HOW TO USE A FINANCIAL INSTITUTION. BUILDING A better FUTURE

HOW TO USE A FINANCIAL INSTITUTION BUILDING A better FUTURE

HOW TO USE A FINANCIAL INSTITUTION LATINO COMMUNITY CREDIT UNION & LATINO COMMUNITY DEVELOPMENT CENTER Copyright 2011 Latino Community Credit Union How to use a financial institution Latino Community Credit Union 2

TABLE OF CONTENTS INTRODUCTION 4 WHY SHOULD I USE A FINANCIAL INSTITUTION? 5 CREDIT UNIONS VS. BANKS 6 WHAT DO I NEED TO OPEN AN ACCOUNT? 7 GENERAL DOCUMENTS 7 INDIVIDUAL TAX IDENTIFICATION NUMBER (ITIN) 7 HOW CAN I APPLY FOR THE ITIN? 7 WHAT QUESTIONS SHOULD I ASK? 8 HOW DO I USE MY CHECKING ACCOUNT? 9 WRITE A CHECK 9 DEPOSIT A CHECK 9 ENDORSE A CHECK 10 BALANCING MY CHECKBOOK 10 DEBIT CARD 11 OVERDRAFT PROTECTION 13 DIRECT DEPOSIT 14 HOW CAN I ACCESS MY ACCOUNTS? 16 PHONE 16 INTERNET 16 ATM 17 MYTH BUSTERS 18 How to use a financial institution Latino Community Credit Union 3

INTRODUCTION In this chapter, we will learn how to begin working with a financial institution. You may wonder if you should keep your money at home instead of a financial institution. We will discuss why financial institutions are the safest option. Using a financial institution offers you a safe place to save and grow your money. In the United States, financial institutions offer many important services including savings accounts, checking accounts and loans. It is important to know how they work to find the best services for you. DISCUSSION TOPIC If I am an immigrant, is my money safer here or in my home country? Your money is safest in a reliable financial institution, whether here or in your home country, where it is federally insured and you can access it easily. A financial institution allows you to manage and grow your money. How to use a financial institution Latino Community Credit Union 4

WHY SHOULD I USE A FINANCIAL INSTITUTION? I AM SAFE If you keep your money under the mattress or carry a lot of cash in your pocket, you could lose your money or be robbed. It is much safer for you and your family to keep your money in a financial institution. MY MONEY IS SAFE The money you save in your credit union or bank is insured by the federal government up to $250,000. This means that you cannot lose your money, even if the financial institution closes. An account in a financial institution is the safest way to save your money for the future. MY MONEY CAN GROW Saving money with my financial institution will allow my money to grow over time to help reach my goals. Financial institutions offer different types of accounts with a variety of terms, fees, and interest rates. The interest rate is written as a percentage (%) of your money or your loan. Interest works in two ways. First, if you deposit your money in an account, you can earn interest. To earn interest means that your financial institution pays you to keep money in your account. Second, if you borrow money (a car loan, for example), you will have to pay interest. You can save money since financial institutions are typically much less expensive than using check cashers or payday lenders. You will also be able to access credit when you create a relationship with a financial institution. This means that you can buy things now and pay for them later. When you manage your credit well, you can build a strong credit history. This will allow you to make important purchases, such as a home, to build wealth for yourself and your family. How to use a financial institution Latino Community Credit Union 5

CREDIT UNIONS VS. BANKS In the United States, there are various types of financial institutions. Two of the main types of financial institutions are credit unions and banks. Both of them offer similar types of services and a safe place to save your money. But, different financial institutions offer varying interest rates and fees. Banks and credit unions are both regulated by the federal government. This means that your deposits are insured up to $250,000. CREDIT UNIONS: are non-profit financial institutions. exist to serve their members and work for the benefit of the community. use the money the organization makes to provide more benefits to their members, such as lower fees and better interest rates. CREDIT UNION MEMBERS: have something in common, such as an employer, association, or community. They must join the credit union to use its services. obtain a share of the credit union by opening a savings account and become owners of the organization. participate in a democratic process to elect leaders of the organization who are part of the board of directors. How to use a financial institution Latino Community Credit Union 6

