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2 This page intentionally left blank Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

3 This page intentionally left blank Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

4 CreditSmart Module 4: Banking Services - An Important Step Table of Contents Welcome to Freddie Mac s CreditSmart Initiative... 6 Program Structure... 6 Using the Instructor Guides... 7 Lesson Concepts and Icons... 8 How to Access the WBT... 8 Tips for Instructors... 9 Workshop Preparation Tips... 9 Before the Workshop Begins... 9 Adult Learning Tips Instructor Training Introduction to Module 4: Banking Services - An Important Step Module Overview Glossary Topic 1: Types of Financial Institutions Overview Types of Financial Institutions Start the Discussion Types of Jobs in a Financial Institution Start the Discussion Topic 2: Why Keep Your Money in a Financial Institution? Overview Why Use a Financial Institution Start the Discussion Benefits of Using a Financial Institution Activity Advantages of Using a Financial Institution Knowledge Check Topic 3: Opening an Account Overview Opening an Account Start the Discussion Activity Topic 4: Additional Banking Services Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

5 Overview Additional Banking Services Module Conclusion Module Summary Appendix A: Glossary Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

6 Welcome to Freddie Mac s CreditSmart Initiative This consumer financial education and outreach initiative is designed to help consumers build and maintain better credit, make sound financial decisions, and understand the steps to successful long-term homeownership. In this guide, you ll find everything you need to lead participants through real-life scenarios, group discussions and activities that will encourage them to apply these lessons to their daily lives. By sharing the CreditSmart resources with others, you ll help them increase their financial understanding, gain life-long money management skills, and show them how to avoid costly mistakes. Program Structure The CreditSmart Curriculum includes 12 complete financial education modules that can be completed in two ways self-paced online or in a classroom setting. Module Title 1 Your Credit and Why It Is Important 2 Managing Your Money 3 Goal Setting 4 Banking Services: An Important Step 5 Establishing and Maintaining Credit 6 Understanding Credit Scoring 7 Thinking Like a Lender 8 Avoiding Credit Traps 9 Restoring Your Credit 10 Planning For Your Future 11 Becoming a Homeowner 12 Preserving Homeownership: Protecting Your Home Investment Continued on next page Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

7 Welcome to Freddie Mac s CreditSmart Initiative, Continued Using the Instructor Guides The Instructor Guides can be used alone or as an adjunct to the Web-Based Training (WBT) program. Even if participants choose not to experience the program online, gaining familiarity with the WBT will help you present the material more effectively. The most up-to-date content can always be found online at Each of the twelve CreditSmart modules has its own Instructor Guide which follows the organization of the Web-Based Training (WBT) available online, and includes much of the same content. Each Instructor Guide includes: A glossary of all the relevant terms introduced in the module A module introduction which includes An overview Learning objectives Sample discussion questions to start the lesson The Basics a list of bullet points outlining the key concepts of the lesson A lesson summary of all the key concepts in the lesson Activities, knowledge checks, discussion questions, and handouts Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

8 Lesson Concepts and Icons Each module topic will present several key concepts. These concepts are introduced to your participants in a variety of ways described in the table below. Activity Discussion Knowledge Check An activity usually involves class participation, whether it is a game, exercise, or worksheet completion. Typically after an activity you will have the opportunity to lead a discussion. Discussions allow you to introduce key concepts while involving your participants in the conversation and making the information relevant to them. Sample questions are included in each lesson to help you guide the discussion. There are short knowledge checks throughout each topic designed to start discussions or quickly test participants knowledge of certain concepts. How to Access the WBT The CreditSmart Web-Based Training (WBT) is available free of charge in both English and Spanish and can be accessed online at Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

9 Tips for Instructors The following tips and suggestions will help to ensure the successful delivery of the CreditSmart curriculum. Workshop Preparation Tips Select handouts and exercises for each topic in advance to help enhance your presentation and discussion with participants. Determine if you will need other instructional materials such as overhead transparencies, slides, flip charts, handouts, and videos. Arrive at the workshop location early to set up. Decide how the room should be set up (e.g., classroom style, lecture). Make sure that all of the necessary equipment, such as a computer and projector is available and working. Provide a sign-in sheet and allow space (e.g., side table, counter, etc.) for handouts and resource materials. Set up refreshments, if provided. Provide adequate signs directing participants to the workshop location. Greet and welcome participants individually as they arrive. Begin the workshop promptly. Distribute and collect evaluation forms before the end of each workshop. Confirm that all participants have signed the sign-in sheet to ensure credit for attending the workshop. Before the Workshop Begins Welcome participants and introduce yourself. Review logistics (session length, restroom location, breaks, etc.). Provide a brief history of the CreditSmart curriculum, which you can find a Provide an overview of workshop materials Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

