2011 banking basic_class_en

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BankingBASICS

Welcome to

MoneyWI$E

A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

YOU can bank on it

© 2011

What will the ‘Banking Basics’ training teach us?

We want you to have a thorough understanding of personal banking services and how they can benefit you.

MoneyWI$EA CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

You will learn about:

Banks and credit unions

How to select a financial institution

How to open an account

How to keep account costs down

How to get more interest on your savings


Checking and savings accounts

What are some of the advantages to having a checking and savings account?


Advantages of checking and savings accounts include: Your money is safe

Each account is insured Checking account records provide

proof that you paid bills and help you keep track of spending

Money in a savings account earns interest to help it grow

Less expensive than check-cashing stores and money orders


Banks and credit unions

What is the difference between a bank and a credit union?


Banks

Banks are financial institutions that take deposits, engage in lending and operate for a profit

Banks offer checking and savings accounts to the general public


Credit unions

Credit unions are financial cooperatives that are owned by and serve individuals with a common affiliation

• for example, a workplace, church, employees union, neighborhood, etc.

Credit unions offer checking and savings accounts to members


Account verification services

How do banks and credit unions learn how you have handled your accounts in the past?


ChexSystems...

Is the major national‘account verification’company• When you apply for a new

checking account, banks and credit unions search for your name in the ChexSystems database

• If you ever abandoned an account, leaving a negative balance, you are probably listed in this database


ChexSystems records

Reports about overdrafts or closed accounts remain in your file for five years

You can get a free copy of your report by contacting ChexSystems at www.consumerdebit.com

You have the right to dispute inaccurate information in your account verification report


http://www.consumerdebit.com/

Your rights You can get a free copy of

your ChexSystems report if:• you have been denied an

account in the past 60 days because of information listed in ChexSystems

• your checks were stolen and used by an impostor or you are the victim of any banking or account fraud

Get a copy anytime for about $10


Don’t get discouraged

If you try to open a new checking account and are turned down by a bank or credit union because of your past account history, don’t give up

Different banks and credit unions have different requirements, so shop around MoneyWI$E


ChexSystems sample report

Let’s review the categories of the ChexSystems sample report:

• Reported information• Drivers license validation• Drivers license verification• Consumer-initiated inquiries• Customer-initiated inquiries• Retail information• Check printing order history


Checking accounts

What kinds of things can you do with a checking account?


Checking accounts

Checking accounts allow you to:

• Pay bills with checks/online bill pay

• Get cash, transfer money and make purchases using your debit card

Access your checking account:

• At an ATM or bank branch• On your computer (online

banking)• By phone or using a data-ready

mobile device (mobile banking)MoneyWI$E


Banking/checking online

Also known as Internet banking

Via a secure website operated by your financial institution (or via an “app”)

Pay bills, view transactions, transfer funds between accounts

Benefits: convenient, low or no acct fees, quick access to info, savings on postage and checks

But, may still need to visit the ATM


Safe Internet banking

Make sure the institution is legitimate

Create a strong password

Keep your ID and password private

Don’t fall for phishing scams

Be careful when using public wireless networks (Wi-Fi) or shared computers

Monitor account activity regularly


Keeping checking account fees in check

Shop around for free or low-cost checking accounts• e-Accounts• Electronic transfer accounts

(ETAs)• Basic (Lifeline) accounts• Low-cost accounts for

seniors or students


Debit cards

You can use your debit card in these ways:• Enter your personal

identification number (PIN) at an ATM or at a retailer’s point-of-sale (POS) terminal

• Sign a receipt• Swipe without a signature or

PIN on purchases under $25 at some stores


Debit cards

If your debit card is lost or stolen:• Alert your bank or credit union

as soon as possible. The longer you wait, the more money you might be responsible for if an unauthorized person uses your card to buy things.


Check writing activity

In this activity you will practice writing a check and entering it into a sample checking account register.


Check writing

Why is it important to enter your checks and debit transactions in your account register?


Keep a record of your transactions: So that you don’t forget checks, cash

withdrawals, and purchases with your debit card• If you forget to record a transaction, it

could overdraw your account. This could lead to a fee for “non-sufficient funds” (bounced check) being charged to your account.

So that you know how much money you have in your account

So that you can track your spending and stick to a budget


Savings accounts

How is a savings account different from a checking account?


What is interest?

