BANKING 101Modified from original presentation by Union Bank employees

Choosing a bank• Big bank vs. small (community) bank• What is important to you?

• Location• Interest

• Loan (mortgages, car, etc.)• Savings• Certificate of Deposit (CD)

• Freebies• Checking• Savings w/o minimum balance or low balance• Online banking

• Customer service• Hours open• Drive up window

• Other• Safe deposit box

Opening a Bank Account• To open a bank account you must provide:

• Valid photo ID (proof of age and identity) (interest can be reported to IRS)• Driver’s license• State issue or military ID• Alien registration number• Utility bill• Apartment Lease

• Social Security Card (to report to FDIC)

SERVICES AVAILABLE

ATM cards• Allows you to access your money quickly

• After hours can withdrawal or deposit funds

• Must have a PIN number to use

• Creating PINs• Easy for you to recall• Difficult for others to guess

• Don’t use personal dates• Don’t use repetitive numbers• Choose a longer PIN

Debit Cards• Banks have limits on how many withdrawals per month

can be done with debit cards (standard rule is 6)• Loss of Liability (up to $50 if reported within 2 business

days)• Cash back

Checking• Regular checking account

• Monthly and per-check fees• Accounts with a minimum balance

• Drop below minimum and you have to pay the full monthly fee

• Free checking• Usually offered with direct deposit

• Interest bearing account• Interest paid on balance at end of the day

• Overdraft Protection (opt-in)• Kicks in when customer writes a check for more than they have in the

account• Comes at a price – interest on the amount floated• Insufficient funds can be expensive – fee to the bank and the payee

• Stop Payment – can cost anywhere from $18 - $32• Cashing checks

Savings• Statement (regular) – minimal withdrawals allowed• Savings Club – no withdrawals until the year end• Education Club/529 – withdrawals only for education

expenses• CD (Certificate of Deposit) – no withdrawals until the end

of the term• IRA (Individual Retirement Account) – penalty free

withdrawals only at appropriate age

Compound interest fun fact

A savings account with $50 monthly deposits can earn, in 30 years:

@ 0% = $18,000 ($0.00)

@ 2% = $24,727.33 ($6,727.33)

@ 4% = $34,868.15 ($16,868.15)

Electronic Transfer• Identify the advantages and disadvantages of:

• Automatic transfer from checking to saving (forced savings)• Online bill payment and credit payment• Deposit of checks using a cell phone• Direct deposit of checks

• Funds available quicker• Employee responsibility to verify funds deposited

• Important to notify bank when email or home address changes

Online Banking• Access to bank accounts to pay bills and monitor

accounts

As Good as Cash• Cashier/Bank checks (guaranteed by bank)

• Drawn on bank’s own funds and signed by cashier• Treated as guaranteed funds• Used for real estate, brokerage transactions, etc.

• Amount is taken out of customers account immediately• Bank assumes responsibility for covering check• Unlike personal checks (funds removed when check presented for payment)

• Certified checks (funds are set aside to pay)• Bank verifies that sufficient funds exist and funds set aside to cover

check• Cannot “bounce”

• Traveler’s check: many use for vacations funds, slowly being replaced by Credit Cards

• Money Order: funds are pre-paid

Do You Lose Money if your Bank Fails?

• FDIC has protected Banks since 1934• Savings deposits, checking deposits, and CD

• Prior to FDIC banks where plagued with bank “runs” • Great Depression shattered peoples confidence in banks• 2014 – FDIC insures accounts for up-to $250,000

• Maximum $250,000 per each group (savings, checking , and CDs) at each different bank

• FDIC receives no federal funds – each member bank pays a premium

• Establishes Reserve requirements (2014: 3% for first $13.3 million)

• Federal Reserve backs the FDIC

CDs• Sold by banks and credit unions• Similar to savings account, they are insured with FDIC or

NCUA• Different from savings:

• Fixed term • Difficult to get funds prior to maturity date (less liquid)

• Fixed interest rate• CD is held until maturity at which time it can funds can be

withdrawn• Given higher interest rates

• Larger funds usually means higher interest rates

Money Market Account• Similar to savings account, but require higher balance• Interest rates vary• The more money in account the higher the interest• Limit the number of transactions you can do in a month

Individual Retirement Accounts (IRAs)

• Useful when employers do not offer retirement accounts• Types:

• Traditional IRA – contributions are tax deductible• Roth IRA – funds withdrawn tax-free many situations

• Both accounts have contribution limits

Loans• What is a loan?• What type of loans can you get?

