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BANKING
TYPES OF FINANCIAL SERVICES
In order to stay competitive in today’s
marketplace, banks and other financial
institutions have expanded the range of
services that they offer.
 Four main categories:

 Savings
 Payment
services
 Borrowing
 Other Financial Services
SAVINGS
Safe storage of funds for future use is a basic
need for everyone.
 Money that is going to be left in a financial
institution for months or years is called a time
deposit.

Money kept in savings
 Certificates of Deposit


Selection of a savings plan is commonly based on
interest rate, liquidity, safety, and convenience.
PAYMENT SERVICES
Transferring money from a personal account to
businesses or individuals for payments is a
basic function of day-to-day financial activity at
a bank.
 Checking Accounts are the most commonly
used payment service.
 Money that you place in a checking account is
called a demand deposit because you can
withdraw the money at any time, or on demand.

BORROWING
Most people use credit at some time during
their lives.
 Options for borrowing money:

 Short
term by using a credit card or taking out a
personal cash loan.
 Longer term borrowing may include car or mortgage
loans.
OTHER FINANCIAL SERVICES
Insurance protection
 Stocks
 Bonds
 Mutual Fund Investment accounts
 Income Tax Assistance
 Financial Planning Services

ELECTRONIC BANKING SERVICES


Obtain cash; check account balance
Transfer funds:

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From savings to checking
From savings to loan
From checking to loan
From checking to savings
Direct Deposit of paychecks, government payments
Preauthorized payments for insurance, mortgage, utilities, and other
bills
Automated Teller Machines – Obtain cash; check account balances
Access “e-banks” with a complete range of financial services
Debit card retail purchases
DIRECT DEPOSIT
Many businesses offer their employees direct
deposit, an automatic deposit of net pay to an
employee’s designated bank account.
 Direct Deposit saves time, money, and effort –
and offers a safe way to transfer funds.

AUTOMATIC PAYMENTS



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Utility companies, lenders, and other businesses allow
customers to use an automatic payment system.
With your authorization, or permission, your bank will
withdraw the amount of your monthly payment or bill
from your bank account.
It is very important when using Automatic payments that
you have enough money in your account for the
payment.
Arrange payments with when you receive your paycheck.
Check monthly statements to make sure payments were
made correctly.
AUTOMATED TELLER MACHINES(ATMS)
A cash machine, or automated teller
machine(ATM), is a computer terminal that
allows a withdrawal of cash from an account.
 ATMs are located in banks, shopping malls,
grocery stores, and even sports arenas.
 To use an ATM for banking, you must apply for a
debit card, which is a cash card that allows you
to withdraw money or pay for purchases from
your checking or saving account.

Some financial institutions may charge a small
fee for the use of the card.
 A debit card is in contrast to a credit card since
you are spending your own money instead of
borrowing additional money.
 When using your debit card the computer will
ask you to enter your personal identification
number(PIN).
 Never give this number to anyone!

PLASTIC PAYMENTS

Although cash and checks are very common
methods of paying for goods and services,
various access cards are also available.
 Electronic
Payments
 Online Payments
 Stored-Value Cards
 Smart Cards
DEPOSIT INSTITUTIONS
Commercial Banks: a for-profit institution that
offers a full range of financial services,
including checking, savings and lending.
 Serve both individuals and businesses.
 Organized as corporations with individual
investors, or stockholders, contributing the
capital the bank needs to operate.

DEPOSIT INSTITUTIONS
Savings and Loan Associations is a financial
institution that traditionally specialized in
savings accounts and mortgage loans but now
offers many of the same services as
commercial banks.
 Services include checking accounts, business
loans, and investment services.

DEPOSIT INSTITUTIONS
Mutual Savings Bonds: Owned by depositors and
specialize in savings accounts and mortgage
loans.
 Some offer personal and automobile loans as well.
 The interest rate on loans from a mutual savings
bank may be lower than those that a commercial
bank charges.
 Sometimes pay a higher interest rate on savings
accounts.

CREDIT UNIONS
A credit union is a non-profit financial
institution that is owned by its members and
organized for their benefit.
 Most credit unions offer a full range of services

NON-DEPOSITORY INSTITUTIONS
Life Insurance Companies
 Investment Companies
 Finance Companies

PROBLEMATIC FINANCIAL BUSINESSES
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Would you pay $20.00 to borrow $100 for two weeks?
Most people without access to financial services use
pawnshops, check-cashing outlets, loan stores, and
rent-to-own centers.
Pawnshops



Make loans based on the value of tangible possessions
such as jewelry or other valuable items
Usually small loans usually around $75 to be repaid in 3045 days.
State regulate rates, but 3% interest per month or higher is
common

Check Cashing Outlets
 Charge
anywhere from one to twenty percent of
the face value of a check; the average cost is
two to three percent.
 Sometimes called currency exchanges, also
offer services, including electronic tax filing,
money orders, private postal boxes, utility bill
payment, and the sale of transit tokens.

Payday Loans:
Desperate borrowers pay annual interest rates of as
much as 780 percent and more to obtain needed
cash from payday loan companies.
 In a typical payday loan, a consumer writes a
personal check for $115 to borrow $100 for
fourteen days.
 The payday lender agrees to hold the check unitl the
next payday. This $15 for the $100 loan for the next
fourteen days translates into an annual percentage
rate of 391%. Some consumers “roll-over” their
loans. Paying another $15 for the $100. After a few
roll-overs, the finance charge can exceed the
amount borrowed

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Rent-to-Own centers:
 Defined
as stores that lease products to
consumers who can own the item if they
complete a certain number of monthly or weekly
payments