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Introduction to Business© Thomson South-Western
ChapterChapterChapterChapter
Banking and Financial Services17-117-1 Banks and Other Financial
Institutions
17-217-2 Financial Services and Electronic Banking
17-317-3 Checks and Payment Methods
1717
Introduction to Business© Thomson South-Western
Chapter 17
Slide 2
LESSON 17-1
Banks and Other Financial Institutions
Goals Explain the purpose of the Federal
Reserve System. List the types of financial institutions. Discuss factors for selecting a financial
institution.
Introduction to Business© Thomson South-Western
Chapter 17
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Key Terms
Federal Reserve System (Fed) commercial bank credit union Federal Deposit Insurance Corporation
(FDIC)
Introduction to Business© Thomson South-Western
Chapter 17
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THE BANKING SYSTEM
The Federal Reserve System (Fed) Main purpose is to supervise and regulate
member banks and to help banks serve the public efficiently
All national banks are required to join – becoming member banks.
United States divided into 12 districts with a central Federal Reserve Bank in each district.
Introduction to Business© Thomson South-Western
Chapter 17
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Introduction to Business© Thomson South-Western
THE BANKING SYSTEM
Federal Reserve activities Supervise banks
Holding of reserves – banks are required to keep a part of the money they receive from customers on deposit in case the banks need additional funds to meet the daily customer demand
As a clearinghouse Uses electronic funds transfer (EFT) to pay
checks among different banks in different cities
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Introduction to Business© Thomson South-Western
THE BANKING SYSTEM
Banking and the Economy The savings you and others deposit make
banking services possible. Deposits do not remain idle in the bank, they are put to work.
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Introduction to Business© Thomson South-Western
Some of the activities for which banking services are used include: Building homes Starting new businesses Planting crops Financing educations Buying goods Paving streets Investing for retirement Building hospitals
These activities create jobs and economic growth.
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Introduction to Business© Thomson South-Western
TYPES OF FINANCIAL INSTITUTIONS
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Introduction to Business© Thomson South-Western
Chapter 17
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Deposit Institutions
Commercial banks Most common bank organization Also known as full-service bank because
they offer services such as: Checking accounts Savings accounts Loans to businesses and individuals
May find branches in shopping centers and grocery stores
Introduction to Business© Thomson South-Western
Deposit Institutions Savings and loan associations
Traditionally specialized in savings accounts and making loans for home mortgages
Recently have expanded to offer a wider variety of services
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Introduction to Business© Thomson South-Western
Deposit Institutions Mutual savings banks
A savings bank that is owned by, and operated for the benefit of, its depositors.
Profits are distributed in proportion to the amount of business each participant does with the company.
Organized mainly for savings and home loans.
Located mainly in the northeastern United States.
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Introduction to Business© Thomson South-Western
Deposit Institutions Credit unions
User-owned, not-for-profit, cooperative financial institution
Comprised of people in the same company, government agency, or profession
Accept savings deposits and make loans Regulated by NCUA, the National Credit
Union Administration
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Introduction to Business© Thomson South-Western
Chapter 17
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TYPES OF FINANCIAL INSTITUTIONS Non-deposit financial institutions
Life insurance companies Investment companies Consumer finance companies Mortgage companies Check-cashing outlets Pawnshops
(continued)
Introduction to Business© Thomson South-Western
Chapter 17
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>> C H E C K P O I N T
What are some examples of non-deposit financial institutions?
Introduction to Business© Thomson South-Western
Chapter 17
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SELECTING A FINANCIAL INSTITUTION Services offered
Savings accounts Checking and payment accounts Loans and other credit plans Other services, such as safe deposit boxes
Introduction to Business© Thomson South-Western
SELECTING A FINANCIAL INSTITUTION Safety
Federal Deposit Insurance Corporation (FDIC) helps to regulate banks and protects depositors’ money in case of the failure of a bank
Insures all accounts in the same name at each bank up to an amount of $100,000 (temporarily increased by the government to $250,000 per depositor through December 31, 2009)
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Introduction to Business© Thomson South-Western
SELECTING A FINANCIAL INSTITUTION Convenience
24-hour banking Branch offices in convenient locations ATMs in convenient locations On-line banking
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Introduction to Business© Thomson South-Western
SELECTING A FINANCIAL INSTITUTION Fees and charges
Compare your needs with the price you pay
Watch for hidden fees such as ATM fees Restrictions
Minimum deposit requirements Amount Time
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Introduction to Business© Thomson South-Western
Chapter 17
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>> C H E C K P O I N T
What factors should be considered when selecting a financial institution?
Introduction to Business© Thomson South-Western
Chapter 17
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LESSON 17-2
Financial Services and Electronic Banking
Goals Identify the financial services used by
consumers. Explain types of checking accounts. Describe electronic banking activities.
