Introduction to Depository Institutions

Presented by

Day 1

Introductions

• Rachel Martini – Customer Relations Specialist

• Lindsey Bamba – Westside Branch Manager

Overview of 2 Days

• Types of depository institutions• Deposit Insurance• Factors to consider when

choosing a depository institution

• Types of accounts• Types of services• Interest• Credit• Worksheets/Homework/Quiz

What do you know

about banks?

Fill out the left side, labeled ‘Before,’ only.

Take notes:

What is a Depository/Financial

Institution?

Depository institution –

businesses that provide financial services

What is the name of one depository institution in your

community?

Types of Depository Institutions

Three types of depository institutions are:Commercial

BanksCommunity Banks Credit Unions

Each type is unique – choose what is best for you

For-profit

Open to anyone who wants to utilize a depository institution

Offer numerous financial services

Usually the largest depository institutions nationwide

Not-for-profit – owned by members

Have membership qualifications – members must share a “common bond”Offer many services but usually not as many as a bank

Are often able to pay higher interest rates and charge lower fees

For-profit (may be owned by their members, or they may be publicly held

Open to individuals or small local businesses who want a local depository institution

Local or regional - Range in size but usually found in local communities

Offer numerous financial services

BANKS

• Investment• Commercial• Community• Savings & Loan

• Employer• Community• Military

CREDIT UNIONS (MEMBERS ONLY)

Types of Depository InstitutionsWhich one should you choose?

Location

Can be an important factor when choosing a depository institution

Physical location or

only online?

Multiple locations or just one?

Locations all across the U.S. or only in your

state or city/town?

Do you have transportation to get to a

location?

Do you know how many locations your financial institution has?

Depository institutions keep your money safe

• Offer a safe and secure place to store your money

• Security (safes, secure networks, etc.)

• Insurance

Federal Deposit Insurance

Corporation (FDIC)

National Credit Union

Administration (NCUA)

How can insurance play a role in choosing a

depository institution?

Insures banks and other types of institutions

other than credit unions

$250,000 per depositor, per

insured institution, for each account

ownership type

Insures credit unions

Same as FDIC

Businesses offer services to the public

What services do these businesses offer?

Grocery store

Gas station

Restaurant

Clothing store

Services offered by depository institutions

What are three services a depository

institution might offer to entice you

to choose them over another?

(free checking, high interest rate, etc.)

Transaction and

Savings Tools

Credit

Financial Advice

Safe-Deposit Box

Special Needs

Payment Instruments

Savings Tools

Accounts that help you

manage your money

May or may not earn interest

The 2 most common accounts:

Checking Account

Savings Account

Does anyone have a checking or savings account?

Checking Account Savings Account

Should you look for a low or high interest rate on a savings

account?

Provides quick access to funds for transactions

Use deposited money anytime by:• Writing checks• Using a debit card• Withdrawing cash• Electronically transferring

money

Some earn interest but most do not

An account for money not intended to be used for daily expenses

Access to money is more limited than a checking account

Earn interest

Account Purposes

Depository institutions offer the ability to earn interest

Interest - the price paid for using someone else’s money

You can earn interest or be charged interest

The amount of interest earned or charged is determined by the interest rate (percentage rate used to calculate interest, usually an annual rate)

Interest ExplainedWhat is Interest?• An amount of money banks or other financial

institution pay you for keeping money on deposit with them or to use their money. Expressed as a percentage.

What is Annual Percentage Yield? (APY)• The amount of interest you will earn on a yearly

basis, expressed as a percentage.• The more often your money compounds, the

higher the APY, and the more interest you will receive.

• Compare the APYs of different accounts, not the interest rate.

Interest Rate View

$100 deposited in an account earning 2%

interest

Look for high interest rates when earning interest

Look for low interest rates when paying interest

$100 .02 $2

Simple Interest

per year

What if You Saved $5 a Day

No Interest

2% Rate of

Return

Year 1

$1,825

$1,844

Year 5

$9,125

$9,595

Year 10

$18,250

$20,188

Where can you find $5?

Credit

What is it? What can you do?

Other Information

• Borrowing money

• Loans• Auto• Home• Student

• Credit cards

• You will pay back the money borrowed plus interest

Loan Services:When should I get a loan?

• Car Loan (Installment Loan)• Repaid over time with a set number of scheduled

payments for a certain term (i.e. 48 months)• Home Loan (Mortgage Loan)

• Home ownership - a long-term living commitment to be over the next 15 to 30 years. An investment that is much more reliable than anything the stock market can offer.

• Credit Card• Variable interest rate. May include additional fees

and finance charges.

Read the fine print. It may include more details that can cost you more than expected in the long run. (Annual fees, early termination fees, etc.)

How long would it take to pay off my credit card balance?

Do I really need to buy those shoes?

Balance $250 $500 $1,000

Interest RateYears to pay off at 2%Minimum Payment*

15% 1.58 3.67 9.83

18% 1.67 3.92 12.58

21% 1.67 4.25 19.58

24% 1.75 4.67 ?

*2% is the typical minimum payment requirement or $10, whichever is higher

$851.03 int.

$1,396.77 int.

$2,797.55 int.

$150.87 int.

$198.34 int.

$257.01 int.

$32.09 int.

$39.85 int.

$48.18 int.

$57.18 int. $332.22 int.

Which option is better?

Saving? Credit Card?

OR

Saving is well worth the money. Remember to create a budget and stick to it.

$1,938 earned

$470 earned

$19 earned

Today’s good saving habits will pay off tomorrow!

What is a credit score?A credit score is a three digit number used by lenders to determine your creditworthiness for a mortgage, loan or credit card. Your score can affect whether or not you are approved as well as what interest rate you are charged.

How is my credit score calculated?

Use Credit Wisely

• Advantages• Build credit• Rent a car• Available for emergencies• Bonuses/Frequent flyer

miles• Online purchases• Convenience

• Disadvantages• Negatively affect credit• Debt accumulation• Years to repay debt• High interest rates• Repayment could be 3 to 5

times the original purchase price

I.O.U.$

Obtaining a loan or credit card…

Meet Josie

Has been accepted to a university 3 hours from home

Making important decisions about her future, especially

regarding money

Looking for a safe place to store her money and pay her

bills while at college

Senior in high school

Your mission: Learn more about Josie and depository

institutions to help her make the best choice

Found two depository institutions in her

hometown that also have branches near

her college

She has summarized their information on the

“Josie’s Depository Institution Comparison

Chart”

Help Josie manage her money by choosing a depository institution

Josie’s Depository Institution Comparison Chart (Homework)

Josie’s Depository Institution Scavenger Hunt Cards

Josie’s Depository Institution (Page 3)

Questions?