Bellwork 1-1

1. Bellwork 1-1 • Let’s say you just started your first job and just got your first paycheck today: • What financial institution would you take it to? • Once there what type of account would you put it in? • Why did you choose that financial institution and account?

2. Financial Institutions and Their Services Unit 2 Objective 4.02

3. Types of Financial Institutions • Commercial banks (Ex. BB&T) • Owned by shareholders and operated for profit • Receives, transfers, and lends money to individuals, businesses, and governments • May be chartered by federal or state government • Regulated either by federal banking regulations or state banking commissions • Insured by Federal Deposit Insurance Corporation (FDIC) to protect deposits • Typical services: checking accounts, savings accounts, loans and mortgages, credit cards, and investments; limited financial advice

4. Types of Financial Institutions • Savings and loan (S&L) associations (Ex. Piedmont Federal) • May be state or federally chartered • Two types • (1) Mutual S&L: owned and operated by depositors • (2) Stock S&L: owned by stockholders • Insured by Savings Association Insurance Fund (SAIF), a branch of FDIC • Originally specialized in providing funds to home buyers • Now provide a variety of financial services: interest-earning checking accounts, savings accounts, loans and mortgages

5. Types of Financial Institutions • Credit unions (Ex. State Employees CU) • Nonprofit financial cooperative owned by and operated to benefit its members • May be state or federally chartered • Membership available to those who belong to a place of employment, union, religious organization, community organization, etc. • Since nonprofit, they pay no federal income taxes • With lower operating costs, often can lend money at slightly lower interest rates • Sometimes they are able to pay higher interest rates on savings • Insured by National Credit Union Administration (NCUA) • Typical services: checking accounts, saving accounts, loans and mortgages, and credit cards; offer share, share draft, and share certificate accounts; many offer free financial counseling

6. Types of Financial Institutions • Brokerage firms (Ex. Merrill Lynch, UBS) • Licensed institutions that specialize in investments • Offer cash management plans to buy and sell stocks, bonds, etc. • Benefits of using financial institutions • Convenience • Cost savings • Safety and security

7. Traditional Services of Financial Institutions • Types of traditional services of financial institutions • Accounts • Checking account - Paper checks or debit cards are used to withdraw money deposited into the account to pay for items • Savings account - Money is deposited into an account to earn interest • Retirement plan account - A plan for saving money for retirement; money tax-deferred until withdrawn • Share account - A savings account at a credit union • Share certificate account - A certificate of deposit at a credit union • Share draft account - A checking account at a credit union

8. Traditional Services of Financial Institutions • Traditional Services Continued • Investments • Bond - An investment of money in a government or organization • Certificate of deposit - An insured interest-earning savings tool with restricted access to funds • Mutual fund - Groups of stocks, bonds, and other investments managed by an investment firm • Real estate investment - Purchasing properties as an investment to gain profit • Stock - Ownership, represented by shares, in a corporation

9. Traditional Services of Financial Institutions • Traditional Services Continued • Loans • Credit card • Loan • Mortgage • Other traditional services • Financial counseling - Assistance to consumers with specific areas of financial planning • Safe-deposit box - A secured box in a bank used by clients for valuable personal items

10. Financial Institution Assignment • You are to find 2 Commercial Banks and 2 Savings & Loans. For each, do they offer: • Checking? Interest Rate? • Savings? Interest Rate? • 1 yr Certificate of Deposit? Interest Rate? • Credit Cards? Interest Rate? • 60 month Car Loans? Interest Rate? • 30 yr Fixed Mortgage? Interest Rate? • You are to find 2 Credit Unions. For each, do they offer: • Checking? Interest Rate? • Share Savings? Interest Rate? • 1 yr Share Term Certificate? Interest Rate? • Credit Cards? Interest Rate? • 60 month Car Loans? Interest Rate? • 30 yr Fixed Rate Mortgage? Interest Rate? • You are to find 2 Brokerage Firms/Companies. For each, do they offer: • Certificate of Deposits? Rates? • Bonds? What types? • Stocks? What types? • Mutual Funds? What types? • Complete in PowerPoint and submit to Edmodo by the end of class.

11. Bellwork 1-2 • What do commercial banks and brokerage firms have in common? • A. Both are insured by SAIF • B. Both are nonprofit • C. Both offer help with investments • D. Both offer share accounts • How do commercial banks and savings and loan associations compare? • A. Banks originally specialized in funding for home buyers; savings and loans did not • B. Both are insured by SAIF • C. Both have share certificate accounts • D. Both may be chartered by state or federal government • Blake invested $200 in the federal government. What type of investment is this? • A. Bond • B. Certificate of deposit • C. Mutual fund • D. Stock

12. E-Banking Blog • Go to: http://www.fdic.gov/consumers/consumer/news/cnwin0910/online_banking.html • Of the 10 ways to protect your money, list 5 of them and describe each

13. E-Banking Services • Using computer networks to make electronic funds transfers (EFT) among bank accounts • Benefits of E-banking • 24-hour access for moving money • Fast, paperless, and convenient • Worldwide access • A variety of E-banking services available

14. E-Banking Services • Types of E-banking services of financial institutions • Point-of-sale (POS) transfers with a debit card • Swiping plastic card at ATM or POS terminal provides access to EFT system • Connected to the cardholder’s checking account and used for purchases • At time of use, money taken from cardholder’s account to pay for purchase • Transactions require a Personal Identification Number (PIN) • Some are dual function, both ATM and POS (Point of Sale)

15. E-Banking Services • Automated Teller Machine (ATM) • Computer terminal for transacting business with a financial institution • ATM card used to deposit and withdraw money from account • Card protected with a PIN • Usually open 24 hours a day

