MONEY MATTERSMONEY MATTERSClass 3Class 3

BankingBanking

Banks offer two main productsBanks offer two main products Checking accounts: Transaction accountsChecking accounts: Transaction accounts Savings accounts: Deposit accountsSavings accounts: Deposit accounts

Other productsOther products:: Guaranteed Bank Checks, cashier’s checkGuaranteed Bank Checks, cashier’s check Money OrdersMoney Orders Safety Deposit boxesSafety Deposit boxes Foreign Currency ExchangeForeign Currency Exchange

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Why do some people choose not to have a Why do some people choose not to have a checking account?checking account?

What are some the advantages of having a What are some the advantages of having a checking account?checking account?

What is the difference between a bank and What is the difference between a bank and a credit union?a credit union?

Safety in BankingSafety in Banking

Money in banks is insured by the Federal Deposit Money in banks is insured by the Federal Deposit Insurance Corporation (Insurance Corporation (FDICFDIC))

Credit Union Deposits are protected through the National Credit Union Deposits are protected through the National Credit Union Share Insurance Fund (Credit Union Share Insurance Fund (NCUSIFNCUSIF))

As Independent agencies of the U.S.Government, your deposits are secure up to

the amount that congress has approved..

Insurance LimitsInsurance Limits

Total deposits in checking and savings Total deposits in checking and savings accounts are insured up to accounts are insured up to $250,000$250,000 per per

Single Account (owned by one person)Single Account (owned by one person) $250,000$250,000 per per

Joint Account (owned by two or more people)Joint Account (owned by two or more people) $250,000$250,000 per IRA Account per IRA Account $250,000$250,000 per Revocable Trust Account per Revocable Trust Account

John had the following accounts at John had the following accounts at one bank. one bank.

Is he insured?Is he insured?

Owner Account Amount

John checking account $ 5,000.00

John savings account $ 245,000.00

John / Mary savings account $ 200,000.00

John Certificate of Deposit / IRA $ 250,000.00

John POD trust, Emily beneficiary $ 200,000.00

John POD trust, Todd beneficiary $ 200,000.00

    $ 1,100,000.00

Are you insured?Are you insured?

Owner Account Amount

Steve Certificate of Deposit $ 300,000.00

Darren’s StoryDarren’s Story

Check cashing feeCheck cashing fee $ 7.50$ 7.50

Money ordersMoney orders $ 4.65$ 4.65 $1.55 x 3$1.55 x 3

Bill-pay feeBill-pay fee $ 6.00$ 6.00 $2.00 x 3$2.00 x 3

Total FeesTotal Fees $18.15$18.15

Direct Deposit Direct Deposit of Paychecksof Paychecks

Many financial institutions offer free checking Many financial institutions offer free checking when you use “direct deposit”when you use “direct deposit”

Checking accounts are safe and insured, cash is Checking accounts are safe and insured, cash is not.not.

Bills are easier to pay.Bills are easier to pay.

Checking accounts cost less than buying money Checking accounts cost less than buying money orders and paying check cashing fees.orders and paying check cashing fees.

Checking AccountsChecking Accounts

Basic checking Basic checking May charge a per check or per month fee. May charge a per check or per month fee.

Student or Senior CheckingStudent or Senior Checking Usually a good deal if you qualify.Usually a good deal if you qualify. Often offers benefits like free checking or traveler’s check Often offers benefits like free checking or traveler’s check

to attract college students or senior citizensto attract college students or senior citizens

Interest Bearing Checking AccountInterest Bearing Checking Account pay interest on your balancepay interest on your balance Typically require higher balances and may limit Typically require higher balances and may limit

transactions transactions

Checking AccountsChecking Accounts

Joint Checking AccountsJoint Checking Accounts Owned by two or more personsOwned by two or more persons All parties equally share rights and liabilities of the All parties equally share rights and liabilities of the

accountaccount

Online Checking AccountOnline Checking Account Exclusively onlineExclusively online

Second Chance Checking AccountSecond Chance Checking Account For people who have had banking problems in the For people who have had banking problems in the

pastpast Typically have higher feesTypically have higher fees

Choosing an AccountChoosing an Account

To choose the best account for you, you’ll To choose the best account for you, you’ll need to determine:need to determine:

the average balance you plan to keep in the the average balance you plan to keep in the accountaccount

the number of debits, checks, online the number of debits, checks, online payments, and ATM withdrawals. payments, and ATM withdrawals.

