1.7.3.g1 © family economics & financial education – revised october 2004 – financial...
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1.7.3.G1
Financial Institutions
Pay Day Loans Commercial Bank Credit Union Brokerage Firm
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Pay Day Loans It works like this: You want money today, but payday is a week
or two away. You write a check dated for your payday and
give it to a check-cashing outlet. You get your money, minus a fee (usually
about $15 per $100 borrowed). In two weeks, the check-cashing outlet does
one of two things: Cashes your check. Lets you pay another fee to renew the loan for
another two weeks.
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Victim of Pay Day Loans
One young lady found out how payday loans work when she needed $200 to pay her bills.
A storefront loan office, called "Check Into Cash," let her write a check she couldn't cover and gave her $200 on the spot.
They agreed not to cash it until her next payday -- for a $38 fee.
When payday came, the $16,000-a-year hospital food service worker didn't have $200 to spare.
No problem, the payday lender said, pay another $38 and you're off the hook until next payday. A year later she had paid $1,220 in fees. And she still owed the $200.
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Victim of Pay Day loans
Rhonda Keller* and her two daughters experienced a financial crisis last summer that sent Rhonda looking for help from payday lenders. Rhonda fell into the payday lending debt trap - the terms of the loans she took out required her to either pay them off in less than two weeks or have $90 fees automatically debited from her bank account repeatedly. Those loans, at triple-digit APR, have cost her much more than the exorbitant fees.
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Victim of Pay Day loans
Sandy Hudson’s first payday loan was for $100, with an $18 fee. All she needed was a source of income and a banking account, so she walked into the shop, and walked out 15 minutes later with the loan. Sandy got caught up in the payday lending debt trap, taking out multiple loans to pay the fees on each one as they became due. At one point, she was paying $300 every two weeks for four different loans. Over a six month period, this added up to $3600,
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Commercial Bank
Full-service financial institutions Wide variety of services and products Operate under state and federal laws Usually the largest financial
institutions FDIC insured Examples – Wells Fargo, US Bank, First
Interstate Bank
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Commercial Bank Services
Checking Accounts They are the only
financial institution allowed to offer non-interest paying checking accounts
Savings Accounts Safe-Deposit Boxes Credit cards
Certificate of Deposit (CDs)
Financial Services Investments Loans Mortgages
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Credit Union Non-profit cooperative financial institution,
member owned Members may have a common bond such
as same employer, union, location, etc. Usually charge lower fees and loan rates
and offer higher interest rates May offer free financial counseling NCUA insured Examples – America First Credit Union,
University of Utah Credit Union
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Credit Union Services
Share Draft Accounts (checking)
Share Accounts (savings)
Share Certificate Accounts (CDs)
Safe-Deposit Box
Credit Card Financial
Counseling Investment Loan Mortgage Retirement Plan
Account
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Brokerage Firm
Relatively new to the marketplace Licensed institutions Offer money management plans for
investing Provide financial assistance and advice Monthly statements provided to track
account activity Examples – Fidelity, ING, Merrill Lynch
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Brokerage Firm Services
Investments Bonds Stocks Mutual Funds
Financial Counseling
Real Estate Investment
Retirement Plan Accounts
**Customers can move money between accounts easily
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Benefits & Advantagesto using Financial Institutions
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Benefits of Financial Institutions Convenience
Quick and easy access to moneyDifferent ways to access money
Teller’s window, drive-up window, automated teller machine (ATM), and electronic banking
Cost savingsLess expensive to purchase money
orders and to cash checks Other businesses may charge to cash checks
Having a checking account instead of buying money orders saves money
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Benefits continued Safety
Protection from fire, theft, & loss Security
Money is protected by the federal government in federally insured institutions
Up to $100,000 for each depositorSigns are displayed if institutions are
insured stating: FDIC, NCUA, or Backed by the Full Faith and
Credit of the United States Government Not all are insured – look for the sign and ask!
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Advantages
Using one financial institution may include these advantages:Simplicity – having all accounts at one
place can simplify bankingRelationship – establishing relationships
can be beneficial when applying for loans Lower interest rates on loans may be offered
to loyal customers!
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Shop around for the best service, rates, products, and locations
before choosing a financial
institution!!!
Remember
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BANKING INSTITUTIONS COMPARISON PROJECT
(40 points) Answer the
questions on the assignment sheet by searching the web, visiting the institution, or calling them.
Create a poster with the logo and information from the questionnaire.
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BANKING INSTITUTIONS COMPARISON PROJECT
PAY DAY LOANS Pay Day Loans Cash Store Affordable Loans Check Cash
Advance Money Mart Loans for Less
Mr. Money Quick Loan Utah Money
Store J & N Pawn Loan Max
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BANKING INSTITUTIONS COMPARISON PROJECT
BANKS Bank of American
Fork Barnes Bank Brighton Bank Celtic Bank Chase Bank
Far West Bank Zions Bank Wells Fargo Bank Frontier Bank US Bank
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BANKING INSTITUTIONS COMPARISON PROJECT
CREDIT UNIONS America First C.
U. Cyprus Credit
Union Trans West C. U. University of
Utah C. U.
Utah First C. U. Jordan C. U. Mt. America C. U. Intermountain C.
U. Deseret First C.
U.
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BANKING INSTITUTIONS COMPARISON PROJECT
BROKERAGE FIRMS (Financial Advisers)
AIG Fidelity ING Merrill Lynch Smith Barney Waddell & Reed
Ameriprise Financial
AAA Financial Planners
Lincoln Financial Adv.
Progressive Planning
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The End
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