16. E-Banking Services • Direct deposits • A convenient way of depositing paychecks and benefit checks directly into a designated account • Account-holder signs an authorization form to put this arrangement into place • Direct withdrawals • A convenient way of paying recurring bills directly from a designated account • Used for fixed bills (home mortgages, car payments) or flexible bills (utilities) • Account-holder signs an authorization form to put this arrangement into place

17. E-Banking Services • Smart cards • Plastic cards storing pre-paid amounts of money on computer chip • Money automatically deducted from card when used for a purchase • Reload additional money to the card as needed • A variation of the smart card is the stored-value card, which is not reloadable; throw away when value is used up

18. E-Banking Assignment • Go to: http://www.consumer.ftc.gov/articles/pdf-0109-electronic-banking.pdf and answer the following: • List and describe the 6 services EFT’s offer. • What 8 things must a Financial Institution give you before you agree to EFT services? • How are Errors handled? • How are Lost/Stolen ATM/Debit Cards handled? • What 2 “Other Rights” do you have? • What “Suggestions” do they make? • Complete in PowerPoint and submit to Edmodo by the end of class.

19. Bellwork 1-3 • An advantage of traditional banking over E-banking is that: • A. a personal check can only be used by the person named in the account. • B. a personal check can be stolen and used by someone else. • C. a point-of-sale transaction is a risky way to pay for purchases. • D. an ATM is a safe place to withdraw cash from an account. • Dwayne used his debit card to pay for his groceries at the self-checkout station. Which E-banking service is this? • A. Automated Teller Machine (ATM) • B. Direct deposit • C. Point-of-sale transfer • D. Smart card • Greg wants to be sure to protect his PIN number from being stolen. What should he do? • A. Attach his PIN number to his debit card • B. Be observant when using an ATM • C. Note on his debit card where his PIN number is kept • D. Tell a friend his PIN so he can help him remember it

20. Traveling with Money Blog • Go to: http://www.hosteltraveler.com/blog_ht/2009/11/carrying-money-when-traveling-abroad-smart-cash-tips/ and answer the following: • Should I carry Traveler’s Checks? • Should I carry Credit Cards? How many? • For the bulk of my travel expenses, which is better cash or credit? • What should if my credit card is lost/stolen? • How much cash should I carry on me? • How can I get cash when traveling?

21. Forms of Payment for Purchases • Payment in full at time of purchase • Cash currency and coins • Readily accepted in most places • No hidden costs • Convenient • May be stolen or lost • Payment with a personal check • More secure than cash when sent through the mail • Can only be used by the payee • Provides a record of expenditures and legal proof of payment

22. Forms of Payment for Purchases • Payment with special-use checks • Each type serves a specific purpose • Cashier’s check---bought from a bank; payment guaranteed by the bank • Certified check---a personal check with a bank’s guarantee of payment • Money order---used to send money by mail by people who have no checking account • Traveler’s check---used in place of cash when traveling; can be easily cashed in many places around the world; can be replaced if lost or stolen • Available from most financial institutions, usually for a fee

23. Forms of Payment for Purchases • Payment with debit card through point-of-sale transactions • Making purchases with a debit card, both online and offline • Must take precautions to protect against theft and fraud • Sign back of card and write “See ID” • Memorize and protect PIN; do not write where card is kept • Be alert to surroundings and people nearby

24. Forms of Payment for Purchases • Payment through credit • Open-end credit---credit cards • Types: General purpose, company or retail store, travel and entertainment • Can be issued by banks, savings and loan associations, credit unions, finance companies, insurance companies, and credit card agencies • Provides accurate recordkeeping • Convenient when ordering by mail or phone • Pay for large purchases in small, monthly installments • Can make purchases without carrying cash on your person • May result in overspending • High interest rates • Card can be lost or stolen • Fraudulent unauthorized charges may appear

25. Forms of Payment for Purchases • Closed-end credit---installment loans • Types: car loans, student loans, home loans • Granted by commercial banks, credit unions, finance companies, insurance companies, and credit card agencies • Secured loans require collateral; unsecured loans on one’s signature alone, and often require a cosigner • Borrow a stated amount and repay with interest in regular installments

26. The Future of Paying Assignment • Go to: http://www.slate.com/articles/technology/technology/2011/11/card_case_the_new_payments_app_that_could_make_cash_and_plastic_.html and answer the following: • Describe the technology that is to replace Credit Cards. • Why is it not currently better than Credit Cards? • What’s the app that delivers and describe how it works? • Describe the author’s experience with Pinkie’s Bakery. • Who created CardCase and what’s the company’s history? • How does it work with Android phones? IPhones? • What are the security issues? • What are the downsides to this technology? • How will this app revolutionize purchasing? • Complete in PowerPoint and submit to Edmodo by the end of class.

27. Bellwork 1-4 • Jennifer does not have a checking account and needs to send $75 to her sister in another town. What should she do? • A. Give her friend $75 and ask him to mail a personal check to her sister • B. Go to the bank and obtain a certified check • C. Mail the cash in a thick, secure envelope • D. Obtain a money order for $75 and mail to her sister • Wanda wrote a check with an incorrect amount. What should she do? • A. Cross out the incorrect amount and write the correct amount above it • B. Remember next time to write in pencil so corrections can be made • C. Tear up the check and write "VOID" beside that check number in the register • D. Use white-out to cover the incorrect amount and then write the correct amount • Warren does not have a personal checking account and does not like to carry cash when he shops. What should he do? • A. Obtain an installment loan • B. Stop at the ATM and get cash • C. Use a credit card when he shops • D. Use a debit card when he shops

28. Financial Institutions Review • Go to Unit 2, Objective 4.02 and open “Financial Institutions Review” • Complete all questions on page 17, 18, 26, and 27 • Complete in Microsoft Word and submit to Edmodo by the end of class.