Title: BANKING Checking Accounts, Savings Accounts, Bank Reconciliations Compound Interest Bank Services Re
1BANKINGChecking Accounts, Savings
Accounts,Bank ReconciliationsCompound
InterestBank ServicesReview
2Checking Accounts
3Benefits of Checking Accounts
- Checking accounts are convenient and safer than
carrying cash. -
- Canceled checks serve as receipts.
- Budgeting is facilitated because check records
are kept.
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6Recording Transactions in a Check Register
andReconciling a Checking Account
7How to Reconcile a Checking Accountbased on a
Monthly Bank Statement
- Bank Statement Balance
- Add Outstanding Deposits
- Subtract Outstanding Checks
- Equals Revised Bank Statement Balance
- Check Register Balance
- Difference
8- Keeping a Check Register
- Beginning Balance 570.00
- 1. April 15 Weekly paycheck from Universal
Studios gets direct deposited 168.00 - 2. April 16 Buy books from Campus Book Store for
500.00 - 3. April 18 18.00 Gas using Debit Card
- 4. April 20 ATM withdrawal 80.00
- 5. April 22 paycheck 190.50 directly deposited
- 6. April 27 paid cell phone bill for 43.85 made
payable to Verizon - 7. April 29 deposit 240.00
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11How to Reconcile a Checking Accountbased on a
Monthly Bank StatementExample
- Bank Statement Balance
570.50 - Add Outstanding Deposits
0 - Subtract Outstanding Checks
(283.85) - 2 43.85
- 3 240.00
.. - Equals Revised Bank Statement Balance
286.65 - Check Register Balance
286.65 - Difference
0.00
12Compounding Interest
13Compounding Interest Annually
Beginning Interest Ending Year Balance Earned
(5) Balance
1 100.00 5.00 105.00 2 105.00 5.25 110.25 3
110.25 5.51 115.76
14Compounding Interest Quarterly
Quarterly Compounding Annual Interest Rate
6 Beginning Quarterly Quarterly Interest
Ending Year Balance Interest Q1 Q2 Q3 Q4 Balan
ce
1 100.00 .015 1.50 1.52 1.55 1.57 106.14 2
106.14 .015 1.59 1.62 1.64 1.66 112.65 3 112.65
.015 1.69 1.72 1.74 1.77 119.57
15Compounding Interest and Making Additional
Deposits
Beginning Interest Ending Year Balance Deposi
ts Earned (5) Balance
1 0.00 100.00 5.00 105.00 2 105.00 100
.00 10.25 215.25 3 215.25 100.00 15.76 333.01 4
331.01 100.00 21.55 452.56
16Bank Services
17What is a Certificate of Deposit?
- CDs are similar to savings accounts in that they
are insured and thus virtually risk-free they
are "money in the bank". - They are different from savings accounts in that
the CD has a specific, fixed term (often 3
months, 6 months, or 1 to 5 years), and, usually,
a fixed interest rate. - It is intended that the CD be held until
maturity, at which time the money may be
withdrawn together with the accrued interest.
18Debit Card vs Credit Card
- Debit Card
- - Easier to obtain
- Uses money you have
- On-line - immediate electronic transfer of funds
OR Offline - takes 2-3 days - Usage grew 3 times faster than credit card
2005-2007
- Credit Card
- Harder to obtain
- - Uses money you dont have
- - Uses a merchant account -
- ie Visa, MasterCard
- - Usage is slowing
19Credit Card Factssource Federal Reserve and
VISA USA
- Of households that have credit card debt, median
is 2,200 balance. - 40 of credit card holders pay their balance in
full every month. 60 dont. - 1 out of 10 has more than 10 credit cards.
Average is 4 cards. - Typical consumer has access to 19,000 on all
credit cards combined. - 23 increase in 5 years of use of cards that
accumulate points (for merchandise or airline
tickets) - U.S. VISA transactions conduct more than
1,000,000,000,000 (1 trillion) in annual volume.
20Debit Card Factsaarp.org - Managing Money
- Generally dont have to show ID or sign at
purchase - Faster in checkout than checks or credit cards
- No interest
- Lower processing fees to storeowner than credit
card - Less protection than credit card if something
goes wrong with your purchase - Less protection than credit card if card is
stolen or mis-used
21How Do I Know My Money is Safe?
22FDIC Insurance(Federal Deposit Insurance
Corporation)
- Formed June 16, 1933
- United States government corporation created by
the Glass-Steagall Act of 1933. - Created because of the number of bank failures
during the Great Depression. - Glass-Steagall Act separated banks into
commercial and investment banks. Insured
commercial bank deposits. - Provides deposit insurance which guarantees the
safety of checking and savings deposits in member
banks, currently up to 100,000 per depositor per
bank - FDIC currently has 4,125 employees
23FDIC Insurance
- FDIC Insurance covers
- Checking Accounts
- Savings Accounts
- Certificates of Deposit
- FDIC Insurance does not cover
- Stocks
- Bonds
24FDIC Lessons
- Never exceed FDIC insurance limits, as you may
NEVER be able to get your uninsured money back. - New Bail-Out bill raised FDIC insurance limits
to 250,000.