BANKING

What is Banking?

• Secure way to maintain your money

• Establishes credit – shows you have money and know how to manage it responsibly

• Began as bartering (trading), but dates back to these era’s:

*Biblical – Roman empire *Medevil – 1st organized bank *Renaissance- international trade/bank

What about CASH?

Money• Money used to be backed by gold. • Which means….the Federal Reserve didn’t just

print money unless there really was “gold” to represent it

• Now we are just writing against the deficit. (Ask your economics teachers to explain)

• Printed money has a serial number on each bill for security and accountability

But…You also need a checking account:

• World is going towards a cashless society• Can use debit (automatic withdrawal from

account) for most purchases (even fast food)

• Online purchases don’t take cash

• Bill paying now comes directly out of your account

• Paychecks deposited directly into your account

Services of a Financial Institution

• Checking accounts

• Savings accounts

• Loans

• Safety Deposit boxes

• Traveler’s checks

• CD’s (certificates of deposit)

• ATM’s (automated teller machines)

• Discounts for bank customers

Benefits of a Checking Account

• Establishes credit

• EASY• Safer than cash ( & you may be less tempted to spend)

• Cancelled checks (cleared) provides a receipt

• Gives you a record of how you spend your money

• Some accounts pay you interest on your balance

Types of Checking Accounts

• Free Checking (for students)

• Low – Cost checking

• ATM checking

• Regular checking

• Interest checking

Bank or Credit Union• Bank – an institution in corporate business

to make a profit. Banks compete for you and try to offer the best customer service, account plans and incentives.

*Commercial Bank – independent bank, has a board of trustees and shareholders

*National Bank – chartered by the Federal Government

*State Bank – chartered by the state government

• Credit Union – a Non-profit institution with members limited to a particular group of people. They provide the same services as a bank.

*Teachers Credit Union *Military Credit UnionThere are credit unions offered to anyone,

but one must join the credit union group by paying a small fee. (Community Credit Union)

Credit Unions are a great place to get low-interest loans!

FDIC

Federal Depositors Insurance Corporation

When choosing a bank, you want to be sure the FDIC backs that bank. Your money will be secure and guaranteed by the United States government.

Terms

• Annual Percentage Rate (APR) – the interest rate you actually pay over the period of a year.

• Cancelled Check – check

which the bank has paid.

It has gone through the

system and cleared.

• Endorsement – signature on the back of a check that allows it to be negotiated (cashed).

• Federal Reserve System – system that regulates the supply of money.

• Float – term applied to the time between transaction and debit from account. Usually a couple of days. You can earn interest while the money is still in your account.

Check 21Check Clearing for the 21st Century Act

Allows banks to dispense with returning original paper check to consumer. Instead, banks now transmit an electronic image of the check (substitute check).

Advantages: saves money (paper and

postage), saves time

Disadvantages: more difficult to spot

forgeries, speed of electronic transfer will

decrease “float” time.

Where are you keepingyour money?