Student Name: Financial Services Types of financial institutions Bank Owned by Profits go to investors. Credit Union Owned by Non-profit entity

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1 Student Name: Financial Services Types of financial institutions Bank Owned by Profits go to investors Credit Union Owned by Non-profit entity Features when comparing checking accounts electronic banking services earnings (or government payments) automatically deposited into bank accounts, saving time, effort, and money. utility companies, loan payments, and other businesses use an automatic payment system with bills paid through direct withdrawal from a bank account. allow customers to obtain cash and conduct banking transactions; some ATMs sell bus passes, postage stamps, gift certificates, and mutual funds. acceptance of ATM/debit card at retail stores and restaurants for payment of goods and services. prepaid cards for telephone service, transit fares, highway tolls, laundry service, library fees, and school lunches. companies are developing electronic replicas of all existing payment systems cash, check, credit cards, and coins.

2 banking through online services. Bank websites allow customers to check balances, pay bills, transfer funds, compare savings plans, and apply for loans online. Money going into your bank account. Money going out of your bank account. Types of accounts Designed as a place to hold money and watch it grow. Earns a small amount of interest Access is limited Transaction account Check withdrawals come out of checking accounts ATM and debit withdrawals come out of checking accounts Generally do not pay interest Money Market Account pays interest at a higher rate than savings and checking accounts Often impose a minimum balance for the account to start earning interest withdrawals are limited Certificate of Deposit (CD) Require the account holder to make a deposit and agree to leave funds in the account for a specific amount of time. In return for this agreement, the financial institution pays interest to the account. The account holder is required to keep his or her money in the account until the specified term is over. May be allowed to withdraw their principal funds before their CD matures, but a penalty is typically charged. Credit : The fee paid for the use of money. Personal Loans, Student Loans, Auto Loans : A legal document that uses property as collateral to secure payment of a debt. Summarize how banks use credit to earn interest from you and for you. : A check which a bank returns because it is not payable due to insufficient funds : A valid check which, although possibly already cashed, has not yet been returned for processing to the financial institution from where it originated.

3 Types of Endorsements Anyone can cash More secure than blank endorsement Special or full endorsement Beware the high cost of financial services charge very high interest for loans based on the value of tangible assets (such as jewelry or other valuable items). offer an opportunity to obtain home entertainment systems or appliances for a small weekly fee. However, the amount paid for the item usually far exceeds the cost if the item were bought on credit. charge high fees (sometimes 2 or 3 percent) just to have a paycheck or government check cashed. provide instant refunds when you pay to have your federal tax return prepared. However, this instant refund is a loan with interest rates as high as 120 percent. allow consumers to get a cash advance on their next paycheck. However, these short-term loans are very expensive. A $200, two-week advance may cost over $30 (with annual costs exceeding $900). Federal Reserve One of the major responsibilities of the Federal Reserve is to monitor monetary policy. This includes balancing and. Banks get their cash from. Homework Complete the Choosing a Checking Account Worksheet by calling or visiting a bank or credit union.

4 Banking & Interest Watch the Time Value of Money Video from the Financial Literacy Links : The payment you receive for allowing a financial institution or corporation to use your money. What Does Interest Rate Mean? The amount received for lending your money to a borrower is expressed as an annual percentage yielded (APY). : how quickly an investment can be turned into cash Usually, the more liquid an investment is, the the APY. The less liquid an investment is, the the APY. The amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets. Interest rates are typically noted on an annual basis, known as the annual percentage rate ( ). Interest is essentially a rental, or leasing charge to the borrower, for the asset's use. When the borrower is a low risk party, they will usually be charged a low interest rate; if the borrower is considered high risk, the interest rate that they are charged will be higher. How Interest Rates are calculated Interest rates are set by the to stabilize the economy. When the economy is growing -- companies are profitable, unemployment is low, and consumers are spending money -- short-term rates are raised to keep the economy from building too fast and risking inflation. Inflation is when too much money chases too few goods and services, driving prices upward. Raising interest rates slows the economy. Higher interest rates mean higher borrowing costs for individuals and businesses; and that usually means there's less money to spend elsewhere. The Fed will lower short-term rates when the economy is contracting -- or slowing. Lowering rates makes it less expensive to borrow money. Consumers and businesses can afford to buy more products and services. That speeds up the economy, keeps people employed, and keeps the economy from sinking into a recession. A recession occurs when consumers get tight-fisted with their money and don't buy the products and services that keep companies afloat and workers employed.