WHAT DO I NEED TO OPEN AN ACCOUNT? GENERAL DOCUMENTS Each financial institution may request different types of documentation. Here are some examples: An ITIN or a Social Security number A driver s license or another form of official identification with your photo and your signature A bill to verify your address A minimum deposit of $10 for a savings account THE INDIVIDUAL TAX IDENTIFICATION NUMBER (ITIN) The Individual Tax Identification Number (ITIN) is a number that the Internal Revenue Service (IRS) issues to people who cannot get a valid social security number so that they can file their taxes. With this number, you can file your taxes, receive interest on your bank accounts, start a credit history, or apply for a loan with some financial institutions. HOW CAN I APPLY FOR THE ITIN? Go to your local Internal Revenue Service (IRS) office and get the form W-7 with the corresponding instructions. You can complete the application yourself or ask for help from your local non-profit organizations. Usually your financial institution or local community center can help you apply for this number. Be aware! Do not pay a lot of money for someone to help you fill out your ITIN paperwork. The ITIN is NOT a work permit. How to use a financial institution Latino Community Credit Union 7

WHAT SHOULD I ASK WHEN I OPEN AN ACCOUNT? DOES THE ACCOUNT EARN INTEREST? You should ask how much interest the account earns. To earn interest means the financial institution pays you for keeping money in your account. All savings accounts should earn interest. There are different types of savings accounts with different interest rates. Some checking accounts earn interest too. ARE THERE ANY FEES/CHARGES? Sometimes you have to pay a monthly maintenance fee for having an account. Most checking accounts have monthly fees, but they should be very low. Some financial institutions have no monthly fee, but have different types of fees instead. For example, you might have to pay when you use the ATM machines or visit the teller. DO I NEED TO MANTAIN A MINIMUM BALANCE? Minimum balance is the amount of money that you need to have in your account at all times. Many financial institutions charge you a fee if your balance goes below the minimum balance. IS THERE A MINIMUM DEPOSIT? Minimum deposit is the amount of money you must deposit to open an account. While each financial institution offers similar products and services, their rates, fees, minimum balances and deposits can vary. It is important to ask the right questions before opening your account. Be aware! Fees and charges for account management, overdraft and ATM use might change and can be very high. Be aware of new fees and penalties charged to your account and compare. How to use a financial institution Latino Community Credit Union 8

HOW DO I USE MY CHECKING ACCOUNT? You can use a checking account to write checks, to pay bills, or to use a debit card to buy things in stores. WRITE A CHECK Learn how to write a check: Check number Name of person or company who will receive the money Miguel Rodríguez 111 Street Durham, NC 00011 123 Write today s date here. Write the amount in words 111111111 Use numbers to write the check amount. Note the purpose of the check Sign here DEPOSIT A CHECK Learn how to deposit a check: Write today s date here Write your name here Write here your account number Indicate here checks to be deposited Subtotal minus cash received Indicate cash to be deposited Write here the amount of each check to be deposited Total cash and checks to deposit Total cash you want to receive How to use a financial institution Latino Community Credit Union 9

ENDORSE HERE Do not sign below this line ENDORSE A CHECK Sign your name on the back of the check where it says ENDORSE HERE. Remember, after your check is endorsed it is the same as cash. So, wait until you cash your check to sign it, in case it is lost or stolen. Sign here BALANCING MY CHECKBOOK 1. Record and subtract all DEBITS - withdrawals using the ATM, debit card or other automatic payments deducted from your account, checks, and service fees. 2. Record and add up all CREDITS - deposits, including direct deposit or electronic funds transfers. 3. Calculate your BALANCE in your register - add your deposits and subtract your withdrawals. Date Number Description of transaction Debit/Payment (-) Credit/Deposit (+) Balance 1/20/09 Previous balance 435.00 435.00 1/21/09 90 Groceries 42.35 392.65 1/2/09 91 Newspaper 17.61 375.04 1/22/09 92 Felipe Fuentes 25.80 349.24 1/23/09 Paycheck 300.00 649.24 Your check register helps you monitor the amount of money in your checking account. This will help you to avoid fees for using more money than you have in your account. It is important to record in your check register every checking account transaction. If there is more than one owner of the account it is recommended that one person tracks the balance in the account using the check register in order to avoid NSF, overdraft and other unnecessary fees. How to use a financial institution Latino Community Credit Union 10

