Intro to Banking and Credit

Two basic types of accounts

1. Savings – savings accounts pay interest on the money in the account. This is because the bank assumes that savings account money will not be used by account holder, thus allowing the bank to use that money to make loans. Bank loans are paid back with interest and some of that interest is then paid back to original account holder.

2. Checking – some checking accounts also pay interest, but there is usually a minimum amount of money that must be kept in the account.

Required elements of a check

1. date

2. amount

3. signature

4. payee

100.00

One hundred and no/100

Bank and Credit Cards

Nowadays, most debit (check) cards are also ATM cards.

Debit/Check Card

Credit Card

• ATM Cards – (automated teller machine)– Must have a bank account.– Allows the holder to withdraw, transfer and

manage their bank account(s).• Debit/Check Cards

– Allows the holder to make purchases.– Money is withdrawn directly from your

account.– If you don’t have enough money in your

account, then the purchase may be denied OR the bank will pay for the purchase and you will be charged an overdraft fee.

• Credit Card– A bank extends a line of credit to the holder.– Each time you use the card, you are taking a

loan and promising to pay back the money and the interest on the loan; i.e. the money being used to pay for the purchase is not yours.