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Banking Basics

Banking 101
What will you learn today
An introduction to common terms and concepts
you will come across

Basic accounts with common features

What to think about when picking an account or


institution

Additional resources
Why should you bank?
Protect your money

Earn money by way of interest

Save and manage your money for a better future

Get a line of credit, mortgage, or a business loan


Bank
A financial institution that handles money,
including keeping it for saving or commercial
purposes, and exchanging, investing, and
supplying it for loans
Credit Union
A non-profit financial institution that is owned
and operated entirely by its members

Provides financial services for their members,


including savings and lending

When a person deposits money in a credit union


the deposit is considered partial ownership in
that credit union

Many have membership eligibility requirements


Savings Institution
A financial institution that accepts deposits from
individuals, makes homes mortgage loans, and
pays dividends
Web Only banks
No Brick and Mortar/ATMs
No tellers just customer service

Offers many of the same services and products


as traditional banks

Generally offer higher interest rates and


different financial products
Deposits and Withdrawals
Deposits
When you put money into an account
Includes cash, check, direct deposit from employers
Cash is immediate
Checks can take several days to clear

Withdrawal
To take money out of an account
Includes withdrawals from ATM or teller, debit card
purchases, checks you write, or online bill payments
Does not include credit card purchases
Transfers
Can be automatic

Online, mobile, ATM, at the bank

International remittance (global remittance)


Allows you to transfer money to family members
in other countries
Not all institutions do this

Not all transfers count as deposits or


withdrawals
Balances
Balance
The amount of money in your account

Available Balance
The amount of money in your account that you have
access to (i.e. after waiting for a check to clear)

Minimum Balance
The amount of money youre required to keep in an
account to avoid fees or to keep the account open
Overdrawing your account
Means you took out more money than you have
in the in that account
Checks can bounce
Debit purchases can be denied

Good banking habits will prevent this

Overdraft fees can be costly


What is interest?
The amount of money paid by a borrower to a
lender in exchange for the use of the lenders
money for a certain period of time.

Examples
You earn interest from a bank if you have a
savings account
You pay interest to a lender if you have a loan

Interest you earn is taxable income


Types of Interest
Simple interest
Earn interest on the principal (the amount of
money you originally deposited)

Compound interest
Interest not only on your original deposit plus the
interest your deposit has earned over time

APY (Annual Percentage Yield)


The rate of return on an investment for a one year
period
Checking Account
An account that allows a customer to deposit
and withdraw money and to write checks

Checking accounts allow you to


Deposit your paycheck
Pay bills
Withdraw money to spend later
Earn interest (not all institutions offer this)

Can be linked to a debit or ATM card


Savings Account
A bank account that allows a customer to deposit
and withdraw money and earn interest on the
balance

May require a minimum balance

Can be linked to a Debit or ATM card


ATM cards Vs. Debit Cards
ATM Cards Debit Cards
Can be used to operate ATM, Can be used to operate ATM,
withdraw money, and access withdraw money and access
account account

Has a Visa or MasterCard logo


Can be used to make in-store on the front and is accepted
purchases if used at a where Visa/MasterCard are
merchant that uses one of the accepted
networks listed on the back of
your card Can be used to purchase
items/services in-store and
online
Credit Cards vs. Debit Cards
Credit Card Debit Card
You are borrowing money and Deducts directly from bank
need to pay it back account

Paying your credit card bills Does not build your credit
on time can build good credit history

Can be used online/in store in Can be used in an ATM


place of cash or checks
Can be used online/in-store in
Safer to use online place of cash or checks
Money Market Accounts (MMA)
Pays interest like a regular savings account
generally higher interest

May require a higher minimum balance

Has checks you can use to make withdrawals


restrictions on the number of withdrawals made
by check
Certificate of Deposit (CDs)
Requires that money stay in an account for a
fixed period of time called a term
i.e. a few months to five or more years

Interest earned is generally higher than on a


regular savings or money market account

If money is withdrawn before the end of the


term, penalties could be applied
Good Banking Habits
Write all of your checks, withdrawals, deposits, and
transfers in your register for each account
That includes your debit card purchases too

Verify the activity with your monthly statements

Sign all of your cards once you get them

Keep bank customer service numbers on file

Report stolen/lost cards immediately


Will my money be safe?
Banks and Savings Institutions are insured by the
FDIC up to $250,000
Credit Unions are insured by NCUA up to $250,000
FDIC and NCUA Insure:
Checking accounts
Savings accounts
CDs
Money market accounts
IRAs and NOW accounts
FDIC and NCUA do not insure:
Safety deposit boxes
Money Market Mutual funds
Stocks, bonds, mutual funds
Insurance products or investments
Anything that is not a deposit
Picking an Institution
Are the products this institution offers
FDIC/NCUA backed?
Is it convenient?
Locations?
Hours?
Services?
Is the staff friendly and helpful?
Do they offer other products or services you are
interested in?
What fees can I expect?
Check with the financial institution about what
kinds of fees they or their products have
This list is not exhaustive:
ATM withdrawals from out of network ATMs
Mailed statements
Not making minimum monthly deposits
Too many or not enough withdrawals
Too many transfers
Not maintaining the minimum balance
Maintenance fees
Other services:
Investing resources (not FDIC/NCUA insured)
Annuities, bonds, mutual funds
Online banking
Mobile banking
Home loans
Business loans
Lines of credit
Solid Advice
Dont sign something you dont understand

Always ask for clarification

Always get written copies and take them home

Have someone you trust go with you to the bank


and review paperwork with you
Things youll need to open an account
Two forms of Identification
Ask your bank which forms they accept
Common types:
State ID or Drivers License
Alien Registration card
Passport
US military ID
Money
Ask if there is a minimum deposit
Online Banking Safety Tips
Use secure WiFi and your own computer
Make sure your browser and virus protection
software are up to date
Dont share your password and change it often
Make sure you have a secure connection
Look for the https:// and the security certificate
Things you can do with banking online
Services vary by institution
Set up new accounts
Transfer money to other accounts or other
people
Set up automatic transfers to your savings or
other accounts
Pay bills or credit cards
View statements and more!
What if my bank is having problems?
Read the news

Massachusetts Division of Banks

Your money will be insured up to the


NCUA/FDIC will protect you up to their limits
even if your bank fails
What can I use to bank better?
Bank Rate Monitor or Bankrate.com
Articles, bank rates, tips and more
Mycreditunion.gov
Find an NCUA insured CU and if your assets are
covered
fdic.gov and Edie
Find FDIC insured institution and if your assets
are covered
handsonbanking.org
Tutorials and lessons about banking for all ages

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