Banking

2.1

11 types of common bank services→ bank accounts, credit cards, ATM, digital banking, cashiers checks, money orders, travelers checks, wire transfers, loans, notary services, safe deposit boxes, foreign currency.

Why banks pay interest on deposits→ so they can make loans and investments

How banks make money→ by lending out deposited money at higher interest rates than they pay on deposits.

Traditional banks offer LOWER interest rates on savings accounts.

Maximum amount of money that is insured by FDCI per person→ $250 000

Key difference between online banks and traditional banks→ online banks usually offer higher interest rates on savings accounts.

2.2

Benefits of opening a bank account→ keeps your money safer, more options for paying easier to deal with checks, makes paying bills easier, easier to keep track of money, ability to get cash from an ATM.

Benefits of being a member of a credit union→ higher interest rates and lower fees.

Bets thing to do if you find an error in your bank statement→ call the bank. the bank will investigate the transaction to see if there was an error.

2.3

Mathematical formula for describing activity on a bank statement→ Ending balance + deposits - withdrawals

2.4

Checking vs savings accounts→ checking accounts are for easy access to money, have less restrictions, earn less interest, and have more fees. Savings accounts are harder to access, have minimum amounts you can withdraw, they money is typically for the future, and the banks loan out your money to others.

Relationship between time of saving→ the earlier you start to save, the more interest you will earn on your money.

Power of compounding→ main idea is that it will take you longer to grow your wealth.

Comparing savings accounts to certificates of deposit→ savings accounts allow you to access your money at all times while certificates of deposit require your money to be left alone for a set period of time.

2.5

Average overdraft fee→ $25

Average service fee→ $15

Average ATM fee→ $4

How to avoid a monthly maintenance fee→ chose a savings account that don’t have them, meeting monthly minimum balance requirements, having both checking and savings accounts with the same banks.

Excessive transaction fee→ a bank penalty from going over the limit of the number of transactions or withdrawals you can make.

Overdraft fee→ a charge when a transaction exceeds the amount of money you have in your account.

Overdraft protection is NOT a required feature of most checking accounts.

Why people sign up for overdraft protection→ to avoid their card declining on purchases that exceed the balance of their account.

2.7

Benefits of opening a bank account as a young person→ your money has more time to earn compound interest.

Reasons some people are unbanked→ not having enough money to make minimum deposits, lack of trust in banks, poor credit history.

Downsides of being unbanked→ interest rates, fees for financial support, lack of access to credit, difficulty building emergency funds, time consuming.

Difference between a prepaid card and a debit or credit card→ your debit card is linked to your bank account whereas you need to load money onto a prepaid card. (think gift cards)

Downsides of prepaid cards→ monthly fees, transaction fees, reloading fees, foreign transaction fees. FEES, not a good way to build credit.

2.9

Recommended percentage of savings per earnings→ 20%

Portion of your pay check that goes to savings→ CPP (Canadian pension plan)

Always use you AFTER tax income when distributing money to the categories

Pay yourself first→ deposit money into your savings account before spending on anything else.

Benefit of the pay yourself first strategies→ encourages you to prioritize saving money

Amount you should aim to save in your emergency fund→ 3-6 months worth of expenses

2.10

Main idea of credit cards→ the provide a convenient way to borrow money.

Why people need to take inflation into account→ wages do not rise at the same pace as inflation on goods and services.

Counteracting the impact of inflation→ reducing personal expenses, being smarter with your money, as well as tracking and saving

Savings and inflation→ in order to avoid losing purchasing power over time, the rate of return of savings should be at least as high as the rate of inflation.

Living paycheck to paycheck→ struggling to cover your financial needs with each paycheck.

How credit cards make it harder to save→ they make it easier to spend money.

2.12

Pros of having a physical card instead of a digital wallet→ don’t have to worry about running out of phone battery, some merchants don’t have the technology. Majority of places take physical cards.

Advantages of digital wallets→ more secure (don’t have to worry about someone seeing your pin) they require face ID or thumbprint to identify that the card is yours. It is easier to keep track of and secure your phone rather than carrying multiple physical cards.

Important information about P2P payments→ make sure you choose a P2P app that your friends and family uses.

Pros of P2P→ convenient, easy to use, privacy.

Cons of P2P→ can get hacked, potential fees, transfer limits (for protection) limited resources.

Precautions to avoid scammers→ verify the ID, use strong passwords, being aware of what scams look like. Verify by contacting the bank directly.

Information required to send a P2P payment→ email address or phone number

Primary purpose of digital wallets→ digital wallets focus on contactless transactions with businesses.

2.14

Two advantages to online banking→ 24/7 access to managing your account, simpler funds transfer. Using online banking, you can request transfers, pay bills, and automate your savings without visiting the bank.

Benefits of setting up recurring payments→ you don’t forget to pay your bills. It will help you avoid late fees.

Information you need to provide your employer with to set up direct deposit→ your bank account number.

Benefits of direct deposit→ saves time, the environment, and paper.

Why you shouldn’t use public WiFi when banking→ you don’t know who can see what you’re doing online.

Cashless society→ a society that is completely dependent on digital payments.

Example of online bill pay→ having your bank send your rent to the landlord each month.