10 Tips for Instructors, Continued Adult Learning Tips Adults learn in different ways; therefore, you will want to use different techniques, vary your presentation style, and be sensitive to how your students are responding. Relate the content to what your students already know. Doing so will make your workshop more effective and will help to ensure participants retain more information. Be sensitive to those with special needs and/or learning disabilities. Use ice breakers, activities, exercises, and/or videos to break up the flow of your presentation. Supply handouts and local and/or national articles that highlight the topic being presented. Poll the audience to gauge participants level of knowledge of the topic being presented. Research available community credit counseling resources in advance to ensure that consumers have access to appropriate referrals, as necessary. Instructor Training Freddie Mac provides CreditSmart instructor training for anyone who is interested in teaching the CreditSmart curriculum. Select one of the options below: Contact Freddie Mac by ing: Attend a CreditSmart Train-the-Trainer workshop hosted by Freddie Mac. This instructor training series includes a comprehensive review of the CreditSmart curriculum, plus instruction on best practices in conducting effective classroom training. Visit for more information Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

11 Introduction to Module 4: Banking Services - An Important Step Module Overview This module will help participants to understand the basics of banking and how to establish a relationship with a financial institution in order to build credit and save money to achieve their long-term goals. Learning Objectives After completing this module, participants should be able to: Identify three types of insured financial institutions Identify five reasons to use a financial institution Describe the steps involved in opening an account Describe three types of deposit accounts Identify additional bank services that come with deposit accounts Module Topics: Types of Financial Institutions Why Keep Your Money in a Financial Institution Opening an Account Additional Banking Services Some of these topics include activities to help simulate real-world scenarios with your participants. Glossary A Glossary is included in Appendix A of this guide, and contains definitions and descriptions of terms and phrases related to this module. A Glossary is also included in the Participant Presentation. Encourage your participants to use the Glossary during and after the class to become more familiar with the terminology Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

12 Topic 1: Types of Financial Institutions Overview In this topic, participants will learn about three major types of financial institutions. Time 10 minutes Types of Financial Institutions The Basics There are many types of financial institutions, including banks and credit unions. In addition to being located in your neighborhood and other major areas, banks have branches in many locations including grocery stores and malls. Banks perform many services such as making loans, cashing checks and processing deposits. Financial institutions employ people for a variety of jobs including tellers, security guards, loan officers, and branch managers Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

13 Topic 1: Types of Financial Institutions, Continued Start the Discussion To start the discussion with your participants, ask some open-ended questions or invite them to discuss some of the benefits of using a financial institution and their experiences. Here are some examples to get you started: What is a bank? What are some other types of financial institutions? Instructor note: Review the descriptions for the three major types of financial institutions Bank, Credit Union, and Thrift. Types of Financial Institutions Continued on next page Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

14 Topic 1: Types of Financial Institutions, Continued Start the Discussion (continued) Instructor note: Define the following terms: Term Definition Credit Deposits Loan Credit is the concept of using tomorrow's money to pay for something you get today. Credit is a promise to repay a debt for goods and services. Credit may be extended via several means, including credit cards, personal loans, car loans, and home mortgages. Money you add to your bank account. Money you borrow from a financial institution with a written promise to pay it back later. With a loan, financial institutions will charge you fees and interest to borrow the money. Types of Jobs in a Financial Institution Instructor note: Review the following job descriptions of employees in a financial institution with participants. Understanding the jobs of the people who work in a financial institution will help you know who you should speak to if you need assistance. Job Security Guard Description The Security Guard in a financial institution: Is stationed in the lobby or front door to protect the vault, money, and other valuables from theft. Protects employees who work there and its customers from someone intending to commit a crime. Continued on next page Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

15 Topic 1: Types of Financial Institutions, Continued Types of Jobs in a Financial Institution (continued) Job Teller Customer Service Representative Loan Officer Branch Manager Description The Teller in a financial institution: Stands behind the counter and takes money, cashes checks, and answers questions. Refers you to the person who can help you with specialized services. The Customer Service Representative in a financial institution: Is seated at a desk in the lobby and helps you open an account, explains services, and answers questions. Refers you to a person who can help you with other services. The Loan Officer in a financial institution: Takes applications for loans and helps you fill them out. Provides written information explaining loan products and answers questions. The Branch Manager in a financial institution: Supervises the bank operations. Helps fix problems that other employees can t solve and is the person you ask for if you have a concern. Continued on next page Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

16 Topic 1: Types of Financial Institutions, Continued Types of Jobs in a Financial Institution (continued) Tour of a Financial Institution Start the Discussion Instructor note: Refer participants to the Choosing a Financial Institution checklist on page 8 of the Participant Presentation. Explain the purpose of the checklist and review the questions below that they should ask themselves when choosing a financial institution. Have participants follow along on their checklist as you lead the discussion. Encourage them to take notes or write down any questions they may have. Does it offer the services you need? Is it close to your home? Does it have reasonable hours? Does it have ATMs? If so, are they located near where you live, work, or shop? If you are choosing a credit union, are you eligible? Do any employees speak your language? What, if any, fees will be charged? How are complaints handled? Is the financial institution insured? Continued on next page Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

