Chapter 10 Banking. Types of Banks Commercial Banks Largest type, locations in multiple states,...
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Transcript of Chapter 10 Banking. Types of Banks Commercial Banks Largest type, locations in multiple states,...
Chapter 10Banking
Types of Banks Commercial Banks
Largest type, locations in multiple states, most services Community Banks
Located in smaller area, fewer locations, “Mom & Pop” type business, Focus more local customers
Savings and loan associations Primarily lend money for home mortgages
Credit Unions Not-for-Profit, Membership Requirements/Criteria, NCUA
insured Online Banks
Bank located solely online, no physical location; Low/No Fees
Financial Security Peace of mind comes from knowing that when
needs arise, you will have adequate money to pay for them.
The amount of money you save depends on: The amount of your discretionary or disposable
income The importance you attach to savings Your anticipated needs and wants Your willpower
Savings accounts FDIC Insured up to $250,000/Depositor
Types of Accounts Savings Accounts Checking Accounts Certificate of Deposits (CDs) Money Market Account
Savings Accounts High “Liquidity”
Speed in which you can get cash without loss of value
Used for Long Term Goals & Emergencies
Interest Bearing The Higher the Interest, the Higher the
Minimum Balance
Checking Accounts Used for Day-to-Day purchases Access through ATM, Debit Card,
Electronic Payments, & Checks High Liquidity Interest Varies
Usually no interest on accounts with no or low minimum balance; Interest Bearing require higher minimum balance
Certificate of Deposit A certificate of deposit (CD), or time
deposit, is a deposit that earns a fixed interest rate for a specified length of time.
A CD requires a minimum deposit. You must leave the money in the CD for the
full time period. If you take out any part of your money early, you will pay
an early withdrawal penalty. A CD has a set maturity date, which is the date on which
an investment becomes due for payment.
Money Market Account A Money Market Account is a type of
savings account that offers a more competitive interest rate than a regular savings account.
There are two different kinds of money market accounts: Money market deposit account—FDIC Insured
But Require Higher Deposits Money Market Fund—NOT FDIC Insured
Invest in Low Risk Government Securities On average, money market funds will pay a
higher interest rate than money market deposit accounts.
Not as liquid as Savings Account—May be limited to # of Withdrawals/Month
Direct Deposit With direct deposit, your net pay is
deposited electronically into your bank account.
You receive a nonnegotiable copy of your check and stub, notifying you of the amount deposited directly into your account
You can have your automatic deposit split between accounts, with some going into savings and some going into checking to cover your bills.