banking services ch. 5.1 deposit accounts. 2 categories of deposit accounts ________________ an...
TRANSCRIPT
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BANKING SERVICES
Ch. 5.1 Deposit Accounts
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2 Categories of Deposit Accounts
________________An account that allows
transactions to occur without restrictions on the frequency or
the volume of transactions.
_________________Deposits accounts that
are held for or mature at a specified
time
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A type of deposit account that is payable on demand whenever the depositor chooses
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Transaction Accounts
Many are demand deposits The total funds in transaction accounts affect
the money supply because of their high liquidity.
They are a large component of M1.They require banks to hold reserve fund,
because the money could be demanded by the depositor at any time
Most common form is checking accounts
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Checking Accounts
Most common form of a transaction account
You withdraw money from the account by means of a check
A check is a written notice to the bank to pay a named person a specified amount from your account
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Checking Accounts
Offer customers quick access to their moneyProvide a convenient way to pay billsFacilitate transferring funds to other
institutionsPrior to writing a check, customers need to
have sufficient funds in the bank to cover checks written & any fees to be deducted
There are many types of checking accounts to best fit customers’ needs
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New Technology & Checking Accounts
Direct DepositAuto DebitOnline bankingElectronic bill pay
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Types of Ownership of Checking Accounts
_________________owned by 1 person
________________2 or more owners, each
of whom has equal & independent access
to it
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2 Types of Joint Checking Accounts
_________________Frequently used by
business partnersThe approval of all
owners is required to make withdrawals
_________________Co-owner accountEach co-owner can
make deposits & withdrawals independently
May be sued by siblings, roommates, spouses, etc.
Provides the “right of survivorship”
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Federal legislation that became effective in October of 2004, that created a new category of negotiable instrument, & allows banks to process check information electronically
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Types of Checking Accounts
Basic“Free”“No Service Charge”Interest-BearingExpressLifeline“No-Frills”Asset management
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Basic Checking Accounts
9 characteristics of Basic Checking Accounts:1.2.3.4.5.6.7.8.9.Ideal for: _________________________________
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“Free” Checking Accounts
List 3 characteristics of “Free” Checking Accounts:
1.2.3.
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“No Service Charge” Checking Accounts
List 3 Characteristics:1.2.3.
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Interest-Bearing Checking Accounts
List 4 Characteristics:1.2.3.4.
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Express Checking Accounts
List 6 Characteristics:1.2.3.4.5.6.
Popular with: ____________________________
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Lifeline Checking Account
List 3 Characteristics:1.2.3.
Attractive to: ___________________________
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“No Frills” Checking Accounts
List 5 Characteristics:1.2.3.4.5.
Designed for: ___________________________
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Asset Management Checking Accounts
List 5 Characteristics:1.2.3.4.5.
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Online Banking Accounts
Available as either independent accounts or as an additional service to standard brick-and-mortar accounts
May offer lower minimum balances & fewer fees than traditional banks.
Offer a variety of services ranging from consolidated management of multiple accounts through automated bill payments
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Banking transactions can be performed from mobile phones such as: Balance inquiries Payment requests Paycheck deposit alerts Bounced check notification
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________________________
Should be carefully assessed
Can possibly incur 2 fees when using an ATM that is not affiliated with your own bank (one from your bank, and one from the other bank)
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Choose the Type of Account that is Best for
Your Needs
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Deposits that are held for or mature at a specified time
Include: Savings accounts Money market deposit accounts Certificates of deposit (CDs) Various bonds
Less liquid than checkable depositsNo reserve requirements
imposed by the Fed
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__________________________
Most common type of time depositBanks may require up to a 7-day notice
before withdrawing your money (most don’t do this)
Savings accounts valued at less than $100,000 are part of the M2 money supply
Can make deposits in person, by mail, electronically, or by direct deposit
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Provide a monthly or quarterly computerized statement detailing all account activity, including interest credited & fees charged
Often, statements are combined with those of other accounts held a t the bank, providing a complete and clear picture of all banking activity
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Savings Accounts
One of the safest places to put moneyAccounts are insured by the FDIC up to
$100,000 per depositor per bankIf liquidity is needed, then savings accounts
are a good option
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(MMDAs)Time deposits that offer a higher rate of
interest than savings accounts, but they usually require a higher initial deposit to open an account
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Money Market Deposit Accounts
List 7 Characteristics:1.2.3.4.5.6.7.
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(CDs)Certificates issued by banks that guarantee
the payment of a fixed interest rate until the maturity date
Maturity dates may range from 7 days to 10 years
The larger the amount of the CD & the longer the term, the greater the interest rate.
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CD Interest Rates
Variable rate CDs are often linked to the prime rate & may offer an interest rate at a predefined % rate less than the prime rate
Some CDs offer “bump-ups” that provide the opportunity to increase the interest rate on the CD when interest rates rise
A “callable” CD can be called in at the discretion of the issuing institution
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Usually less than 18 monthsYou can get your money before the maturity
date, but you will pay an interest penalty, anywhere from 3 to 6 months’ worth of interest
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CDs
Safe, insured by FDIC up to $100,000Not very liquidYou should consider the maturity date when
investing in CDs, because the interest rate remains the same on fixed rate CDs
If interest rates rise, the CD rate will not earn as much as other investments
If interest rates fall, fixed rate CD can be good
You must also decide how long you’re willing to tie up your money
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These accounts usually represent shares in the credit union rather than deposits
“Share-draft account” = checking account“Share-account” = savings account“Share certificate” = CD