Financial Institutions Overview

Financial Institutions

• Depository Institutions take deposits and make loans, examples include banks, credit unions, and savings and loan associations.
• Investment Institutions help individuals and businesses invest their money, examples include mutual funds, brokerage firms, and investment banks.
• Contractual Institutions provide financial services based on contracts, examples include insurance companies, pension funds, and finance companies.

Credit Unions, Payday Lenders, and Pawn Lenders

• Credit Unions are member-owned financial institutions, often serving specific groups like employees or communities.
• Payday Lenders provide short-term loans, usually with high interest rates and fees, based on the borrower's paycheck.
• Title Pawn Lenders offer loans secured by the borrower's vehicle title, with high interest rates and the potential for vehicle repossession if payments are not made.

Checking and Savings Accounts

• Checking Accounts are designed for frequent transactions, allowing for easy access to funds via checks or debit cards.
• Savings Accounts are intended for saving money, often earning interest, but may have limits on withdrawals or impose penalties.

Types of Credit and Loans

• Credit Cards allow individuals to borrow money for purchases, with revolving balances and interest payments.
• Personal Loans are unsecured loans for personal needs, often with fixed interest rates and repayment terms.
• Auto Loans are secured loans for purchasing vehicles, with interest rates and terms based on the vehicle's value and the borrower's creditworthiness.
• Mortgages are secured loans for real estate purchases, usually with long repayment terms and varying interest rates.

Why Is Your Money Safer in a Bank Account?

• Banks have security measures to prevent theft, such as vaults, alarms, and surveillance systems.
• Federal Deposit Insurance Corporation (FDIC) insures deposits, protecting account holders against bank failure.

Financial Accounts Earning Interest

• Savings Accounts typically earn interest on your deposits.
• Certificates of Deposit (CDs) offer higher interest rates for fixed terms, limiting access to funds.
• Money Market Accounts offer higher interest rates than savings accounts, but may restrict withdrawals.

Choosing a Bank Account

• Fees: Consider monthly charges, ATM fees, and penalties for insufficient funds.
• Interest Rates: Look for accounts that offer competitive interest rates on savings and CDs.
• Services: Evaluate the convenience of online banking, mobile apps, customer service, and available financial products.

Depositing and Accessing Checking Accounts

• Depositing Money:
  • Direct deposit: Automatic deposit of your paycheck into your checking account
  • Mobile deposit: Using a mobile app to deposit checks through your phone.
• Accessing Money:
  • Checks: Written authorization to withdraw funds from your account
  • Debit Card: A card linked to your checking account that allows you to withdraw cash or make purchases.

Writing Checks

• Image: Use the check image provided to write a check to your best friend for $11.60, include all necessary elements, such as date, payee name, amount, and signature.

Bank Statements

• Items Included on a Statement:
  • Transaction date
  • Transaction details
  • Beginning and ending balance
  • Fees charged
  • Interest earned
• Reconciling a Bank Statement:
  • Compare your records: Check your account register for discrepancies with the statement.
  • Reconcile differences: Account for any outstanding deposits, checks, or fees.
  • Contact your bank: Resolve any remaining discrepancies with your bank.

Overdraft Protection

• Purpose of Overdraft Protection: To prevent checks from bouncing or debit card transactions being declined when insufficient funds are available.
• Downsides: Overdraft protection can be costly, with high fees associated with overdraft charges.

Reconciling Account Balances

• Reconciling account balances can protect you against errors on your statement.
• Maintaining a positive account balance prevents overdraft fees.

Key Terms

• Automated Teller Machine (ATM): A machine allowing customers to access their bank accounts
• Balance: The amount of money in a bank account at a specific time.
• Certificate of Deposit (CD): A time deposit account that offers higher interest for fixed terms.
• Checking Account: An account for frequent transactions using checks or debit cards.
• Contractual Institution: A financial institution offering services based on contracts with customers (e.g., insurance companies, pension funds).
• Credit: The ability to borrow money, based on your creditworthiness.
• Credit Card: A plastic card allowing you to borrow money for purchases, with revolving balances and interest charges.
• Debit Card: A card linked to your checking account, allowing you to withdraw cash or make purchases directly from your account.
• Depository Institutions: Financial institutions accepting deposits and making loans (e.g., banks, credit unions).
• Economy: The system by which a country manages its resources and wealth, including production, consumption, and trade.
• Financial Institution: An organization providing financial services to individuals and businesses (e.g., banks, credit unions, insurance companies).
• Interest: Payment received for lending money, often expressed as a percentage of the principal.
• Investment Institution: An institution helping individuals and businesses invest money (e.g., brokerage firms, mutual funds).
• Loan: A sum of money borrowed, requiring repayment with interest.
• Reconcile: To match your account statement with your personal records, correcting discrepancies.
• Savings Account: An account for storing money designed to earn interest.

New Jersey Driver License Requirements

• Motorists must carry a valid driver license, probationary license, or New Jersey permit while driving in the state.
• Motorists must also carry valid insurance and vehicle registration cards.
• A validated New Jersey driver permit holder must be accompanied by a licensed driver.
• Motorists must report address changes to the MVC within one week.
• Individuals moving out of New Jersey must also update their address with the MVC.
• Motorists changing their names due to marriage, divorce, or court order must report the change within two weeks.
• Individuals moving to New Jersey from another state must apply for a New Jersey license within 60 days of moving.
• Commercial driver license (CDL) holders must apply for a New Jersey license within 30 days of moving.
• The out-of-state license must be surrendered upon receipt of a New Jersey license.
• Individuals with a valid license from another country can drive in New Jersey for up to a year.
• Operators of commercial vehicles must meet stricter testing standards than drivers of cars or motorcycles.
• Commercial vehicle operators must possess a valid New Jersey driver license before applying for a CDL.
• Individuals who have never held a driver license must complete the MVC’s Graduated Driver License (GDL) Program.
• The GDL program introduces driving privileges in phases with a period of supervised driving.