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Name: ____________KEY______________________Date: ________Financial LiteracyFinancial Institutions and ServicesObjectives:Identify different types of financial institutions.Select the financial services that will best meet your needs.Use ATM and debit cards responsibly.Manage a personal checking account.Write and endorse checks correctly.Calculate a checkbook balance.Types of Financial InstitutionsEconomic system cannot function without financial institutionsThey are financial go-betweens that keep money flowing throughout the economy among consumers, businesses, and governmentCommercial BanksCommercial banks offer a wide variety of servicesFederal Deposit Insurance Corporation (FDIC) maintains confidence in the banking system by__insuring bank customers’ deposits__examining and supervising financial institution ____policies___ and __operations_________Insures up to $250,000_____ for each deposit ownership category in each insured bankOwnership Categories can be the following:_____single accounts______Certain retirement accounts (including Individual Retirement Accounts (IRAs))___Joint accounts__ (accounts with more than one owner with equal rights to withdraw)Revocable trust accounts (containing the words "Payable on death", "In trust for", etc.)Irrevocable trust accountsEmployee Benefit Plan accounts (deposits of a pension plan)Corporation/Partnership/Unincorporated Association accountsGovernment accountsSavings and Loans AssociationsSavings and loan associations (S&L) offer many of the same services of commercial banks Two S&L types:__Mutual savings and loan associations_________Stock savings and loan associations________Credit UnionsCredit union memberships available through employers, unions, religious organizations, community organizations, or other groupsLower operating costs (no federal income taxes required) allow them to pay higher interest rates on savings and charge lower rates on loansEither federally or state charteredNational Credit Union Administration (NCUA) ___grants federal charters________supervises credit unions across the country______insures deposits up to $250,000___Mutual Savings BanksMutual savings banks exist in only 17 statesEarnings divided among depositors as dividendsOffer a wide variety of services___Receive and pay dividends on deposits______Make home and mortgage improvement loans____Choosing a Financial InstitutionImportant Questions to ask…What services does the institution provide?What fees are charged?Is the staff helpful?SafetyLook for signs that say“Insured by the FDIC”“Insured by the NCUA”This means the institution is regularly checked and passes ongoing examinationsServices of Financial InstitutionsElectronic funds transfer (EFT) makes transactions quickly and convenientlyAutomated teller machine (ATM) lets you access your account to withdraw cash, make deposits, perform other servicesTo use an ATM you need ____an ATM card________personal identification number_____Direct Deposits or WithdrawalsChecks and payments are deposited directly into an accountBills can be paid without writing and mailing checksMoney can be automatically transferred from checking to savingsPoint-of-Sale Transfers (POS)Moves money from your account to pay for a purchase without using checks, cash, or creditA merchant scans a debit card and purchase amount immediately transfers from customer’s to merchant’s bank accountOnline Banking ServicesOnline access to accounts using identification number and security codeYou can_____check account balances_______review account history______schedule electronic bill payment______confirm deposits, withdrawals, and transfers_____Personal financial software often available Overdraft Protection____Overdraft___—the act of withdrawing money or writing a check for an amount greater than an account balanceFinancial institutions offer overdraft protectionBanks charge fees for each overdraftStop PaymentA financial institution will refuse to honor a check written by a customer___A fee is usually charged_______Customers must request this service______Drive-Up and Mail-In ServicesCustomers make deposits and withdrawals by___mail________drive-up windows_____Safe-Deposit BoxesCustomers’ important documents and valuables are stored in a secure vault____An annual fee is usually charged_____Other Special Programs____Trust preparation department_______Tax reporting assistance_______Financial planning_________Money market funds_________Mortgage loans_____Personal Checking AccountsAdvantages of checking accounts:__Safe place to keep money_____Easy way to buy goods and services______Easy way to pay bills________Provides record of deposits and receipts_______Aids in money management________Helps build sound credit rating___Accounts and ServicesLook for financial institutions that offer the accounts and services you want in a checking accountAsk about availability of different features and their fees, if anyRestrictions and Penalties__Minimum balance requirements_____Withdrawal limitations ________Overdraft protection_______Late payments on credit penalties___Fees and Charges___Maintenance fees________Charges for ATM use_______Low-balance penalties______Check writing fees_________Check printing costs___Interest RatesInterest ratespaid on interest-bearing checking accounts charged to borrow moneycharged to use a bank credit cardLook for high yields on savings and low rates for using creditConvenienceConvenient hoursATMs in various and convenient locationsOnline banking availabilityCredit cards offeredChecking Account