Endorse A Check
Go to page 6 in your packet
Read the scenarios on the following slides and endorse each check accordingly.
Slide37Check Endorsing Scenarios
1. You
receive a check for $63 that you wish to give to Ethan. Endorse the check using a
third party endorsement
.
2.
You
receive a check for $933. Use a
blank endorsement
to deposit the check in your account #
740696.
3. You
receive a check for $395. Use a
restrictive endorsement
so it may only be deposited directly into your account.
Slide38Check Endorsing Scenarios
4. You
receive a check for $922 that you wish to give to Anna. Endorse the check using a
third party endorsement
.
5. You
receive a check for $33. Use a
blank endorsement
to deposit the check into your account.
6. You
received a check for $50. Use a
restrictive endorsement
so it may only be deposited directly into your account.
Slide39Slide40Check-Clearing Process
When you deposit money, you cannot withdrawal the money unless you have enough in your account already to cover what you are taking out.
Example:
You have a current balance of $50
You deposit a check for $100
You cannot take more than $50 out until the check you just deposited has cleared.
Slide41IF a bank charges a fee for a checking account, there are 2 basic fees that can be charged...Monthly Service Fee (flat fee)Service Charge Fee
Checking Account Fees
Slide42Types of Checking Accounts and Fees...
Account Feature
Free Checking
Green Checking
Premier Checking
Ultimate Checking
Min. Balance to waive service charge
None
None
$1,500 in account or $5,000 in bank
$10,000 in account
Service Charge
None
None
$8 per month
$10 per month
Interest
None
Compounded daily, paid monthly
Compounded daily, paid monthly
Tiered at $25,000
Free Checks
None
None
Standard Style
Any Style
Other Features
-Free
ATM Withdrawals
-Free
Bill Pay
-Free
Online Banking
-Free
Check Image Return
-Annual
Fee waived on approved VISA
-Electronic
Statement
-Free
ATM Withdrawal
-Free
Online Banking
-Free
Bill Pay
-Annual
Fee waived on approved VISA
FREE CHECKING FEATURES PLUS:
-Service
charge waived for 55 and older
-50
% off small safe deposit box
FREE CHECKING FEATURES PLUS:
-.
25% rate bump on CDS
-Free
Cashier’s checks
-Free
stop payments
-Free
small safe deposit box
Slide43Chapter 7.3 Balance Your Checkbook
Slide44Your Bank Statement
Received at the end of the month showing all transactions for the month
You should
compare your checkbook register to your bank statement to make sure no mistakes have been made.
This is called
reconciliation
or
balancing
your account.
Slide45Reconciliation
Checking bank statement with checkbook register to assure no mistakes have been made.Check Summary01/03 Deposit $717.20+01/08 Check 101 $35.24-01/15 Check 103 $40.00-01/15 Check 104 $41.80-01/19 Check 105 $120.24-01/28 Check 107 $314.12
PAYMENT OUTSTANDINGNo. 102 24.00 106 33.93 108 450.00 TOTAL 507.93
ENDING BALANCE ON STATEMENT
$ 160
80
ADD DEPOSITS NOT SHOWN
692
37
SUB-TOTAL
853
17
SUBTRACT PAYMENTS OUTSTANDING
507
93
BALANCE
345
24
Slide46Reconciliation
Look at your statement and start with the
first transaction
and compare it with your check register.
Continue this
one transaction at a time
.
After you have checked off everything listed in your statement, look for any entries in your check register that you did not check off.
Slide47Routing Diagram
Slide48Canceled Check
A check that has been paid A check that has made its way through the banking system
Slide49What is included in a Statement?
Account Balance
Any checks you have written
Any withdrawals you have made (ATM or debit card)
Any deposits you have made
Any fees that you have received
Slide50Can’t reconcile?
The design of reconciliation forms varies from bank to bank
Often times a reconciliation form will be attached to the back of your statement
You should speak with a bank representative or manager if you have an issue with your bank account.
Slide51Bank Reconciliation- Page 8
Use the bank statement and check register to reconcile your bank account.
1. Use the checkmark column on your checkbook register to check off transactions that are on your bank statement.
2. On your reconciliation form, record checks that are on your checkbook register, but are NOT on your bank statement.
3. Record any deposits you have made that are not on your bank statement.
4. Determine the correct balance!
Slide52Slide53Slide54Bell Ringer–3
Name 3 types of fees you can incur when having a checking account
Slide55Chapter 7.4 Electronic Banking
Slide56Electronic Funds Transfer (EFT)
To move money from one account to another by computer. (Including smartphone or tablet)You DO NOT need checks or currency in order to do this.EFTS are quicker and less expensive for banks to complete than paper transactions.
