TYPES OF FINANCIAL SERVICES
A financial institution can provide services for various personal and business activities. The services you use depend on your needs.
Savings ServicesSafe storage of funds for future use is a common need. One of the main services that financial institutions offer is accepting money from customers for safekeeping. A range of savings plans is available for this purpose.
Payment ServicesThe ability to transfer money to others is necessary for daily business activities. Types of payment services include checking accounts, debit cards, online payments and automatic withdrawals.
Lending ServicesMost people, businesses, and governments borrow money at some time. A business may want to borrow money to build a new warehouse or buy products to resell. Individuals may borrow to buy a car or pay college tuition. Banks make loans because most of their income is from the interest they charge borrowers.
Banks offer many types of lending services. These include auto loans, business loans, and mortgages. Credit cards allow a person to buy items without having the cash. When paying with a bank credit card, you are borrowing money from the bank.
Electronic BankingElectronic funds transfer (EFT) refers to the use of computers and other technology for banking activities. Electronic banking services include the use of automated teller machines (ATM), point-of-sale transactions, direct deposit, and automatic bill payment. Online computer banking allows a customer to access many financial services.
Storage of ValuablesBanks offer safe-deposit boxes for storage of valuables. Because these safe-deposit boxes are in secured areas, they are very safe places to keep jewelry, rare coins, investment certificates, birth records, a list of insurance policies, and other valuable documents.
Only you or someone to whom you have given the right to open the box may open it. Not even a bank has the right to open your safe-deposit box unless it is ordered to do so by a court. You rent safe-deposit boxes by the year. They come in a variety of sizes.
Investment AdviceMany financial institutions help customers by offering financial advice and investment services. Banks can assist customers with decisions about buying a home, offer tips on money management, and help customers exchange U.S. funds for foreign currency.
Most banks offer advice on investments. This involves savings that are put to work to earn more money. Types of investments include government bonds, stocks, and mutual funds.
Management of TrustsMany banks manage investments on behalf of customers. When they do this, the money or other property that is turned over for the bank to manage is said to be held in trust. This service can be offered through a trust company or through trust departments in banks.
Trusts are used by people of all ages. They are especially useful for very young people and for some elderly people. A young person who inherits money may not have the skill and experience to manage it wisely. Elderly people who are ill may ask the trust department of a bank to manage their money. The bank makes investments and keeps the customers informed about what is happening to their money.
A financial institution can provide services for various personal and business activities. The services you use depend on your needs.
Savings ServicesSafe storage of funds for future use is a common need. One of the main services that financial institutions offer is accepting money from customers for safekeeping. A range of savings plans is available for this purpose.
Payment ServicesThe ability to transfer money to others is necessary for daily business activities. Types of payment services include checking accounts, debit cards, online payments and automatic withdrawals.
Lending ServicesMost people, businesses, and governments borrow money at some time. A business may want to borrow money to build a new warehouse or buy products to resell. Individuals may borrow to buy a car or pay college tuition. Banks make loans because most of their income is from the interest they charge borrowers.
Banks offer many types of lending services. These include auto loans, business loans, and mortgages. Credit cards allow a person to buy items without having the cash. When paying with a bank credit card, you are borrowing money from the bank.
Electronic BankingElectronic funds transfer (EFT) refers to the use of computers and other technology for banking activities. Electronic banking services include the use of automated teller machines (ATM), point-of-sale transactions, direct deposit, and automatic bill payment. Online computer banking allows a customer to access many financial services.
Storage of ValuablesBanks offer safe-deposit boxes for storage of valuables. Because these safe-deposit boxes are in secured areas, they are very safe places to keep jewelry, rare coins, investment certificates, birth records, a list of insurance policies, and other valuable documents.
Only you or someone to whom you have given the right to open the box may open it. Not even a bank has the right to open your safe-deposit box unless it is ordered to do so by a court. You rent safe-deposit boxes by the year. They come in a variety of sizes.
Investment AdviceMany financial institutions help customers by offering financial advice and investment services. Banks can assist customers with decisions about buying a home, offer tips on money management, and help customers exchange U.S. funds for foreign currency.
Most banks offer advice on investments. This involves savings that are put to work to earn more money. Types of investments include government bonds, stocks, and mutual funds.
Management of TrustsMany banks manage investments on behalf of customers. When they do this, the money or other property that is turned over for the bank to manage is said to be held in trust. This service can be offered through a trust company or through trust departments in banks.
Trusts are used by people of all ages. They are especially useful for very young people and for some elderly people. A young person who inherits money may not have the skill and experience to manage it wisely. Elderly people who are ill may ask the trust department of a bank to manage their money. The bank makes investments and keeps the customers informed about what is happening to their money.
TYPES OF CHECKING ACCOUNTSWhile checking accounts vary from one bank to another, three types are most common.
