Banking Fees - ATM fees
- Debit Card fees (few still charge)
- Check printing fees
- Stop payment fees
- Bounced check fees
- Checking fees
- Checking Accounts
- Savings Accounts
- Certificate off Deposits (CDs)
- Money Market Accounts
Checking Accounts - Bank holds on to your money for you to access by writing a check. Checks tell the bank it is okay to transfer that amount of money to another person.
- Stop Payment: if you contact your bank before the check is paid, they can stop the payment on the check and the person will not get the money.
Advantages/Disadvantages of Checking Accounts - Adv.
- Easy access to money via. Check or ATM/Debit card
- Money is safe, no need to carry large sums of cash
- Dis.
- Most checking accounts do not earn interest. As inflation increases, the value of your money decreases.
Bounced Check - If there is not enough money in your account, the bank can refuse to honor the check. Your bank will charge a fee and the person who you wrote the check to may charge a fee. Overdraft privileges with your bank prevents bouncing checks.
Special Checks - Cashier’s check: guarantee that the check is good because it is drawn from a bank’s account
- Certified Check: personal check guaranteed by the bank
- Traveler’s Check: issued by travel companies and can be used where personal checks will not be accepted
- Money Order: pay teller amount and they create a check for you.
Savings or Deposit Accounts - Bank account where money earns interest but less accessible than checking accounts.
Advantages/Disadvantages of Savings Accounts - Adv.
- Deposited money earns interest (1-2%)
- Money is safe and relatively easy to access
- Dis.
- Interest earned is low, often lower than inflation.
- Cannot access with checks
Certificate of Deposit (CD) - Person deposits money with a bank and promises they will not withdraw money for a set period of time (6 months, a year)
- Money withdrawn early is charged a fee.
Advantages/Disadvantages of CDs. - Adv.
- Dis.
- Money is locked into set interest rate. If other interest rates go up, still stuck with lower one.
- Cannot access money until set period of time. Penalty fees for taking money out early.
Why do banks pay interest? - Interest is payment by the bank for use of your money.
- Banks take deposits made and use them a loans for homes, cars, etc. Money that is more likely to remain in the bank earns a higher rate of interest (CDs), while money that may be used receive little to no interest (Savings/Checking accounts)
Money Market Accounts - Accounts where the bank invests the money in short-term investments. These investments pay out interest.
Advantages/Disadvantages of Money Market Accounts - Adv.
- Pay out more interest than CDs or other accounts
- Dis.
- They require a high minimum deposit to open, usually between $1000 and $10,000 and must keep a high balance to avoid fees
- Subject to change in market/interest rates
- Strict limits on the number of checks that access these accounts.
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