Understanding Depository Institutions: What You Need to Know

1. Depository Institution Discovery

2. Depository Institution • Business that offers and sells financial services to people • Checking Accounts • Savings Tools • Assist people with daily financial tasks

3. Types of Depository Institutions • Credit Union • Savings and Loan Institution • Commercial Bank

4. Commercial Bank • The most popular type of depository institution • Lend, issue, borrow and protect customer’s money • Offer a better way to track and manage money • Provide records of money deposited, or put into an account, and money withdrawn, or taken out of an account

5. Checking Account • Very common type of account • Offers safety and convenience • Most do not pay interest, or additional money earned • Frequent withdrawals and deposits are expected

6. Withdrawing Money • Checks • Legal documents that function like cash • If sufficient funds are not in the account, checks can “bounce” • Fee • Harm future opportunities for credit • Debit Card • Electronically connected to an account • When purchases are made, money is automatically withdrawn from the designated account • A PIN (Personal Identification Number) is required to confirm the user is authorized to access the account

7. Check 21 • Check Clearing for the 21st Century Act • Money is automatically withdrawn from an account as soon as a check is written • Makes it difficult to “bounce checks” • An individual must have money in his/her account to make a purchase

8. Opening a Checking Account • Read through the contract from the bank • Complete a Signature Authorization Card • Printed name • Signature • Social Security number • Telephone number • Address • Date of birth • Make an initial deposit

9. Interest Earning Checking Account • Checking account that pays a small amount of interest • Usually require a minimum balance, which is the smallest amount of money that must be kept in the account in order to keep paying interest

10. Savings Tools • Savings Account • Money Market Deposit Account • Certificate of Deposit (CD)

11. Savings Account • Keeps money safe until the owner needs it • Emergencies • Purchase expensive items • Money can be deposited and withdrawn an unlimited number of times each month • No check writing privileges • A debit card may be used with certain accounts • Money has the opportunity to earn more interest than if it was in an interest earning checking account

12. Money Market Deposit Account • Pays a higher interest rate than a regular savings account • Requires more money to open than a regular savings account • Money can be withdrawn only a limited number of times each month with checks or a debit card

13. Certificate of Deposit • Pays interest on a lump sum of money • Once money is placed in a CD, it must remain there for a specific time period • If withdrawn early, a penalty fee is charged • Interest rate is higher than a savings account and Money Market Deposit account • The rate of interest money earns in a CD increases as the length of time the money is required to stay in the CD increases

14. Commercial Banks Safety • Storing large amounts of money in a commercial bank is safer than at home • Fire, burglary, or other type of disaster • Federal Deposit Insurance Corporation (FDIC) • Protects money in bank accounts from loss

15. Quick Review • Depository Institution • Checking Account • Savings Tools • Savings Account • Money Market Deposit Account • Certificate of Deposit (CD) • FDIC