Regular Checking AccountsIf you write a lot of checks each month, consider a regular checking account. A service charge is a fee a bank charges for handling a checking account. With most banks, there is no service charge for a regular checking account as long as you maintain a certain minimum balance. This amount varies and is often $300 or higher. A checking account at a credit union may be called a share draft account because the members are called shareholders .
Interest-Earning Checking AccountsMany financial institutions offer checking accounts that earn interest. These accounts may require a higher monthly balance than regular checking accounts. If the account falls below the required amount, the bank usually pays no interest and may add a service charge.
The rates of interest that banks pay their customers also vary. Usually, a bank will offer a higher rate of interest when a higher balance is kept in the account. Very often, interest rates on checking accounts are quite low. When you are depositing larger amounts of money, consider other savings alternatives.
Special Checking AccountsIf you only write a few checks each month, consider a special checking account . Also called an activity account, banks charge customers about 10 to 20 cents for each check written. A monthly service charge may also be added.
Comparing Checking AccountsWhen selecting a checking account, evaluate the following items.
Regular Checking AccountsIf you write a lot of checks each month, consider a regular checking account. A service charge is a fee a bank charges for handling a checking account. With most banks, there is no service charge for a regular checking account as long as you maintain a certain minimum balance. This amount varies and is often $300 or higher. A checking account at a credit union may be called a share draft account because the members are called shareholders .
Interest-Earning Checking AccountsMany financial institutions offer checking accounts that earn interest. These accounts may require a higher monthly balance than regular checking accounts. If the account falls below the required amount, the bank usually pays no interest and may add a service charge.
The rates of interest that banks pay their customers also vary. Usually, a bank will offer a higher rate of interest when a higher balance is kept in the account. Very often, interest rates on checking accounts are quite low. When you are depositing larger amounts of money, consider other savings alternatives.
Special Checking AccountsIf you only write a few checks each month, consider a special checking account . Also called an activity account, banks charge customers about 10 to 20 cents for each check written. A monthly service charge may also be added.
Comparing Checking AccountsWhen selecting a checking account, evaluate the following items.
- Minimum balance
- Interest rate earned, if any
- Monthly service charge
- Fees for other services, such as printing checks and stop payment orders
- Other restrictions
ELECTRONIC BANKINGEach day, more and more people are using electronic banking services. ATMs, personal computers, cell phones, and other electronic devices are processing most bank transactions.
E-Banking ServicesOver the years, banks have expanded their hours of operation to meet the demands of their customers. Traditional “banker's hours” of 9 A.M. to 3 P.M. are a thing of the past. Banks have expanded hours, whiles ATMs and online banking
are available 24 hours a day. Figure 17-3, on page 435, illustrates some common electronic banking services.
Automatic Teller Machines Commonly called a cash machine , an automatic teller machine (ATM) allows many banking services. The most common use of an ATM is withdrawing cash from a bank account or getting a cash advance from a credit card. Bank customers also can use ATMs to check account balances, make deposits, or transfer funds from one account to another.
A debit card , or cash card , is used for ATM transactions. A debit card is different from a credit card. With a debit card issued by your bank, you are using money that is in your account. With a credit card, you are borrowing from the bank to pay later.
A lost or stolen debit card can be expensive. If you notify the financial institution within two days of the lost card, your liability for unauthorized use is $50. After that, you can be liable for up to $500 of unauthorized use for up to 60 days.
ATM services have expanded to provide other types of transactions. You can use these machines to buy bus passes, postage stamps, and gift cards.
Be aware that many banks charge fees for ATM usage. To minimize ATM fees, compare rates at several financial institutions. Use your bank's ATMs to avoid surcharges. Withdraw larger amounts to avoid fees on several small transactions.
Payments at the Point-of-Sale In a point-of-sale transaction , a merchant accepts a debit card to pay for purchases. Most gas stations, stores, and restaurants accept this type of payment. Vending machines that accept debit cards are also becoming more common.
Direct Deposit A major portion of society uses direct deposit of paychecks and government payments. Funds are deposited electronically and available automatically for your use.
Automatic Bill Payments Each month, many people pay their rent, mortgage, loans, utilities, and other bills without doing anything. Automatic bill payment requires a bank customer to authorize preset amounts of monthly expenses. The bank deducts the payments from your account and transfers them to the appropriate companies. With automatic bill payments, be sure to check each month that the correct amounts have been deducted.
Electronic Payment OptionsThe use of cash, checks, and credit cards is declining. These payment methods are being replaced by newer electronic alternatives.
Debit Card Transactions Most stores, restaurants, and other businesses accept debit cards issued by Visa and MasterCard. You may also know these cards as check cards . When the debit card transaction is processed, the amount of the purchase is deducted from your checking account.
Online Payments Various Web companies and banks now provide online bill payment services between buyers and sellers. When using these services, be sure to think about the monthly charge as well as online security and customer service availability.