17 Topic 1: Types of Financial Institutions, Continued Start the Discussion (continued) Checklist: Choosing a Financial Institution Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

18 Topic 2: Why Keep Your Money in a Financial Institution? Overview This topic discusses reasons why you should keep your money in a financial institution. Time 10 minutes Why Use a Financial Institution The Basics Banks, thrifts and credit unions are all federally regulated institutions. Keeping your money in a financial institution is safe, convenient, and will help you establish a pattern of being financially responsible. Keeping your money in a financial institution will protect you from cash advance scams. You may incur extremely high fees using a check cashing service to cash your check. Start the Discussion To start the discussion with your participants, ask some open-ended questions or invite them to discuss some of the benefits of using a financial institution and their experiences. Here are some examples to get you started: Why would you use a bank and its services? What are some reasons why a person would choose not to keep their money in a bank? Describe some difficulties you might face if you did not use a bank s services Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

19 Topic 2: Why Keep Your Money in a Financial Institution?, Continued Benefits of Using a Financial Institution There are several reasons why you should keep your money in a financial institution, such as a bank, thrift or credit union. Instructor note: Before you discuss the benefits of using a financial institution, describe the differences between a bank, thrift and credit union. Financial Institution Bank Thrift Credit Union Description A federally regulated financial institution that offers you a place to keep your money and uses it to make more money. Banks make loans, cash checks, accept deposits, and provide other financial services. A federally regulated savings bank or savings and loan association that is similar to a bank and makes home loans. Thrifts were created to promote homeownership and must have a majority of their assets in housing-related loans. A federally regulated cooperative financial institution that is owned by the people who use its services. Credit Unions serve groups that share something in common, like where they work or go to church. You have to become a member of the credit union to keep your money there Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

20 Topic 2: Why Keep Your Money in a Financial Institution?, Continued Benefits of Using a Financial Institution (continued) Instructor note: Why Keep Your Money in a Financial Institution? After describing the three types of financial institutions, discuss the five benefits of keeping your money in a financial institution. Benefit Safety Convenience Cost Description Keeping your money in a financial institution keeps it safe from theft, loss and fire. Keeping your money in a financial institution can allow you to access your money quickly and easily. A financial institution is usually less expensive than using other businesses, such as a check cashing business to cash your check. A checking account allows you to write checks rather than pay for money orders. You can pay your bills such as utilities and credit cards securely online directly from your bank account. Continued on next page Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

21 Topic 2: Why Keep Your Money in a Financial Institution?, Continued Benefits of Using a Financial Institution (continued) Benefit Security Financial Future Description Most financial institutions are insured. This means that if for some reason the financial institution closes and cannot give its customers their money, the insuring organization, liked the Federal Deposit Insurance Corporation (FDIC), will return the money to the customer. The FDIC will insure deposits of up to $250,000 per account holder. Building a relationship with a financial institution will allow you to write checks so that you can demonstrate a record of paying bills, saving money, and perhaps get a loan or mortgage. It's possible to obtain a mortgage without having an established banking relationship. But you must keep all your receipts and accurate records of paying your rent and other bills. In addition, having a bank account will help you to establish and manage good credit. For example, if you choose to receive overdraft protection on your account a feature that automatically advances funds into your checking account to cover items that would cause a check or debit to bounce you could also receive a positive trade line reference in your credit file. A trade line is any credit account you might have, such as a loan, credit card, or mortgage Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

22 Topic 2: Why Keep Your Money in a Financial Institution?, Continued Activity Instructor note: Divide the class into groups. Refer them to page 10 of the Participant Presentation and instruct them to write down answers to the questions in the spaces provided. When they are finished, lead a discussion about the differences between a bank, credit union, and thrift. Instructions: Have participants read each characteristic in the left column and then decide whether it describes a bank, credit union or thrift. More than one answer may apply. Characteristic Offers consumer loans, mortgages and short-term business credit Bank, Credit Union or Thrift? Bank, Thrift Specializes in real estate lending Thrift Services offered to members only Credit Union Governed by federal and state laws and regulations Offers savings accounts and checking accounts Receives deposits that are held in a variety of different accounts Bank Bank, Credit Union, Thrift Bank Offers checking accounts Bank, Thrift, Credit Union Offers home loans, issues credit cards, makes commercial loans Bank, Credit Union Non-profit institution Credit Union Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

