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BankingBASICS

Welcome to

YOU can bank on it

© 2016

‘Banking Basics’

A financial education project

What will the ‘Banking Basics’ training teach us?

We want you to have a thorough understanding of personal banking services and how they can benefit you.

You will learn about: Banks and credit unions How to select a financial institution

How to open an account How to keep account costs down How to get more interest on your savings

Participants’ folders contain: You Can Bank On It (brochure)

Check Writing (class activity) Sample ChexSystems Report Sample Account Application Choosing a Bank or Credit Union

(take-home worksheet) Evaluation of the MoneyWI$E

Banking Basics Seminar

Checking and savings accounts

What are some of the advantages to having a checking and savings account?

Advantages of checking and savings accounts include:

Your money is safe Each account is insured Checking account records provide

proof that you paid bills and help you keep track of spending

Money in a savings account earns interest to help it grow

Less expensive than check-cashing stores and money orders

Banks and credit unions

What is the difference between a bank and a credit union?

Banks

Banks are financial institutions that take deposits, engage in lending and operate for a profit

Banks offer checking and savings accounts to the general public

Credit unions

Credit unions are financial cooperatives that are owned by and serve individuals with a common affiliation• for example, a workplace, church,

employees union, neighborhood, etc.

Credit unions offer checking and savings accounts to members

Account verification services

How do banks and credit unions learn how you have handled your accounts in the past?

ChexSystems... Is the major national‘account verification’company• When you apply for a new

checking account, banks and credit unions search for your name in the ChexSystems database

• If you ever abandoned an account, leaving a negative balance, you are probably listed in this database

ChexSystems records Reports about overdrafts or

closed accounts remain in your file for five years

You can get a free copy of your report by contacting ChexSystems at www.consumerdebit.com

You have the right to dispute inaccurate information in your account verification report

Your rights You can get a free copy of your ChexSystems report if:• you have been denied an account

in the past 60 days because of information listed in ChexSystems

• your checks were stolen and used by an impostor or you are the victim of any banking or account fraud

Get a copy anytime for about $10

Don’t get discouraged

If you try to open a new checking account and are turned down by a bank or credit union because of your past account history, don’t give up

Different banks and credit unions have different requirements, so shop around

ChexSystems sample report Let’s review the categories

of the ChexSystems sample report:• Reported information• Drivers license validation• Drivers license verification• Consumer-initiated inquiries• Customer-initiated inquiries• Retail information• Check printing order history

Checking accounts

What kinds of things can you do with a checking account?

Checking accounts Checking accounts allow you to:• Pay bills with checks/online bill

pay• Get cash, transfer money and make

purchases using your debit card

Access your checking account:• At an ATM or bank branch• On your computer (online banking)• By phone or using a data-ready

mobile device (mobile banking)

Banking/checking online Also known as Internet banking Via a secure website operated by

your financial institution (or via an “app”)

Pay bills, view transactions, transfer funds between accounts

Benefits: convenient, low or no acct fees, quick access to info, savings on postage and checks

But, may still need to visit the ATM

Safe Internet banking

Make sure the institution is legitimate

Create a strong password Keep your ID and password private Don’t fall for phishing scams Be careful when using public

wireless networks (Wi-Fi) or shared computers

Monitor account activity regularly

Keeping checking account fees in check

Shop around for free or low-cost checking accounts• e-Accounts• Electronic transfer accounts

(ETAs)• Basic (Lifeline) accounts• Low-cost accounts for

seniors or students

Debit cards

You can use your debit card in these ways:• Enter your personal identification

number (PIN) at an ATM or at a retailer’s point-of-sale (POS) terminal

• Sign a receipt• Swipe without a signature or PIN

on purchases under $25 at some stores

Debit cards

If your debit card is lost or stolen:• Alert your bank or credit

union as soon as possible. The longer you wait, the more money you might be responsible for if an unauthorized person uses your card to buy things.

Check writing activity

In this activity you will practice writing a check and entering it into a sample checking account register.

Check writing

Why is it important to enter your checks and debit transactions in your account register?

Keep a record of your transactions: So that you don’t forget checks,

cash withdrawals, and purchases with your debit card• If you forget to record a

transaction, it could overdraw your account. This could lead to a fee for “non-sufficient funds” (bounced check) being charged to your account.

So that you know how much money you have in your account

So that you can track your spending and stick to a budget

Savings accounts

How is a savings account different from a checking account?