FeesFees

Is there a monthly fixed fee to maintain Is there a monthly fixed fee to maintain your account?your account?

Is there a minimum balance requirement Is there a minimum balance requirement to avoid fees?to avoid fees?

What is the fee for checks?What is the fee for checks?

Is there a charge for paying bills Is there a charge for paying bills electronically?electronically?

Is there a charge for withdrawing money Is there a charge for withdrawing money or getting checking account balances or getting checking account balances from the bank’s ATMs?from the bank’s ATMs?

Is there a fee for using an ATM from Is there a fee for using an ATM from another bank?another bank?

Is there a charge for using your debit Is there a charge for using your debit card to pay for a purchase?card to pay for a purchase?

What is the fee if I overdraw my account? What is the fee if I overdraw my account? Usually $35Usually $35

Is overdraft protection available?Is overdraft protection available?

Banks may Banks may check a standard credit report before before opening a bank account, or they may opening a bank account, or they may check your credit if you request an check your credit if you request an overdraft line of credit. overdraft line of credit.

Bounced ChecksBounced Checks

Writing a check for more money than is in Writing a check for more money than is in your account.your account.

The bank will charge you for each check The bank will charge you for each check that it must return unpaid. $35that it must return unpaid. $35

The business you wrote the check to will The business you wrote the check to will also charge you a fee. $35also charge you a fee. $35

You hurt your reputation with the bank and You hurt your reputation with the bank and with the people to whom you owe money.with the people to whom you owe money.

Steps to prevent bounced Steps to prevent bounced checkschecks

Carrying a higher balance in the checking Carrying a higher balance in the checking account; to always have a “buffer”.account; to always have a “buffer”.

Balancing your checkbook regularlyBalancing your checkbook regularly

Overdraft Protection- A link to a savings Overdraft Protection- A link to a savings account, credit card or line of credit that account, credit card or line of credit that can cover overdrafts. Fees often apply.can cover overdrafts. Fees often apply.

Opening an AccountOpening an Account

Photo ID, such as a driver’s license, state Photo ID, such as a driver’s license, state ID card or passportID card or passport

Proof of your address, such as a utility bill Proof of your address, such as a utility bill or leaseor lease

Your Social Security NumberYour Social Security Number

Balancing your checkbookBalancing your checkbook Verifies that your records match the Verifies that your records match the

bank’s records.bank’s records. Banks Banks CANCAN make mistakes make mistakes If you make a mistake or forget to post a If you make a mistake or forget to post a

transaction in your register, you may start transaction in your register, you may start bouncing checks and incurring fees.bouncing checks and incurring fees.

If there’s a problem, you won’t need to If there’s a problem, you won’t need to wade through months of transactions to wade through months of transactions to figure it out.figure it out.

Balancing Your Balancing Your Checking AccountChecking Account

Calculate the current balance of your checking Calculate the current balance of your checking account as of the last transaction you made.account as of the last transaction you made.

Check Register:Check Register:record the checks you write, check card record the checks you write, check card

purchases, deposits and automated teller purchases, deposits and automated teller machine (ATM) withdrawals machine (ATM) withdrawals

Write the new balance after each Write the new balance after each transactiontransaction

Balancing your Checking Balancing your Checking AccountAccount

Statement, check register, pencil and Statement, check register, pencil and calculatorcalculator

Check off, in your register, all items shown Check off, in your register, all items shown on your statement on your statement