E-Banking ServicesOver the years, banks have expanded their hours of operation to meet the demands of their customers. Traditional “banker's hours” of 9 A.M. to 3 P.M. are a thing of the past. Banks have expanded hours, whiles ATMs and online banking
are available 24 hours a day. Figure 17-3, on page 435, illustrates some common electronic banking services.
Automatic Teller Machines Commonly called a cash machine , an automatic teller machine (ATM) allows many banking services. The most common use of an ATM is withdrawing cash from a bank account or getting a cash advance from a credit card. Bank customers also can use ATMs to check account balances, make deposits, or transfer funds from one account to another.
A debit card , or cash card , is used for ATM transactions. A debit card is different from a credit card. With a debit card issued by your bank, you are using money that is in your account. With a credit card, you are borrowing from the bank to pay later.
A lost or stolen debit card can be expensive. If you notify the financial institution within two days of the lost card, your liability for unauthorized use is $50. After that, you can be liable for up to $500 of unauthorized use for up to 60 days.
ATM services have expanded to provide other types of transactions. You can use these machines to buy bus passes, postage stamps, and gift cards.
Be aware that many banks charge fees for ATM usage. To minimize ATM fees, compare rates at several financial institutions. Use your bank's ATMs to avoid surcharges. Withdraw larger amounts to avoid fees on several small transactions.
Payments at the Point-of-Sale In a point-of-sale transaction , a merchant accepts a debit card to pay for purchases. Most gas stations, stores, and restaurants accept this type of payment. Vending machines that accept debit cards are also becoming more common.
Direct Deposit A major portion of society uses direct deposit of paychecks and government payments. Funds are deposited electronically and available automatically for your use.
Automatic Bill Payments Each month, many people pay their rent, mortgage, loans, utilities, and other bills without doing anything. Automatic bill payment requires a bank customer to authorize preset amounts of monthly expenses. The bank deducts the payments from your account and transfers them to the appropriate companies. With automatic bill payments, be sure to check each month that the correct amounts have been deducted.
Electronic Payment OptionsThe use of cash, checks, and credit cards is declining. These payment methods are being replaced by newer electronic alternatives.
Debit Card Transactions Most stores, restaurants, and other businesses accept debit cards issued by Visa and MasterCard. You may also know these cards as check cards . When the debit card transaction is processed, the amount of the purchase is deducted from your checking account.
Online Payments Various Web companies and banks now provide online bill payment services between buyers and sellers. When using these services, be sure to think about the monthly charge as well as online security and customer service availability.
Some online payment services give you a choice of using a credit or a bank account, while others require one or the other. Being linked to your checking account may not give you as much leverage when disputing a transaction.
Stored-Value Cards The gift card your aunt sent you for your birthday is a stored-value card. Prepaid cards for phone service, transit fares, highway tolls, and school lunches are common. Some stored-value cards are disposable. Others can be reloaded with additional funds. Some employers use prepaid cards instead of paper paychecks to help employees avoid check-cashing fees. Employees can use the cards to make purchases and to withdraw cash at ATM machines.
Smart Cards These “electronic wallets” are similar to ATM cards. Their embedded microchip stores prepaid amounts as well as account balances, transaction records, insurance information, and medical history.
Banking in the FutureYour use of banks and money will continue to change. Electronic financial services will be available though wireless technology. You will be able to do almost any banking transaction through your home computer, cell phone, or access card. Technology will create a personalized system for obtaining, transferring, and using funds.
Even when your bank is not open, touch-screen systems will permit you to apply for, negotiate, and finalize loans. And, location-based services will allow financial activities and other business transactions based on your geographic position. You will be able to identify the location of the nearest cash machine or bank branch through a variation of global positioning technology.
Stored-Value Cards The gift card your aunt sent you for your birthday is a stored-value card. Prepaid cards for phone service, transit fares, highway tolls, and school lunches are common. Some stored-value cards are disposable. Others can be reloaded with additional funds. Some employers use prepaid cards instead of paper paychecks to help employees avoid check-cashing fees. Employees can use the cards to make purchases and to withdraw cash at ATM machines.
Smart Cards These “electronic wallets” are similar to ATM cards. Their embedded microchip stores prepaid amounts as well as account balances, transaction records, insurance information, and medical history.
Banking in the FutureYour use of banks and money will continue to change. Electronic financial services will be available though wireless technology. You will be able to do almost any banking transaction through your home computer, cell phone, or access card. Technology will create a personalized system for obtaining, transferring, and using funds.
Even when your bank is not open, touch-screen systems will permit you to apply for, negotiate, and finalize loans. And, location-based services will allow financial activities and other business transactions based on your geographic position. You will be able to identify the location of the nearest cash machine or bank branch through a variation of global positioning technology.