FIN 2081 Chapter Notes - Chapter 4: Cash Machine, Payment Service Provider, Money Market Fund
Chapter 4 - Financial Services: Savings Plans and Payment Accounts
Types of Financial Services
Savings - provides safe storage of funds for future use.
Commonly reffered to as time deposits, money in savings accounts and certificates of deposit are examples of
savings plan.
Payment Services - offer an ability to transfer money to others for daily business activities.
Checking accounts and other payment methods are generally called demand deposits.
Borrowing - is used by most people at some time during their lives.
Credit alternatives range from short-term accounts, such as credit cards and cash loans, to long-term
borrowing, such as a home mortgage.
Asset management account - an all-in-one account that includes savings, checking, borrowing, investing, and
other financial services for a single fee.
Also, called a cash management account.
Online & Mobile Banking
Automatic teller machine (ATM) - a computer terminal used to conduct banking transactions;
Also, called a cash machine.
Debit Card - a plastic access card used in computerized banking transactions;
Also called a cash card.
Some cards issuers use the same rules for lost or stolen debit cards as for credit cards.
Interest Rate
When Interest Rates are Rising
Use long-term loans to take advantage of current low rates.
Select short-term savings instruments to tak eadvantage of higher rates when they mature.
When Interest Rates are Falling
Use short-term loans to take advantage of lower rates when you refinance the loans.
Select long-term savings instruments to "lock in" earnings at current high rates.
Comparing Financial Institution
Where can I get the best return on my savings?
How can I minimize the cost of checking and payment services?
Will I be able to borrow money if I need it?
Types of Financial Institution
Deposit institution serve as intermediaries between suppliers (savers) and users (borrowers) of funds.
The most common of these traditional organizations are:
Commercial banks - which offer a full range of financial services,including checking, savings, lending, and most
other services.
Savings and loan associations (S&Ls) - which traditionally specialized in savings accounts and mortgages.
Non-deposit institution offer various financial services:
Life insurance companies.
Investment companies, also called mutual funds, which offer a money market fund - a combination savings -
investment plan.
The company uses the money from many investors to purchase a variety of short-term financial instruments.
Brokerage firms, which employ investor advisors and financial planners, serve as an agent between the buyer
and seller for stocks, bonds, and other investment securities.
Credit card companies, which specialize in funding short-term retail lending.
Finance companies, which provide loans to consumers and small business.
Mortgage companies, which are organized primarily to provide loans for home purchase
Mutual Savings Bank - a financial institution that is owned by depositors and specializes in savings accounts and
mortgage loans.
Document Summary
Chapter 4 - financial services: savings plans and payment accounts. Savings - provides safe storage of funds for future use. Commonly re ered to as time deposits, money in savings accounts and certi cates of deposit are examples of savings plan. Payment services - o er an ability to transfer money to others for daily business activities. Checking accounts and other payment methods are generally called demand deposits. Borrowing - is used by most people at some time during their lives. Credit alternatives range from short-term accounts, such as credit cards and cash loans, to long-term borrowing, such as a home mortgage. Asset management account - an all-in-one account that includes savings, checking, borrowing, investing, and other nancial services for a single fee. Automatic teller machine (atm) - a computer terminal used to conduct banking transactions; Debit card - a plastic access card used in computerized banking transactions;