5 : earning interest on the principal amount only : earning interest on interest Watch the Compound Interest Video on the Financial Literacy Link Homework: Lookup the interest rate for a savings account for at least 3 different bank or credit unions. Write the name of the bank or credit union and the APY. Then, lookup the Interest Rates for three different investment amounts for those same banks and/or credit union. Type the document in Word, print, and turn into the basket. See the example below. Mountain America Credit Union: Savings APY 0.4% Earned Interest Rates Mrs. Wing, Date, Period Money Market $10,000-.1% $20,000-.2% $30,000-.3%

6 Banking and the Economy Go to Econedlink.org. o Under the student tab, click on Lessons o On the right side under Find a Lesson, choose the Banking concept and 9-12 grade level Open the It s a Not So Wonderful Life lesson. o Read through Introduction, Task, and Process. o Complete the Interactive Activity. o Watch the Fed101 video on the Federal Reserve (15 min) and answer the following questions. History 1. Who was allowed to issue paper money during the 1800s? 2. Why did some people lose faith in the banking system before the Federal Reserve System was in place? 3. When was the Federal Reserve Act passed, and which U.S. President signed it into law? Structure 4. What are the three primary roles of the 12 Federal Reserve Banks? Monetary Policy 5. What is the primary focus of monetary policy? 6. What decision does the Federal Open Market Committee make when it meets? 7. According to The Fed Today video, what are the economic conditions that may lead to inflation? Bank Supervision 8. Why does the Fed attempt to make banks both safe and sound?

7 9. What do Federal Reserve bank examiners analyze when they examine a bank? Financial Services 10. Why is the Fed often called the bankers bank? 11. Why is the Fed considered to be the government s bank? The Fed Today 12. What is the mission of the Federal Reserve, and what is its short name? Open the Online Banking-What is it & Should I do it lesson. o Read through the introduction. You can take the optional pretest if you want to. o In the process section, Open the What is Online Banking link and answer the following 1. Describe online banking. 2. Why did online banking begin? o 3. List the advantages of online banking. b. c. d. e. 4. List the disadvantages of online banking. b. c. Go through the online banking demo for Wells Fargo bank. What did you like about their online site?

8 o Write a paragraph (at least 3 sentences) summary on your opinion of online banking and whether you think the advantages outweigh the disadvantages or not. Open the Multipliers and the Mystery of the Magic Money lesson. o Write a paragraph summary on what you read and the cause and problem of hyperinflation. Assignment: Read either The Story of Banks or The Story of the Federal Reserve comic. Afterwards, complete a ¾-1 page, double spaced summary of the comic and anything new that you learned. Managing a Checking Account Register Complete the Managing a Checking Account Register as a class.

9 name: date: choosing a checking account name of bank: branch information Branch nearest your home: Branch nearest your work: Number of branches: number of ATMs: bank hours: are your funds insured? types of accounts: fees: Must maintain a minimum daily balance of: Must maintain an average daily balance of: Monthly maintenance charge: interest: How much interest do you earn on your account? How is it calculated? charges: checks: Printing checks Bouncing checks Stopping checks Certifying checks withdrawals at: Teller window Bank-owned ATMs Regional network ATMs National network ATMs International network ATMs deposits: balance inquiries: At teller window At ATMs By phone special services: Fund transfer by phone Pre-authorized bill payment Signature guarantee Bill payment by phone Check card Overdraft protection banking services student activity 6-1