Introduction to Business© Thomson South-Western
Chapter 17
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Key Terms
safe-deposit box service charge debit card
Introduction to Business© Thomson South-Western
Chapter 17
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TYPES OF FINANCIAL SERVICES Savings services Payment services Lending services Electronic banking Storage of valuables Investment advice Management of trusts
Introduction to Business© Thomson South-Western
Chapter 17
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>> C H E C K P O I N T
What are the main financial services used by consumers?
Introduction to Business© Thomson South-Western
Chapter 17
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TYPES OF CHECKING ACCOUNTS Regular checking accounts Interest-earning Checking accounts Special checking accounts
Introduction to Business© Thomson South-Western
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COMPARING CHECKING ACCOUNTS Minimum balance Interest rate earned, if any Monthly service charge Fees for other services, such as
printing checks and stop payment orders
Other restrictions
Introduction to Business© Thomson South-Western
Chapter 17
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>> C H E C K P O I N T
What are three main types of checking accounts?
Introduction to Business© Thomson South-Western
Chapter 17
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ELECTRONIC BANKING
E-banking services Automatic teller machines Payments at the point-of-sale Direct deposit Automatic bill payments
Introduction to Business© Thomson South-Western
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ELECTRONIC PAYMENTOPTIONS Debit card transactions Online payments Stored-value cards Smart cards
Introduction to Business© Thomson South-Western
Chapter 17
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BANKING IN THE FUTURE
Financial services combined with wireless technology
Personalized systems for obtaining, transferring, and using funds
Introduction to Business© Thomson South-Western
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>> C H E C K P O I N T
What are common electronic banking services?
Introduction to Business© Thomson South-Western
Chapter 17
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LESSON 17-3
Checks and Payment Methods
Goals Describe three main types of
endorsements. Describe proper check-writing
procedures. Explain the bank reconciliation process. Identify other payment methods.
Introduction to Business© Thomson South-Western
Chapter 17
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Key Terms
endorsement check register stop payment order bank statement bank reconciliation outstanding checks
Introduction to Business© Thomson South-Western
Chapter 17
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OPENING A CHECKING ACCOUNT Benefits of checking accounts
Convenience and ease of making payments
Safety to make payments with less risk than using cash
Proof of payment A record of finances for managing your
money
Introduction to Business© Thomson South-Western
Chapter 17
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THE FIRST DEPOSIT
Signature card Joint account Deposit slip
Introduction to Business© Thomson South-Western
Chapter 17
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SIGNATURE CARD
Introduction to Business© Thomson South-Western
Chapter 17
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TYPES OF ENDORSEMENTS Blank endorsement Full endorsement Restrictive endorsement
Special endorsement Two signatures required Restrictive endorsement
Introduction to Business© Thomson South-Western
Chapter 17
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SAMPLE ENDORSEMENTS
Introduction to Business© Thomson South-Western
Chapter 17
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>> C H E C K P O I N T
What are the three types of endorsements?
Introduction to Business© Thomson South-Western
Chapter 17
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USING A CHECKING ACCOUNT Check-writing procedures
Elements of a check The check register Writing a check Proper check writing
Stopping payment
Introduction to Business© Thomson South-Western
Chapter 17
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PARTS OF A CHECK
Introduction to Business© Thomson South-Western
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>> C H E C K P O I N T
What is the purpose of a check register?
Introduction to Business© Thomson South-Western
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THE RECONCILIATION PROCESS Bank statement information Determine checks paid Find differences Calculate adjusted balance
Introduction to Business© Thomson South-Western
Chapter 17
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MONTHLY ACCOUNT STATEMENT
Introduction to Business© Thomson South-Western
Chapter 17
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RECONCILIATION FORM
Introduction to Business© Thomson South-Western
Chapter 17
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>> C H E C K P O I N T
What are causes of differences between the bank statement balance and a person’s check register?
Introduction to Business© Thomson South-Western
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OTHER TYPES OF PAYMENTS Certified checks Cashier’s checks Traveler’s checks Money orders
Introduction to Business© Thomson South-Western
Chapter 17
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CERTIFIED CHECKS
Personal check for which a bank has guaranteed payment
Certification stamped on face Signed or initialed by a bank officer
Introduction to Business© Thomson South-Western
Chapter 17
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CASHIER’S CHECKS
Check that a bank draws on its own funds
Costs the amount of the check plus a service fee
More acceptable than the personal checks
Introduction to Business© Thomson South-Western
Chapter 17
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TRAVELER’S CHECKS
Special forms designed for making payments when away from home
Require your signature in two places Cash a check or pay for a purchase Commonly accepted throughout the
world
Introduction to Business© Thomson South-Western
Chapter 17
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MONEY ORDERS
Form of payment that orders the issuing agency to pay the amount printed on the form to another party
A bank money order A postal money order An express money order A telegraphic money order
Introduction to Business© Thomson South-Western
Chapter 17
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>> C H E C K P O I N T
How does a certified check differ from a cashier’s check?