Add any fees to your registerAdd any fees to your register

Check Register

Check # DateDescription of

Transaction

Payment/Debit (-) Fee  

Deposit/ Credit (+) Balance

              500.00

  12/5 Paycheck     470.50 970.50

  12/6 ATM-cash 100.00     870.50

101 12/12 Sears-clothes 75.00     795.50

102 12/22 Best Buy - CDs 85.72     709.78

  12/23 ATM-cash 75.00     634.78

103 12/24 West Apartments - rent 510.00     124.78

104 12/28 BP-gas 28.00       96.78

  12/30 Paycheck       470.50 567.28

  12/1 Service charge   6.00     561.28

1.1. Enter the ending balance shown on the front Enter the ending balance shown on the front $$ of your statement.of your statement. 2. 2. List all checks or other withdrawals recorded List all checks or other withdrawals recorded $$ in your checkbook but not shown in your checkbook but not shown on your statement. on your statement.

3. 3. Subtract the withdrawals shown in step 2 from theSubtract the withdrawals shown in step 2 from the $ $ ending balance in step 1. Enter the difference.ending balance in step 1. Enter the difference.

4. 4. List all deposits in your checkbook register List all deposits in your checkbook register $$ that are not on your statement.that are not on your statement. 5. 5. Add the amount in step 3 and all the deposits listed Add the amount in step 3 and all the deposits listed $$ in step 4. Enter the total here. This figure should in step 4. Enter the total here. This figure should match your checkbook balance. match your checkbook balance.

Savings PlanSavings Plan

SAVE, SAVE, SAVESAVE, SAVE, SAVE

Start now no matter how small your savingsStart now no matter how small your savings Pay yourself first, use automatic deductionsPay yourself first, use automatic deductions Put your savings into a separate account that Put your savings into a separate account that

does not have ATM accessdoes not have ATM access Put any pay raises, bonuses or tax refunds into Put any pay raises, bonuses or tax refunds into

savings after you complete your emergency savings after you complete your emergency fund. fund.

Savings ProductsSavings Products

Basic savings accountsBasic savings accounts pays interest at a lower rate than other savings pays interest at a lower rate than other savings

productsproducts Lower minimum deposit requirementsLower minimum deposit requirements

Money market accountsMoney market accounts pay a somewhat higher rate than basic accountspay a somewhat higher rate than basic accounts typically limit the number of withdrawals or transfers typically limit the number of withdrawals or transfers

you can make each monthyou can make each month may impose fees or stop paying interest, or both, if may impose fees or stop paying interest, or both, if

your balance falls below a certain minimumyour balance falls below a certain minimum usually require a higher minimum balance. usually require a higher minimum balance.

Certificates of depositCertificates of deposit (CDs) (CDs)

highest rates for savings productshighest rates for savings products specific term, or period of time, to earn specific term, or period of time, to earn

interest. interest. forfeit some or all of the interest if you make forfeit some or all of the interest if you make

an early withdrawal before the CD reaches an early withdrawal before the CD reaches full term.full term.

generally, the longer a CD’s term, the higher generally, the longer a CD’s term, the higher the rate of interest it pays. the rate of interest it pays.

Beyond BankingBeyond Banking

Investment Accounts Investment Accounts Save for college Save for college RetirementRetirement Wealth BuildingWealth Building

AnnuitiesAnnuities

Not ALL products available at banks Not ALL products available at banks are FDIC are FDIC insuredinsured

Credit UnionsCredit Unions

Credit Unions are financial institutions Credit Unions are financial institutions formed by an organized group of people formed by an organized group of people with a common bond. Such as residents with a common bond. Such as residents of Clarke County.of Clarke County.