What is interest? Interest is the cost of borrowing

money • When a bank/credit union gives you

a loan, you pay interest to them • When you keep your savings in a

bank/credit union, they pay interest to you

APR, or annual percentage rate, is the annual amount of interest, expressed as a percentage of the amount loaned or borrowed

Types of interest

There are two types of interest:• Simple interest means that you

only earn interest on your initial deposit

• Compound interest allows you to earn interest not only on your initial deposit, but also on the interest you earn as you go along

Interest Simple interest• $100 on deposit for 10 years at a

1% APR would earn $10 in interest

Compound interest• The same deposit, compounded

monthly, would earn $10.51 (51¢ more because of compounding)

• Compounding earns more, especially if you save regularly

In the second half of Banking Basics, we’ll discuss:

• How to earn more interest• Safe deposit boxes• Choosing and opening an account• Managing your checking account • How to resolve any issues with

your account See you then!

Certificates of deposit (CDs)

What is a certificate of deposit?

Certificates of deposit (CDs) A certificate of deposit, or CD, is a

kind of savings account in which you leave your money on deposit for a set period of time in order to earn interest

The longer the term of your CD, the higher your interest rate will be

If you withdraw your money before the term ends, you will lose interest and might have to pay a penalty

Safe deposit boxes

What is a safe deposit box?

What are some things that you might keep in a safe deposit box?

What to keep in a safe deposit box Copies of insurance policies

Birth, marriage and death certificates

Mortgages, leases and other important contracts

Stock and bond certificates and certificates of deposit (CDs)

Valuable jewelry

Safe deposit boxes

What should you not keep in a safe deposit box?

Safe deposit boxes

The originals of your will and life insurance policies should not be kept in a safe deposit box

The box might be sealed at the time of your death and your survivors would need a court’s permission to open it

Opening an account Questions to ask:• What is the minimum to open an

account?• What is the interest rate on

the account?• Is there a monthly fee?• Is there any way to avoid

monthly fees?- (more questions on next

slide)

More questions to ask when opening an account

• Is there a maximum number of checks I can write each month?

• Is there a fee for using your ATMs?

• What happens if my balance falls below the minimum requirement?

TIP: Use the MoneyWI$E worksheet in your folders as a guide when you apply for an account

Opening an account

What should you bring with you when you are opening a new account?

Identification

When you go to a financial institution to open a new account, bring:

• Photo identification, such as a driver’s license, state ID card or passport

• Proof of your address, such as a utility bill or lease

• Your Social Security number for tax purposes

Activity

Sample savings account application This is a sample application for an interest-bearing account at MoneyWI$E Bank

Lets walk through the activity together

Savings account application Ownership W-9 certification Optional services• ATM cards

• Linking accounts ATM fees Sign and date your application

Keeping your account straight Once you have an account, write

down and deduct in your check register:• Every check you write• Every debit card transaction you

make (including “cash back” at stores)

• ATM cash withdrawals• Any bank fees you pay• Any online transactions• Any automatic payments/deductions• All deposits and credits

Account costs

How can you save money on account costs?

Ideas to keep account costs down

Combine checking and saving balances to avoid monthly fees

Save on ATM fees by using your own bank’s machines

If you can’t avoid an ATM fee, take out larger sums less frequently

Use direct deposit for your paycheck or government benefits check

Ideas to keep account costs down Ask your local bank or credit union

about accounts with free checks Order from a reputable mail-order

company Check with the Better Business

Bureau before buying checks from a company you are not familiar with

Write down all transactions and reconcile your account so you don’t overdraw your account and incur overdraft fees

Standard overdraft protection Your overdraft transaction is

covered if you pay a fee There is a separate fee for each

overdraft transaction You must give your permission (opt

in) to allow overdrafts on debit card and ATM transactions

If you don’t opt in, you can’t be charged but your overdraft debit transactions will be declined

Overdraft protection plans An optional bank service called

overdraft protection waives overdraft fees

It can work with a loan or line of credit or with your savings account• For the line of credit, you must

have a good credit history• You will be charged a small

transaction fee when you overdraw your account

• You’ll pay interest on funds from the credit line when you use them

Resolving problems

Mistakes happen! Bring issues or errors on your account or account statements to the attention of your bank or credit union

Don’t delay—waiting too long could make a situation worse

Solving an account problem Contact the financial institution as

soon as you can Write down the date of all calls and

the names of the people who help you resolve the issue

Send a summary letter (by registered mail, receipt requested, or by email) to establish a “paper” trail on your problem (and keep copies of email)

Offer a solution and a date by which you hope to resolve the issue

Escalating your issue Give your bank or credit union time

to solve or report back to you on your problem

If you are not able to resolve your issue with your bank or credit union after a reasonable time, you can contact the institution’s regulator

Call the RBI at 022-2266 1602 to find the resolution

Congratulations

By attending the ‘Banking Basics’ training, you’ve empowered yourself to make good decisions about your account needs.

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