Financial Services and Electronic Banking
Goals:
Key Terms:
Types of Financial Services – A financial institution can provide services for various personal and business activities. The services you use depend on your needs.
Savings Services – Safe storage of funds for future use is a common need. One of the main services that financial institutions offer is accepting money from customers for safekeeping. A range of service plans is available for this purpose.
Payment Services – The ability to transfer money to others is necessary for daily business activities. Types of payment services include checking accounts, debit cards, online payments and automatic withdrawals.
Lending Services – Most people, businesses, and governments borrow money at some time. A business may want to borrow money to build a new warehouse or buy products to resell. Individuals may borrow money to buy a card or pay college tuition. Banks may make loans because most of their income is from the interest they charge these borrowers.
Banks offer many types of lending services. These include auto loans, business loans, and mortgages. Credit cards allow a person to buy items without having the cash. When paying with a credit card you are borrowing money from the bank.
Another way that banks lend money is by sending several checks with a customer’s credit card statement. This allows the customer to use one of the checks to obtain cash or to pay a bill. If the customer uses the checks, the bank charges the amount of each check to the customer’s credit card account. In effect, the amount of the check is a loan.
Electronic Banking – Electronic fund transfer (EFT) refers to the use of computers and oter technology for banking activities. Electronic banking services include the use of automated teller machines (ATM), point-of-sale transactions, direct deposit, and automatic bill payments. Online computer banking allows a customer to access many financial services.
Storage of Valuables – Banks offer safe deposit boxes for storage of valuables. Because these safe-deposit boxes are in well-guarded vaults, they are very safe places to keep jewelry, rare coins, investment certificates, birth certificates, a list of insurance policies, and other valuable documents.
Only you or someone to whom you have given the right to open the box may open it. Not even a bank has the right to open you safe-deposit box unless it is ordered to do so by a court. You rent safe-deposit boxes by the year. They come in different sizes.
Investment Advice – Many financial institutions help customers by offering financial advice and investment services. Banks can assist customers with decisions about buying a home, offer tips on money management, and help customers exchange US currency for foreign funds.
Management of Trusts – Many banks manage investments on behalf of customers. When they do this, the money or other property that is turned over for the bank to manage is said to be held in trust.
Trusts are used by people of all ages. They are especially useful for very young people and for some elderly people. A young person who inherits money may not have the skill and experience to manage it wisely. Elderly people who are ill may ask the trust department of a bank to manage their money. The bank makes investments and keeps the customers informed about what is happening to their money.
Types of Checking Accounts – While checking account vary from bank to bank, three types are most common.
Regular Checking Account – If you write a lot of checks each month, consider a regular checking account. A service charge is a fee a bank charges for handling a checking account. With most banks there is no service charge for a regular checking account as long as you maintain a certain minimum balance. This amount varies and is often $300 or higher. A checking account at a credit union may be called a share draft account because the members are called shareholders.
Interest-Earning Checking Accounts - Many financial institutions offer checking accounts that earn interest. These accounts may require a higher monthly balance than regular checking accounts. If the account falls below the required amount, the bank usually pays no interest and may add a service charge.
The rates of interest that banks pay their customers also vary. Usually, a bank will offer a higher rate of interest when a higher balance is kept in an account. Very often rates on checking accounts are quite low. When you are depositing larger amounts of money, consider other savings alternatives.
Special Checking Accounts – If you only write a few checks each month, consider a special checking account. Also called activity accounts, banks charge customers about 10 to 20 cents for each check written. A monthly service charge may also be added.
Comparing Checking Accounts – When selecting a checking account, evaluate the following items.
- minimum balance
- interest rate earned, if any
- monthly service charge
- fees for other services, such as printing checks and stop payment orders
- other restrictions
When choosing a checking account, be careful. A bank may lure you in with a low minimum balance, but fees can result in a higher total cost.
Electronic Banking – Every day, the use of electronic banking services expands. You can do your banking from an ATM, from a home computer, or from a wireless internet connection on your cell phone.
E-Banking Services – Over the years, banks have expanded their hours of operation to meet the demands of their customers. Traditional “banker’s hours” of 9am to 3 pm are a thing of the past. Banks have evening and weekend hours, ATM machines dispense cash 24 hours a day, and e-banking services are available any time of the day or night.
Automatic Teller Machines – An automatic teller machine (ATM) allows many banking services. The most common use of an ATM is withdrawing cash from a bank account or getting a cash advance from a credit card. Bank customers can also use ATMs to check account balances, make deposits, or transfer funds from one account to another.
A debit card is used for ATM transactions. A debit card is different from a credit card. With a debit card issued by your bank, you are using money that is in your account. With a credit card, you are borrowing from the bank to pay back later.
ATM services allow you to by just about anything. But be aware that many banks charge fees for ATM usage. Usually these fees are charged for people who do not have an account in the charging bank.
Payment at the Point-of-Sale – In a point-of-sale transaction, a merchant accepts a debit card to pay for purchases. Most stores and restaurants accept debit cards for payments. Vending machines that accept debit cards are becoming more common. Online sales have been aided by the use of debit cards.
Direct Deposit – A major portion of society uses direct deposit of paychecks and government payments. Funds are deposited electronically and available automatically for your use.
Automatic Bill Payments – Each month, many people pay their rent, mortgage, loans, utilities, and other bills without doing anything. Automatic bill payment requires a bank customer to authorize preset amounts of monthly expenses. The bank deducts the payments from your account and transfers the money to the appropriate companies. With automatic bill payments, be sure to check each month to make certain the correct amounts have been deducted AND paid.
Electronic Payment Options – The use of cash, checks, and credit cards is declining. These payment methods are being replaced by newer electronic Alternatives.
Debit Card Transactions – Most stores, restaurants and other businesses accept debit cards issued by MasterCard and Visa. When the debit card transaction is processed, the amount of purchase is deducted from your checking account.
Online Payments – Various Web companies and banks now provide online bill payment services between buyers and sellers. When using these services, be sure to think about the monthly charge as well as online security and customer service availability.
Stored Value Cards – The gift card your aunt sent you for your birthday is a stored value card. Prepaid cards for phone service, transit fares, highway tolls and school lunches are common. Some stored value cards are disposable. Others can be reloaded with additional funds.
Smart Cards – These “electronic wallets” are similar to ATM cards. Their imbedded microchip stores prepaid amounts as well as account balances, transaction records, insurance information, and medical history.
Banking in the Future – The way you use banks and money will continue to change. Electronic financial services will be combined with wireless technology. You will be able to do almost any ransaction away from the financial institution.
Assignments:
Define Key Terms (Page 428)
Go to Online Resources (see link below). Select Chapter 17.
1 - Click on and complete the Crossword Puzzle, When you are finished, print out your puzzle, write your name on it and turn it in for a grade.
2 - Click on Online Quiz Prep. Take the Web Quiz. When your quiz score is displayed, call the teacher over to see and record your score.
3 - Click on Study Tools
Complete Lessons 1 - 3
Lesson 1 - Types of Financial Institutions
Lesson 2 - Financial Services and Electronic Banking
Lesson 3 - Types of Endorsements
When your quiz scores are displayed, call the teacher over to see and record your scores
Online Resources
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