Lower loan ratesLower loan rates Higher savings ratesHigher savings rates Fewer service feesFewer service fees

CREDIT UNIONSCREDIT UNIONS

Not-for-profitNot-for-profit Owned by membersOwned by members

Operated by mostly Operated by mostly volunteer boardsvolunteer boards

TRADITIONAL BANKSTRADITIONAL BANKS

For profitFor profit Owned by outside Owned by outside

stockholdersstockholders Controlled by paid Controlled by paid

boardsboards

Credit Unions vs BanksCredit Unions vs Banks

Check Cashing StoresCheck Cashing Stores

Cash Payroll checks for a fee (4-5%)Cash Payroll checks for a fee (4-5%) cost you cost you $4-5$4-5 for every $100 cashed for every $100 cashed

Cash Personal Checks (up to 15%)Cash Personal Checks (up to 15%) Cost you Cost you $15$15 for every $100 = $85 for every $100 = $85

Bill paying servicesBill paying services Money OrdersMoney Orders Money TransfersMoney Transfers Phone CardsPhone Cards

Payday LendersPayday Lenders

Short-Term cash advance on paycheckShort-Term cash advance on paycheck Extremely high fees for short term loansExtremely high fees for short term loans Additional fees apply if the loan is rolled overAdditional fees apply if the loan is rolled over

Example: a $500 payday loan at 15-25% for Example: a $500 payday loan at 15-25% for two weeks would cost you $75-$125 that two weeks would cost you $75-$125 that will reduce your paycheck.will reduce your paycheck.

Payday LendersPayday Lenders

LOAN TERM(days)

FEE PAYMENT APR

       

$100.00 16 $25.00 $125.00 506.94%

$100.00 14 $25.00 $125.00 651.79%

$100.00 7 $25.00 $125.00 1303.57%

$200.00 16 $50.00 $250.00 506.94%

$200.00 14 $50.00 $250.00 651.79%

$200.00 7 $50.00 $250.00 1303.57%

$300.00 16 $75.00 $375.00 506.94%

$300.00 14 $75.00 $375.00 651.79%

$300.00 7 $75.00 $375.00 1303.57%

Title LendersTitle Lenders

Short-term loansShort-term loans Usually one monthUsually one month

CollateralCollateral CarCar Household assetHousehold asset

Example Monthly Fee 15-20% per month Example Monthly Fee 15-20% per month APR 180% - 240%APR 180% - 240%

DefaultDefault Lender has the right to take and sell your propertyLender has the right to take and sell your property

Rent-to-OwnRent-to-Own

Purchase big ticket items such asPurchase big ticket items such as FurnitureFurniture ElectronicsElectronics ComputersComputers Washer/DryersWasher/Dryers

Payments overtime are not refunded if the Payments overtime are not refunded if the item is returneditem is returned

Rent-to-own a $400 TV at $15 a Rent-to-own a $400 TV at $15 a week for 65 weeksweek for 65 weeks

Weekly Rental $15 x 65 weeks $975.00

7% Sales Tax $1.05 x 65 weeks $68.25

Delivery Fee $30 once $30.00

Total Cost   $1,073.25

Total cost topurchase TV

$400 + ($400 x .07) $28 = $428.00

Difference Overpayment $645.25

Save to own $428 / $16.05 27 weeks

Tax Preparers – Refund Tax Preparers – Refund Anticipation Loans (RAL)Anticipation Loans (RAL)

Quicker access to Tax RefundQuicker access to Tax Refund

High Interest rate loanHigh Interest rate loan

Refund is available in 1-2 days Refund is available in 1-2 days

vs. 3-4 days with electronic filing vs. 3-4 days with electronic filing

Alternatives to RALsAlternatives to RALs

Open a bank account and take advantage Open a bank account and take advantage of direct deposit for both your tax refund of direct deposit for both your tax refund and your pay check.and your pay check.

File your tax return electronically (E-file) File your tax return electronically (E-file)

Deposit refund directly into your bank accountDeposit refund directly into your bank account 3-4 business days3-4 business days

Pawn ShopsPawn Shops

Provide quick loansProvide quick loans Must leave property at Pawn shopMust leave property at Pawn shop Receive only a fraction of what the item is Receive only a fraction of what the item is

worthworth Pawn brokers can sell the item if the loan Pawn brokers can sell the item if the loan

is not repaid with interest in the specified is not repaid with interest in the specified timetime

Pawn brokers do not report loan defaults Pawn brokers do not report loan defaults to credit reporting agenciesto credit reporting agencies