DEBIT CARD When you open a checking account, you can request a debit card. Debit cards can be used to make purchases almost anywhere. You can also use a debit card to withdraw money from the ATM. In most cases you will need to enter a Personal Identification Number (PIN) that your financial institution will provide you. When you use your debit card, it takes money directly from your checking account to make the payment. It acts like a check, but faster. PIN stands for personal identification number. This number is normally sent to your home by mail in a separate envelope when you apply for a debit card. You use this number to access your accounts at the ATM or make purchases with your debit card at stores. The PIN is a safety feature; it is like an electronic signature. ADVANTAGES DISADVANTAGES You do not need to carry cash. If your purse or wallet is lost or stolen your money is safe since a PIN number is required to access your funds. You do not need to visit your financial institution every time you need cash. You can use your card just about anywhere you go and if you need cash, you can access your money at an ATM machine any time. If you do not use your check register to track the money in your account, you could spend more than you have. Your debit card provides direct access to your checking account. So, be sure to protect your Personal Identification Number (PIN) and debit card number. Do not carry your PIN with your card and do not allow anyone to watch you enter your PIN at the ATM. YOUR PIN IS PERSONAL, DO NOT SHARE IT WITH ANYONE! BE AWARE! If your card is lost or stolen or you detect any fraudulent use, contact your financial institution immediately. In some cases, such as online purchases, credit cards have more protection than debit cards in case of fraud. How to use a financial institution Latino Community Credit Union 11

ATM CARD, DEBIT CARD AND CREDIT CARD ATM card Debit card Credit card To obtain it you need to have: A savings account A checking account Any account, but your application needs to be approved first. Can I withdraw money from the ATM? Do I need a PIN to use the ATM? Yes Yes Yes Yes Yes Yes. It is possible you will be charged more interest for a cash advance. Can I use it for purchases? No Yes Yes Do I need a PIN to make purchases? You cannot make purchases Yes No. You only need to sign the receipt. When you use your card to withdraw money or make purchases, the money is withdrawn immediately from your account. is withdrawn immediately from your account. is borrowed from your financial institution and you pay it back the following month. Limit you can spend The amount in your account. The amount in your account. Credit limit previously approved. It is very important to understand that the amount you have in your account determines the maximum amount you can spend. If you spend more than you have in your account, you will be charged a Non-Sufficient Funds (NSF) fee. The amount in your checking account = The limit you can spend on your debit card To avoid spending more than you actually have, it is important to keep a record of your expenses, writing each transaction in your check register and carefully checking the transactions in your printed or online monthly statement. How to use a financial institution Latino Community Credit Union 12

OVERDRAFT PROTECTION Overdraft protection helps you if you spend more money than you have available in your checking account. There are two types of overdraft protection: One type takes money from your savings account and puts it into your checking account. The other type gives you a small loan to pay the check. While overdraft is less expensive than incurring non-sufficient funds fees, there is still typically a fee for overdraft protection and a maximum number of transfers that can be made each month from your savings to your checking account to fund overdrafts. These restrictions and fees vary by financial institution. SAVINGS ACCOUNT FINANCIAL INSTITUTION CHECKING ACCOUNT It is good to have overdraft protection, but you should try not to use it. You should always know how much money you have in your checking account. Do not withdraw or write checks or make purchases for more than that amount. If you do not manage your accounts carefully, they could be closed and it could be difficult to open an account in another financial institution. How to use a financial institution Latino Community Credit Union 13

DIRECT DEPOSIT Direct deposit allows your employer to deposit your salary directly in your account. You receive a payment stub with all the information about your hours worked and salary. Your money is safe, you save time waiting in line to deposit your check, and your money begins to earn interest right away. Ask your employer if they offer direct deposit. If the answer is yes Ask for a direct deposit form from a representative at your financial institution and give it to your employer. Name and address of your bank or credit union Choose the account type where you want your money to be deposited Number that identifies your bank or credit union Account #1 Account Type: Checking Savings Money Market Bank Name: LATINO COMMUNITY CREDIT UNION Bank Address: 201 West Main Street City, State, Zip: Durham, NC 27701 Routing # (9 digits): Account#: Requested amount for this account: Account in which you want your money to be deposited % of Net Pay: Specific Amount $ Entire Balance Amount you want to deposit in this account Direct deposit also allows you to receive your Social Security and other federal benefit payments. You can sign up at http://www.godirect.org or calling 1-800-333-1795. How to use a financial institution Latino Community Credit Union 14