• Student loans• Personal loans• Car loans• Mortgages

• Secured (collateralized)• Unsecured (uncollateralized)• Interest rates are based on credit scores

Safety Deposit Box

1. Your items are protected from fire, flood or other natural disasters at home. 

2. It’s a cost-effective way to keep valuables private and safe. 

3. Your items are protected from theft at home. 

4. Your items are protected from being lost or misplaced.

5. Your family members will know where to find your important papers. 

You rent the space from your bank

ABUSE: REMEDIES AND PREVENTION

Money Order Scams• You receive a fake money order and mail the merchandise• You receive a money order in excess of amount owed,

overpayment to be mailed somewhere else• Red flags:

• An offer that came from out of the blue• International money orders • Messages with numerous grammar and spelling mistakes • Refusal to pay you electronically • Buyer is not very interested in checking out the merchandise or

product details • Buyer asks for sensitive information like your bank account

number, etc.• It sounds too good to be true

Check Fraud• Copy or duplicating actual financial documents

• Stealing blank checks• Cancelled checks from garbage• Paid bills in your mail box, thieves take them

• Chemical alteration• Victims

• Financial institutions• Business who accept and issue checks• Consumer

• Types of Fraud:• Forgery• Counterfeiting and Alteration• Paperhanging• Check Kiting

• Signs for bad checks

Loaning your ATM card• What problems can you see with loaning out your ATM

card?

Check Cashing storesPros

• Convenience (later hours)• Payday loans and other types of loans• Money transfers• Bill payments• Money orders• P.O. boxes• Stamps, envelopes, and mailing

services• Notary public• Currency exchange• Prepaid debit and credit cards• Public transportation passes and tokens• EBT services• Photocopying and faxing services• ATM machines• Motor vehicle renewal and registration

Cons• Resort to check cashing stores

because cannot get a bank account due to problems with credit history

• High fees (3-5% of check)• Leave store with a great deal of cash

on them (dangerous)• Stores usually located in higher crime

areas

Payday Loan• Small, short-term unsecured loan• Sometimes called cash advances• Must have previous payroll and

employment records• Payment due borrowers next pay

day• Borrower writes a postdated

check• For $15 charge on a $100 14-day

payday loan, the annual percentage rate is 391.34%

• They have a 10-20% default rate

Title Loan• Also called:

• Auto title loan• Pink slip loan

• Secured loan where borrow used their vehicle as collateral

• Lender places a lien on the vehicle• Temporarily surrender the hard copy of vehicle title• Leander can repossess vehicle if loan not paid• Short-term high interest loans (36% to well over 100%)

What is Identify Theft?• It occurs when someone steals your personal information

– e.g. credit card or Social Security number – and uses it fraudulently

• It can cost you time and money• It can destroy your credit and ruin your good name

How Does Identity Theft Happen?

Identity thieves may:• Go through your trash or

“dumpster dive”• Steal your wallet or purse• Steal your mail or submit a

change of address form for your mail

• Use “phishing” or take emails to get you to provide personal information

• Steal personnel records from their employers

What Can you do?

Deter• Deter identify thieves by safeguarding your information

Detect• Detect suspicious activity by routinely monitoring your

financial accounts and billing statements

Defend• Defend against identity theft as soon as you suspect a

problem

Deter Identify thieves by safeguarding your information.• Shred financial documents before discarding them• Protect your Social Security number• Don’t give out personal information unless you’re sure

who you’re dealing with • Don’t use obvious passwords• Keep your information secure

Detect suspicious activity by routinely monitoring your financial accounts and billing statements• Be alert

• Mail or bills that don’t arrive• Denials of credit for no reason

• Inspect your credit report• Law entitles you to one free report a year from each nationwide

credit reporting agencies if you ask for it.• Online: www.annualcreditreport.com by phone: 1-877-322-8226; or

by mail: Annual Credit Report Request Service, PO Box 105281, Atlanta, VA 30348-5281

• Inspect your financial statements• Look for charges you didn’t make

Defend against identify theft as soon as you suspect a problem• Place a “Fraud Alert” on your credit reports by calling any

one of the three nationwide credit reporting companies:• Equifax: 1-800-525-6285• Experian: 1-888-397-3742• TransUnion: 1-800-680-7289• Review reports carefully, looking for fraudulent activity

• Close accounts that have been tampered with or opened fraudulently

• File a police report• Contact the Federal Trade Commission

Where can you learn more?• Online: www.ftc.gov/idtheft• By Phone: 1-877-ID-THEFT• By Mail: Identity Theft Clearinghouse

Federal Trade Commission

600 Pennsylvania Avenue, NW

Washington, DC 20580