Section 4.1 Banking Systems

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Transcription:

Section 4.1 Banking Systems

Objectives Identify different types of financial institutions Describe the services of financial institutions Explain special services offered by financial institutions

Types of Financial Institutions Financial Institution = an organization that provides services related to money Examples: Commercial Banks Savings and Loan Associations Credit Unions Purpose is to keep money flowing throughout the economy among consumers, businesses, and government No banks = no circulation of money

INFLOW (Depositors) OUTFLOW (Borrowers) 1. Consumer SAVINGS 1. Consumer LOANS 2. Business DEPOSITS 2. Business LOANS Government DEPOSITS 3. 3. Financial Institution Money Flow Through Financial Institutions RESULTS (Uses of Capital) 1. Homes, Autos, Education, Travel, Taxes 2. Plant & Equipment, Expansion, Acquisition, Business Needs 3. Roads & Highways, Schools, Hospitals, Public Buildings, Government Projects & Programs Government LOANS

Federal Deposit Insurance Corporation FDIC = an independent agency created by the federal government to protect bank customers by insuring their deposits Also does the following: Examines and supervises financial institution policies & operations Guarantees that depositors are protected if the bank fails or cannot repay deposits on demand As of 2010, the FDIC will cover up to $250,000 of an insured deposit

Commercial Banks Commercial Bank = a business owned by investors called stockholders OR shareholders Also called full-service banks Receive, transfer, and lend money to individuals, businesses, and governments Financial Services offered: Checking Savings Lending

Charter Charter = the license authorizing a bank to operate Commercial Banks may be chartered by the Federal Government OR State Government 1. 2. Federal Chartered Banks are called national State Chartered Banks are regulated by banks state banking commissions Usually have the word national in their name Must comply with federal banking regulations

Community Bank Community Bank = a type of commercial bank that is locally owned and operated. All lending decisions are made locally by bank loan officers who live in the local community It is easier to obtain a loan from a community bank vs a larger bank Offers: Standard banking services Checking Savings Loans Safe-deposit boxes FDIC insured

Savings & Loan Associations S&L = a financial institution that offers most of the services commercial bank do 2 types of S&L s that are insured by the FDIC: 1. Mutual Savings & Loan Associations = owned and operated for the benefit of their depositors; depositors receive dividends on their savings 2. Stock Savings and Loan Associations = owned by stockholders and operate for profit.

Credit Unions Credit Unions = a non profit financial cooperative owned by and operated for the benefit of its members Services are only offered to its members They pay no federal income taxes Can be federal or state chartered Offer: Lower rates Pay higher interest rates on savings

Services of Financial Institutions

Online Banking Online Banking = allows bank customers to conduct financial transactions on a secure website owned by the bank An account holder can: Pay bills Transfer money between accounts View account balance and statements View checks and deposits Review the history on an account

Mobile Banking Mobile Banking = allows bank customers to conduct financial transactions using a smartphone application (App) Services include: Alerts and text banking Mobile banking websites Mobile banking apps

Direct Deposits & Withdrawals Electronic Funds Transfer (EFT) = the movement of money electronically from one financial institution to another Safe Secure Efficient Faster than paper check payments and collections Cheaper than paper check transfers Costs the US Government $1.03 per paper check Costs $0.11 to issue an EFT payment

Automated Teller Machines (ATM) Must have a Personal Identification Number (PIN) Uses: Check account balances Make cash withdrawals and deposits Move money from one account to another ATM owned by your bank = no charge ATM owned by a different bank other than your own = charge

Bank Card Debit Card = allows you to make purchases that comes directly from your checking account Transactions are automatic and are deducted almost immediately from your account Make withdrawals, deposits, and transfer money ATM Card = allows you to check account balances, withdraw and deposit cash, transfer money using an ATM You CANNOT make purchases with ATM Cards

Overdraft Overdraft = a check written for an amount greater than the balance of the account The bank will charge an insufficient funds fee to cover the transaction Approximately $30 or more per overdraft Some banks offer overdraft protection

Checks Certified Check = a personal check that your bank issues and certifies is a genuine check. The money is taken out of the individual s account. Cashier s Check = a check the bank issues and guarantees to pay. The money is taken out of the bank s account after payment from the individual s account.

1. What are 3 examples of financial institutions? Checkpoint 4.1 In your class folder & a new Google Doc, complete the following with the Doc labeled as Today s Date Checkpoint 4.1 2. What are the primary functions of a commercial bank? 3. What are 2 advantages of using online banking? 4. How does an ATM Card differ from a Debit Card? 5. What are 2 special services that many financial institutions offer to customers?

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