First Presbyterian ChurchCollegeCARE Ministries presentsSmart Personal Finance Workshop By Dave Berkow & Kevin Kelley
The Role of Banks • Banks are in business to earn a profit! • HOW???? • Interest, Fees, Financial Advice • Banks provide security! • HOW???? • FDIC (Federal Deposit Insurance Corporation) • Insures deposits up to $250,000 • Banks make mistakes • Balance your accounts
Types of Money • Currency • Debit Cards • Checks • Credit Cards http://www.checksinthemail.com/
Types of Money • Advantages of Using Checks • Safety • Valuable only to payee • Legal proof of payment • If lose checkbook, money is safe • Convenience • Help keep financial records • You can send via mail • Online account access
Your Checking Account • What do you need to Opening a Checking Account? • Be 18 years old or older • Signature card (record of signature) • Valid identification • Initial deposit (some banks will give you money to open an account) • Account signatures • Add your parents
Parts of a Check Check Number Andrea Davis 9800 N Lawler Ave Skokie, IL 60077 ABA Number 2-7135/2710 Bank RoutingNumber Check Number Account Number
Your Checking Account (How Checks Work…) • Always write in pen!!! • Show your driver’s license • Can NOT ask for your SS# • Store deposits in their bank, bank transfers checks to your bank for payment. • If your account has enough $, it is paid and canceled. • If not enough $$ - NSF check + FEE Non Sufficient Funds
Your Checking Account • After writing a check, you need to record in the check register • You can keep track on your smartphone using a spreadsheet program • Also record & deduct debit card transactions
WARNING: The speed of deducting $$ from your checking account will increase. Be certain you have enough money before you write the check.
Endorsements • Instructions and permission to the bank about what to do with the check: • Cash it • Put it in your account • Put some in your account and take some in cash • Pass it along to someone else
Endorsements go where? • On the back • Top ¼ of the check • Left side as check is facing you
Blank Endorsement • Use when you are in the building where you will cash or deposit the check • Anyone holding the check can cash or deposit it • Write your account number under your signature Endorse Here Andrea Davis
Restrictive Endorsement • Used when depositing the check into an account • Safest type • Can be used when sending checks through the mail, putting them in a night depository, or having someone else take them to the bank • Write your account number under your signature Endorse Here For deposit only Andrea Davis
Your Checking Account • Checking Account Types • Interest-Bearing Account • Non interest-Bearing Account • Checking Account Fees • Maintenance Fee • Flat fee • Service Fee • For every check you write
Electronic Banking • Automated Teller Machines • Electronic Funds Transfer – move money from 1 account to another by computer • Use of Electronic Funds • Direct Deposit • Debit Cards • Automatic Bill Payment • Pay by Phone • Automatic Withdrawals • Online Banking
Reconciliation Form • Statement Column • Balance from bank statement • (+)Deposits not on statement • (=)Total statement balance and deposits • Checks not on statement (Outstanding Check) • (=)Total checks • Statement balance • Checking Column • Balance from checkbook register • (+)Deposits not in checkbook • (=)Total Checkbook balance and deposits • Fees not in checkbook • (=)Total fees • Checkbook balance
Savings Accounts • Earn greater interest than checking • May have withdrawal restrictions • Use for funds not immediately required
Debit Cards • Used like a check to access funds in your checking account • Can also be linked to a savings account • Potential pitfalls • liability
The Daily Show Trendspotting---Credit
Students & Credit Cards • A good way to establish a credit rating, but be careful . . . • Some recent statistics • 84% of students (18-25) have credit cards (up from 73% in 2004) • 50% of students have four credit cards or more • Only 65% of students pay their bill on time and in full. • The average undergrad has $3,173 in credit card debt • Nearly 20% owe $7,000 or more • Seniors graduate with an average credit card debt of more than $4,100 • In 2002 more than 100,000 people under the age of 25 filled for bankruptcy Source: http://www.creditcards.com/credit-card-news/credit-card-industry-facts-personal-debt-statistics-1276.php#topofpage
Students & Credit Cards Only 2% of undergrads had NO credit history Only 38% have obtained a copy of their credit report and 36% have checked their credit report in the past 12 months
What is the average rate for a credit card? 14.67% What is the average default rate for a credit card? 28.6%
What is the highest interest rate currently charged on a credit card? 41% As High As…
What is the average late fee on credit cards? $28.19 How much in credit card penalty fees will American's pay? $20.5 billion
What is the Average Household Credit Card Debt? $15,799 What is the Total U.S. Consumer Debt? $2.45 Trillion
What is the total Bankruptcy filing in 2009? 1.4 million Americans What is the Total U.S. credit card 30-day delinquency rate? 33%
How many credit card offers do the credit card companies send out to the American Family? 6 billion (average of 6 per household per month)
True or False? • You can easily get credit if you have never borrowed before and have not had any credit problems. • FALSE • You can help yourself to obtain larger amounts of financing if you use small amounts of credit first and repay them as agreed. • TRUE
True or False? • Interest rates can vary greatly from lender to lender. • TRUE • Applying for as many credit cards as possible will improve your credit rating. (ex. AE credit card, Best Buy credit card) • FALSE
True or False? • If you pay your balance in FULL each month, you will never pay interest. • TRUE
And what if you use your credit card to buy the television and you make monthly payments of $300? • Assume you never miss a payment and the annual percentage rate on your card is 8%.
What will the television end up costing you? How long will it take to pay for it?
Your total cost will be $2052 • It will take you SEVEN MONTHS to pay for it
Now, instead of an 8% rate, assume that, because your credit rating is poor, you must pay interest at a rate of 24%. • Also assume that you pay the MINIMUM MONTHLY PAYMENT of only $50 per month.
How long will it take you to pay for the television? How much will you end up paying for the television?
It will take you 82 MONTHS (almost SEVEN YEARS).Total payment: $4,062!
Your choices: • pay $2,000 cash • pay $2,052 over seven months • pay $4,062 over seven years More About Balances
Read the credit card agreement • What is meaning of the following provision: “Your APRs may increase if . . . you fail to make payment to another creditor when due . . . .”?
• What’s this provision called? • “Universal default clause” • Credit CARD Act of 2009 cut back on – but did not completely ban -- these provisions. • Card issuers cannot raise rates on existing balances based on a universal default clause • But they can raise rates immediately on new charges for any reason or no reason at all (as long as the credit card agreement gives them this right) • They can even raise rates on existing balances if you are 60 days late on your payments Recent Developments
True or False? • You pay no interest on a debit card purchase.
TRUE • A debit card works just like a check. Your ATM card is probably a debit card.
Credit card companies are constantly searching for the next “unbanked population” • What does this term mean? • Industry term for potential credit card customer groups that have not previously had access to credit cards. • What was the key unbanked population that credit card issuers discovered in the 1990s?
YOU!!College-bound students became a lucrative new market starting in the 1990s* Recent Developments
Regular Charge Accounts(aka: Charge Account) • Must pay entire amount each month • Often within 25-30 days after billing date. • No stated interest rate…Do not pay interest • Must come in grip with credit problems every month • Examples:
Revolving Charge Accounts • Carry a balance from one month to the next. • Minimum payment due or more • APR is the annual percentage rate of interest the is charged for credit. • The maximum rate that may be charged is controlled by state law. • Buy when the time is right…and pay when the time is right. • Examples:
To Summarize on Card Shopping* • How do you figure out the right card for you? Shop by • APR • Introductory rate (don’t be seduced) • By affinity • By annual fee (don’t pay one) • By other fees
Your credit history • Begins now—when you choose and use credit cards • Includes your missteps for as long as 7 years