Slide57Automated Teller Machine (ATM)
A computer terminal that you can use to make deposits, withdraw cash, transfer money between accounts, check your account balance, and pay some kinds of bills.An ATM can come complete most transactions that a human teller can.Most popular way to transfer money.
Slide58Personal Identification Number (PIN)
A secret number that identifies you to the ATM as the owner of the account.When you insert your card and enter your PIN on the ATM key pad, the machine identifies you as the card owner and authorizes you to make transactions.
Slide59Direct Deposit
Having your payroll check directly deposited into your checking/saving account.You will receive a pay-stub which does not have value and cannot be deposited.
Slide60Debit Card
Plastic card that resembles a credit card.Also know as a “Check Card.”Used in place of writing a check.When using a debit card, the funds automatically get withdrawn from your bank account.
Slide61Automatic Withdrawal
An arrangement you can make with your bank to pay certain bills automatically from your bank account.
Often done online
Convenient way for you to make sure bills are paid on time each month.
Eliminates late fees
Slide62Online Banking
FeaturesKeeps checkbook registerPay bills - AutomatedTransfer fundsConvenientAny device can be used, just need internetSecurityPassword protectedUse of different computers/devices
Slide63Mobile Banking
https://www.bankofamerica.com/online-banking/mobile.go
Slide64Chapter 7.5
Slide65Certified Check
Personal check that has been stamped and signed by a bank officer to guarantee your account has the funds to cover the check.
Slide66Cashiers Check
A way to guarantee paymentA banks own check signed by the bank’s cashierYou pay the teller the amount you want the check written for and the bank uses their own check.There is usually a $25 fee to use this type of check.In what situations may you need to get a cashiers check?
Slide67Money Order
A check that draws on the money of the bank or other financial business that doesn’t accept personal checks.Similar to a cashiers check only there are 2 major differences:1. Many different companies sell money orders, not just banks... post office, a check-cashing business, Western Union, American Express, etc...2. Your name, not the bank’s name, appears on the money order.
Slide68Traveler’s Check
Checks you pay for in advance, and if they are lost of stolen, the company you got them from will replace them for free.
Can be bought in many places:
Banks, American Express offices, travel agencies, offices at the American Automobile Association
Generally sold in amounts such as $20, $50, or $100
Fee is usually 1% of the amount it is worth
How to cash them- sign bottom signature line in front of the person you want to pay. Usually an ID will be required.
Slide69Why Travelers check...
Why travelers Check?If you travel its not always a good idea to bring a lot of cash with you.. In case you lose your suitcase, misplace your money, etc...Most local businesses wont accept a personal check, especially if your bank is from away from where you currently are visiting.Traveler’s checks are a good option in this situation!
Slide70Wire Transfer
An electronic communication that moves money from an account in one bank to an account in a different bank.
They happen instantly
On a smaller scale... This is what happens when you withdrawal money from an ATM.
Why a wire transfer?
Suppose a company orders thousands of monitors from a company and agrees to pay 28 million for them. This huge sum would earn substantial interest in a bank account each day. Companies don’t want to lose this interest so instead of writing a check and waiting a few days for it to go through, they will do a wire transfer to pay immediately.
Slide71Safe Deposit Box
Boxes with individual locks that you can rent from a bank.Located in a vault, where their contents are safe from fire, theft, and loss.Renting a small safe deposit box can range from $30-$50 per year.A larger safe deposit box can cost moreIf you need to access your safe deposit box you need to sign in, show your ID, and give your box key to a bank employee.
Slide72Endorsing Assessment
1. You have just entered the bank, and you are depositing your check from Grandma Sally. On the back of this check, write a
blank endorsement
to put this check in your account. Your account number is: #700456
.
2.
You have received a check from Grandpa Frank, and you want to mail it to your bank. On the back of this check, write a
restrictive endorsement
so that you can mail this check to the bank and have it deposited to your account. Your account number is: #700456.
Slide73Endorsing Assessment
3. You receive a check for $50 that you wish to give to Rachel Adams. Endorse the check
in full
to Rachel
A
dams. Rachel Adams’ account number is #100123.