ADVANTAGES OF DIRECT DEPOSIT 1. Your salary is available automatically and starts to generate interest immediately. Even if you are sick, on vacation, or traveling, you continue to receive your money automatically 2. It is convenient. You won t miss going to the branch and waiting in a long line to deposit or cash a check. 3. Your money is safe. There is no risk of being robbed or losing your money. 4. It is a trustworthy service. Millions of people use this service in the United States. Payments always arrive on time and you can enjoy your money immediately. 5. It is confidential because there is not a printed check and thus no one can see what you earn. You will receive a check stub from the employer with the same information you receive in your regular check (how much you are paid and how many hours you worked). 6. Direct deposit can help you manage your finances and develop a habit of saving. You can decide to deposit your money directly into one account, or divide your salary into various accounts. This way, you can deposit a portion of your paycheck into your checking account and the remainder in one or more savings accounts. 7. Fewer problems. Problems with direct deposit are very infrequent. If a problem arises, you can call the financial institution and it can be fixed with a phone call. Normally, a problem with a lost or stolen check takes much longer to resolve. 8. It is better for the environment because electronic services save paper and this helps save our forests. How to use a financial institution Latino Community Credit Union 15

HOW CAN I ACCESS MY ACCOUNTS? Of course, at the branch your representative can help you with anything you need, but there are other quicker and easier ways to do basic transactions such as check your balance and transfer money between accounts. You can handle many types of transactions over the phone or mobile phone, using the Internet or the ATM. PHONE Almost all financial institutions have a phone system that allows you to: 1. View your account balances. 2. Review your account transactions. 3. Transfer money between accounts. 4. Compare interest rates for deposits and loans. 5. Find the closest ATM. 6. Make a report of a lost or stolen card. Ask your financial institution how to access your accounts by phone. INTERNET Through the internet you can access your accounts and make almost exactly the same transactions as you would in your branch, except for withdrawing or depositing checks or cash. You just need a computer with internet access and your personal passwords. MOBILE PHONE Using your cell phone, you can check your balance, recent transactions and more. You can also receive alerts via text message when there is a deposit or withdrawal in your account or when your balance is getting low. How to use a financial institution Latino Community Credit Union 16

ATM Automatic Teller Machines (ATM) give you access to your accounts 24 hours a day, 7 days a week. You can check your balance, deposit and withdraw money and transfer money between your accounts. To use the ATM, you need an ATM card or debit card and your PIN. B G A = Card Slot B = Menu Keys C = Key Pad D = Envelopes C F A D E = Cash Withdrawal F = Deposit Envelope G = Receipt Slot To withdraw money To deposit money Transfer money between accounts 1. Insert your card 2. Select a language 3. Type in your code or PIN 4. Press withdraw cash 5. Selecta an account 6. Type the amount to withdraw 7. Take the money, your card, and the receipt 8. Document the amount you took out in your check register 1. Take an envelope and complete the part on the back with your name and amount of your deposit 2. Insert your card 3. Select a language 4. Type in your code or PIN 5. Press Deposit 6. Selecta an account 7. Type the amount you are depositing 8. Put the money or the endorsed check in the envelope 9. Insert your envelope 10. Take out your card and receipt 11. Document the amount in your check register 1. Insert your card 2. Select a language 3. Type in your code or PIN 4. Press Transfer 5. Select an account from where the money is transferred 6. Select an account to where the money is transferred 7. Enter the amount to transfer 8. Take your card and the receipt 9. Document the transaction in your check register How to use a financial institution Latino Community Credit Union 17

MYTH BUSTERS It is more expensive to use a financial institution than a check-cashing outlet or a payday lender. In fact, it is much less expensive to use a financial institution. Ask the right questions and look for a credit union or bank that does not charge many fees. Credit unions tend to offer the low fees and better interest rates. My money might not be safe in a financial institution. When you deposit money in a financial institution you can be sure that your money is safe. The federal government insures individual deposits up to $250,000 at both banks and credit unions. I will not be able to access my money in a credit union or bank. You can access your money at any time in a number of ways at the branch, at an ATM, by telephone, cell phone, or on the internet. What happens with my money if I have to return to my country or if I die? You can access your money using your credit card or you can send your money wherever you are. In the event that you die, the beneficiaries designated in your account would have access to the money in the account. How to use a financial institution Latino Community Credit Union 18