Interest is the cost of borrowing money • When a bank/credit union gives

you a loan, you pay interest to them

• When you keep your savings in a bank/credit union, they pay interest to you

APR, or annual percentage rate, is the annual amount of interest, expressed as a percentage of the amount loaned or borrowedMoneyWI$E


Types of interest

There are two types of interest:• Simple interest means that you

only earn interest on your initial deposit

• Compound interest allows you to earn interest not only on your initial deposit, but also on the interest you earn as you go along


Interest

Simple interest

• $100 on deposit for 10 years at a 1% APR would earn $10 in interest

Compound interest

• The same deposit, compounded monthly, would earn $10.51 (51¢ more because of compounding)

• Compounding earns more, especially if you save regularly


In the second half of Banking Basics, we’ll discuss:

• How to earn more interest• Safe deposit boxes• Choosing and opening an account• Managing your checking account • How to resolve any issues with

your account

See you then!


Certificates of deposit (CDs)

What is a certificate of deposit?


Certificates of deposit (CDs) A certificate of deposit, or CD, is a

kind of savings account in which you leave your money on deposit for a set period of time in order to earn interest

The longer the term of your CD, the higher your interest rate will be

If you withdraw your money before the term ends, you will lose interest and might have to pay a penalty


Safe deposit boxes

What is a safe deposit box?

What are some things that you might keep in a safe deposit box?


What to keep in a safe deposit box Copies of insurance policies

Birth, marriage and death certificates

Mortgages, leases and other important contracts

Stock and bond certificates and certificates of deposit (CDs)

Valuable jewelry


Safe deposit boxes

What should you not keep in a safe deposit box?


Safe deposit boxes

The originals of your will and life insurance policies should not be kept in a safe deposit box

The box might be sealed at the time of your death and your survivors would need a court’s permission to open it


Opening an account

Questions to ask:• What is the minimum to open

an account?• What is the interest rate on the

account?• Is there a monthly fee?• Is there any way to avoid

monthly fees?- (more questions on next slide)


More questions to ask when opening an account

• Is there a maximum number of checks I can write each month?

• Is there a fee for using your ATMs?

• What happens if my balance falls below the minimum requirement?

TIP: Use the MoneyWI$E worksheet in your folders as a guide when you apply for an account


Opening an account

What should you bring with you when you are opening a new account?


Identification

When you go to a financial institution to open a new account, bring:

• Photo identification, such as a driver’s license, state ID card or passport

• Proof of your address, such as a utility bill or lease

• Your Social Security number for tax purposes


Activity

Sample savings account application

This is a sample application for an interest-bearing account at MoneyWI$E Bank

Lets walk through the activity together


Savings account application

Ownership

W-9 certification

Optional services

• ATM cards

• Linking accounts

ATM fees

Sign and date your application


Keeping your account straight Once you have an account, write

down and deduct in your check register:

• Every check you write• Every debit card transaction you

make (including “cash back” at stores)

• ATM cash withdrawals• Any bank fees you pay• Any online transactions• Any automatic

payments/deductions• All deposits and credits


Account costs

How can you save money on account costs?


Ideas to keep account costs down

Combine checking and saving balances to avoid monthly fees

Save on ATM fees by using your own bank’s machines

If you can’t avoid an ATM fee, take out larger sums less frequently

Use direct deposit for your paycheck or government benefits check


Ideas to keep account costs down

Ask your local bank or credit union about accounts with free checks

Order from a reputable mail-order company

Check with the Better Business Bureau before buying checks from a company you are not familiar with

Write down all transactions and reconcile your account so you don’t overdraw your account and incur overdraft fees


Standard overdraft protection Your overdraft transaction is covered if

you pay a fee

There is a separate fee for each overdraft transaction

You must give your permission (opt in) to allow overdrafts on debit card and ATM transactions

If you don’t opt in, you can’t be charged but your overdraft debit transactions will be declined


Overdraft protection plans

An optional bank service called overdraft protection waives overdraft fees

It can work with a loan or line of credit or with your savings account• For the line of credit, you must have a

good credit history• You will be charged a small

transaction fee when you overdraw your account

• You’ll pay interest on funds from the credit line when you use them


Resolving problems

Mistakes happen!

Bring issues or errors on your account or account statements to the attention of your bank or credit union

Don’t delay—waiting too long could make a situation worse


Solving an account problem Contact the financial institution as

soon as you can Write down the date of all calls and

the names of the people who help you resolve the issue

Send a summary letter (by registered mail, receipt requested, or by email) to establish a “paper” trail on your problem (and keep copies of email)

Offer a solution and a date by which you hope to resolve the issue


Escalating your issue

Give your bank or credit union time to solve or report back to you on your problem

If you are not able to resolve your issue with your bank or credit union after a reasonable time, you can contact the institution’s regulator

Call the FDIC at 877-275-3342 to find the name and contact info for your institution’s regulator


Congratulations

By attending the MoneyWI$E ‘Banking Basics’ training, you’ve empowered yourself to make good decisions about your account needs.


MoneyWI$E


Visit money-wise.org for additional information and to access free financial education

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2011 banking basic_class_en

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