Andrea Morgan, Gary Moore, and Melissa Greenslade Program Coordinators University of Arkansas Office of Financial Aid Bank or Credit Union? Bank “For-Profit” organizations in business to make money for their stockholders Serve the general public Deposits federally insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC) www.fdic.gov Credit Union “Not-For-Profit” organizations that exist to serve their members Some require you to be a member of a certain group to join (i.e. teachers, police, etc.) Many are now open to anyone who wishes to join Deposits federally insured up to $250,000 by the National Credit Union Administration (NCUA) www.ncua.gov Types of Bank Accounts Savings Accounts Checking Accounts CDs (Certificates of Deposit) Money Market Accounts Safe Deposit Boxes Consider Liquidity— how easily or quickly you can/want to withdraw your money Savings Accounts Basic “deposit” account with most banks and credit unions to earn interest on savings Interest rates are usually about 1-2% How is interest calculated? Simple Interest – interest is calculated only on the principal Compound Interest – interest is calculated on the principal plus any interest already paid Pros: low risk, high liquidity Cons: low interest rate Checking Accounts Convenient “transactional” account to deposit and withdraw money and write checks to pay for purchases and bills Usually do not pay any interest Single vs. Joint Checking Accounts Single : you are the only person with access to the account Joint: you share the account and money in the account with one or more persons Be careful about having joint checking accounts! Pros: low risk, high liquidity Cons: low/no interest rate, balance required to avoid fees Money Market Accounts Like combined checking and savings accounts Can write checks (although may be limited each month) and earn higher interest than a typical savings account Usually require a minimum balance of $10,000 or more and may charge fees if balance drops below a certain level Pros: better interest rates, high liquidity Cons: greater initial deposit required, may have limited transfers/withdrawals Certificates of Deposit (CDs) Fixed interest rate for a specified term, from three months up to five years or longer Best suited for those with funds that can remain untouched for longer periods of time If you withdraw your money before the term ends, you will lose interest and may be charged a penalty fee Pros: higher interest rates, often insured by the government Cons: low liquidity Safe Deposit Boxes A metal drawer in a bank vault that is rented out on an annual basis as storage for important papers and small items of value Cost between $15-100 per year Opening a Bank Account To open a bank account you will need: Identification Photo ID Social security card And/or certified copy of birth certificate Cash or check for deposit The bank will have you complete paperwork and sign an account agreement and a signature card ATM and Debit Cards ATM Cards are linked to your checking and/or savings account and allow you to withdraw money from your account using your bank’s (and other banks’) Automatic Teller Machines (ATMs). Debit Cards are upgraded ATM/credit cards. Money spent using your debit card is withdrawn immediately from your checking account and sent straight to the company you are paying. PIN (Personal Identification Number) is a secret code that only you should know that grants access to the money in your account at ATMs and merchants Checks Never have your Social Security Number, Driver’s License Number, or Phone Number printed on your checks Many checks are now processed electronically Writing a Check 1. 2. 3. 4. 5. 6. Date Payee Name Amount in numbers Amount written in words Memo (optional) Payer Signature Deposit Slips Available in the back of your checkbook or at the bank, used for making deposits at your bank Direct Deposit Automatic deposit of wages into a consumer’s bank account Convenient and safer than paper check deposits Banking Fees Checking Fee – fee for having a checking account open; often based on balances Some banks offer free checking with direct deposit or certain minimum balances Minimum Balance Fee – fee for failing to keep a certain minimum balance in your checking or savings account ATM Fee– fee charged for using another bank’s ATM NSF Fee – non-sufficient funds (bounced check) – fee for over withdrawing on your account; around $35 per instance Other Bank Policies and Services Funds Availability Policy – how long before your deposit is available for you to use Automatic Withdrawals – bill payments or savings transfers are made automatically; best for fixed payments Overdraft Protection – bank will cover payment over the amount you have in your bank account New Regulations require that you opt in to this; it is not automatic Debit Card purchases will be declined if you are overdrawn Some banks have a charge for this Balancing a Checkbook Make it a habit to record EVERY checking account deposit, payment, or withdrawal in your checking account register (checkbook) Reconciliation – comparing your checkbook and monthly bank statement to ensure the balances match Balancing a Checkbook 1. 2. 3. 4. 5. Check number Date of Transaction Title of Transaction Payment Deposit Sample Bank Statement Internet Banking Internet-only banks without physical offices Online branches of brick and mortar banks Benefits of online banking: Access to account information at any time Ability to transfer money easily between accounts To Bank or Not to Bank? Other Options? Must find ways to cash a check. Check cashing store Fee ranging from 1.75% to 3% of the check $300 check, 2% fee = $6 each time. 24$/month Must find ways to pay bills. Cashier’s checks or money orders cost money Immediately withdraw money from an account or have cash available to pay bank or merchant to write a guaranteed check to pay a bill Fees around $5 each. Any Questions? Before you go… Evaluation Forms PowerPoint will be posted on our website Thank You! Contact Information: Office of Financial Aid; Andrea, Gary, and Melissa Campus location: 114 Silas Hunt Hall Phone: 479-575-3806 Fax: 479-575-7790 E-mail: [email protected] Website: http://finaid.uark.edu/ And find us on Facebook at University of Arkansas Financial Aid!