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Banking Today

Banking Today. Measuring Money Supply. All the available in the U.S. M1 Liquid Money (Easy Access) 44%= Currency, money not in an account 55%= Checking Accounts M2 M1 + Near Money (Interest Bearing) Exp. Savings Accounts, CD, Money Market. Banking Services. Storing Money

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Banking Today

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  1. Banking Today

  2. Measuring Money Supply • All the available in the U.S. • M1 • Liquid Money (Easy Access) • 44%= Currency, money not in an account • 55%= Checking Accounts • M2 • M1 + Near Money (Interest Bearing) • Exp. Savings Accounts, CD, Money Market

  3. Banking Services • Storing Money • Safe place to keep money • Saving Money • Savings, Checking, Money Market, CDs • Loans (More moneyout than in) • Lending helps economy function, money in hands of consumers increases demand, money in investors’ hands leads to more businesses • Banks loose money if borrowers default on loans, do not pay back

  4. Banking services, cont. • Mortgages • Loan to buy real estate • Down Payment, minimum of 20% to avoid insurance fees • Period of time, usually 30 years • Credit Cards • Interest Based Loans • bank lend at time of purchase and consumer repays in bill

  5. Types of interest • Interest = price paid to use borrowed money • Principal = initial amount of borrowed money • Simple interest is only applied on the principal • Compound interest is applied to both principal and accumulated interest

  6. Types of Financial Institutions • Commercial banks • Traditionally provided services to businesses • Offer checking, savings, and loans • Some state chartered others are national • Savings and Loan Associations • Traditionally just savings accounts and loans for homes • Thrifts- loans for working class people • Savings Banks • Offered savings and checking accounts for people with less deposits than commercial banks

  7. More Financial Institutions • Credit Unions • Co-ops that specialize in lending and some offer checking accounts • Finance Companies • Offer consumer installment loans for large cost items • Higher rates due to better chance of defaults

  8. Electronic Banking • Automated Teller Machines • Replaces the need for some tellers • Debit Cards • Able to withdraw money from a checking account from ATM or purchase goods at stores with an ‘electronic check’ • Home Banking • Internet banking, paying bills and other banking services • Automatic Clearing Houses • Regular payments in place of writing physical checks for bills • Stored Value Cards • Pre-paid cards, electronic gift cards, rebate cards

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