TypesBasic checking accounts are good for people who write many checks and can keep the minimum balanceInterest-bearing account:__Combination savings and checking accounts_______Also called share drafts or NOW acccounts__Lifeline account:An option for low-income customersOpening a Checking AccountSign a signature cardThose under 18 usually need a joint account with a parent; spouses often share joint accountsRecord all starter checks and personalized checks that you useKeep track of transactions with a register Managing the Cards Linked to Your AccountAdvantages of ATM and debit cards:__Eliminates__ need to carry lots of cash__Access__ to your money at any time__Access_ to your money almost anywhere __Access__ to goods and services of businesses that do not accept checksKeep all receipts Record transactions and fees in checkbook registerSafeguard your card and PINKnow your balance and don’t overdraw your accountATM CardsUse ATMs affiliated with your bank’s network____Usually no fees charges___________Other ATMs charge fees, which can add up____Debit CardsUsed at ATMs and businesses that accept credit cards Similar to writing a check; the purchase amount comes directly from your checking accountMaking DepositsDeposits can be made__ in person_____by mail_____at an ATM____Fill out a deposit slipSave receipts and record deposits in your registerEndorsing ChecksBefore you cash or deposit a check made out in your name, you must endorse itThree ways to endorse a check:____Blank endorsement__–just the payee signs___Restrictive endorsement___–the specific use is noted, such as “for deposit only”___Special endorsement___–the payee writes “pay to the order of…” and signs, and the other party also signsWriting Checks___Use a permanent dark ink (black or blue is best) ___In case of error, destroy check and write a new oneFill in the___date______payee name____check amount in number and in words____your signature___Filling out checkbook register_Record_ check number, date, payee, and amount_Subtract_ check amount from balance__Record_ deposit dates and amount__Add__ deposit amount to balanceFor destroyed checks, __write number and “void”__Balancing Your CheckbookBank statements are sent out __monthly__Always check the statements against your recordsBank statement contents include:beginning and ending __balances___total amount of __checks_ and __payments___total amount of __deposits__ and _credits___details of _checks paid__ (dates, numbers, amounts) and canceled checks or check photocopiesother items ___paid__ (withdrawals, fees, bills)__deposits__ and__credits__ (dates, descriptions, amounts)Always do the following after receiving your bank statement:1. Compare __canceled checks with those recorded in checkbook register2. Compare __deposits___ in register with those on statement and your receipts3. Check ATM_transactions and _fees_ in register against those on statement4. Subtract ___service charges_on statement from register balance5. Account for checks, ATM transactions, and deposits not yet on statement 6. If numbers from Step 5 and bank statement balance are not equal, check math or contact the bank for helpSpecial-Use ChecksMost financial institutions offer these, usually for a fee__cashier’s checks___certified checks______money order____traveler’s checks__Central Ideas of the ChapterFinancial institutions are vital to the economy because they make financial transactions possible.A checking account is a basic tool to help you manage your financial resources.Vocabulary:_______ATM card_____________ A card that allows customers to withdraw cash from and make deposits to their accounts using an ATM. ___Automated teller machine A computer terminal used to transact business with a financial institution. __Bank statement A record of checks, deposits, and charges on a checking account. ___Cashier’s check A check drawn by a bank on its own funds and signed by an authorized officer of the bank. ____Certified check A personal check with a bank’s guarantee the check will be paid. __Commercial bank A bank owned by stockholders and organized to receive, transfer, and lend money to individuals, businesses, and governments. __Credit union A nonprofit financial cooperative owned by and operated for the benefit of its members. It accepts deposits, makes loans, and provides other services.__Electronic funds transfer (EFT)_ The movement of money electronically from one financial institution to another. ___Endorse__ To sign one’s name on the back of a check in order to cash or deposit the check. __Federal Deposit Insurance Corporation A U.S. government agency that protects bank customers by insuring deposits as well as examining and supervising financial institutions.__Money order_ An order for a specific amount of money payable to a specific payee. __Mutual savings bank_ A saving depository owned by the depositors that divides the profits among depositors in the form of dividends.__National Credit Union Administration An agency that grants federal charters to qualified groups, supervises credit unions, and insures accounts in all federally chartered and many state chartered credit unions.__Savings and loans association (S&L)___A for-profit financial institution that receives and pays dividends on depositors’ savings, makes mortgage loans, and offers most of the services commercial banks offer. __Traveler’s checks__ Checks that can be cashed in most places around the world. They are often used by people who travel and do not want to carry large amounts of cash. ................
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