23 Topic 2: Why Keep Your Money in a Financial Institution?, Continued Advantages of Using a Financial Institution The Basics You don t need a large amount of money to begin saving. Beware of the high fees charged by check cashing businesses to use their services. Open an account with a financial institution to establish, build and improve your credit. Using a checking account to deposit your checks rather than cashing them at a check cashing company shows evidence to a lender that you have established a financial record and can demonstrate responsible use of your accounts. Limit your risk of becoming a victim of cash advance company scams by conducting your financial transactions with a financial institution. Your money is protected and insured with a financial institution. Financial institutions provide many services such as wire transfer and cashing paychecks Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

24 Topic 2: Why Keep Your Money in a Financial Institution?, Continued Advantages of Using a Financial Institution (continued) Instructor note: Define the following terms: Term Definition Advantages of Using a Financial Institution Savings Mortgage Lenders An account where you keep money for safe keeping or as an investment that earns interest. A document that is signed by a borrower when a home loan is obtained and gives the lender the right to take possession of the property if the borrower fails to make loan payments. The term used for the person or entity that is providing credit or a loan to a borrower at specific terms and conditions. The term lender can generally be used interchangeably with the term creditor Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

25 Topic 2: Why Keep Your Money in a Financial Institution?, Continued Advantages of Using a Financial Institution (continued) Instructor note: Ask participants to turn to page 13 of the Participant Guide. Review the example below of the cost of using a check cashing service with participants. Cashing a Check at a Check Cashing Company: Angela uses a check cashing company to cash her checks. She cashes four checks a month and is charged $9 each time. That means she pays $36 a month (4 x $9) or $432 a year ($36 x 12 months) just to cash her checks. She does not have the ability to write checks to pay her rent and utilities since she does not have a checking account at a local financial institution. Cashing a Check at a Financial Institution: Juan, on the other hand, cashes his checks by using an account at a financial institution that charges a monthly fee of $12, which includes eight free checks per month and use of the automated teller machine (ATM). Additionally, ordering a box of 100 checks costs him about $24, since he purchases his checks through the financial institution. In this case, using a checking account for one year costs Juan $168. This equals a savings of $264 a year ($432 - $168), as compared to Angela. Advantages of Using a Financial Institution (cont.) Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

26 Topic 2: Why Keep Your Money in a Financial Institution?, Continued Advantages of Using a Financial Institution (continued) Instructor note: Define the following terms: Term Definition Interest rates Payday loans Wire transfers Interest rates are commonly thought of as the cost of borrowing money. The interest rate is expressed as a percentage. The amount of interest that is paid each year is determined by multiplying the amount of the loan by the percentage. Payday loans are short-term (e.g., two weeks), unsecured loans linked to a borrower's payday and past and current payroll. Interest rates on these loans are very high. A consumer usually pays a fee of $10 to $30 per $100 borrowed. A fee of $25 for every $100 is equal to an annual interest rate of 650 percent if the loan is paid on time. Wire transfer is a method of electronically transferring money from one financial institution to another. It's a particularly important way of transferring funds to relatives who live in another country. The fees charged by financial institutions to wire money to countries outside of the United States are usually less expensive than check cashing businesses Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

27 Topic 2: Why Keep Your Money in a Financial Institution?, Continued Knowledge Check Instructor note: Now that participants have learned more about the advantages of using a financial institution, ask them to turn to page 15 of the Participant Presentation to identify the reasons why you should keep your money in a financial institution. Knowledge Check Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

28 Topic 2: Why Keep Your Money in a Financial Institution?, Continued Knowledge Check (continued) Instructor note: Ask participants the following true or false question and then restate some of the reasons why having a checking account with a financial institution is safer and less expensive than a check cashing business. Instructor note: Knowledge Check 2 After participants have answered the question, remind them that some check cashing businesses charge extremely high fees to use their services. Using a financial institution is usually less expensive than using a check cashing business to cash a check Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

29 Topic 3: Opening an Account Overview This topic discusses opening an account with a financial institution. Time 15 minutes Opening an Account The Basics When you first open an account, the financial institution will review your history of using bank accounts. Some financial institutions will review your credit report before you can open an account. You may not be able to open an account if you have a history of misusing accounts, like frequently bouncing checks. You will need a government- or state-issued ID to open an account with a financial institution. Most financial institutions require a minimum deposit amount to open an account. If you have more than one account with the same financial institution, be sure to ask them about convenient ways to transfer funds between accounts. Many financial institutions offer online banking. Once your checking or savings account is open, you ll probably have many options for how to make deposits and withdrawals. Start the Discussion To start the discussion with your participants, ask some open-ended questions or invite them to discuss their experiences opening a checking or savings account with a financial institution. Here are some examples to get you started. What are some reasons why you would open a checking or savings account? What are some questions to consider before opening an account? Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

30 Topic 3: Opening an Account, Continued Start the Discussion (continued) Instructor note: Define the following term: Opening an Account Term Credit Report Definition A credit report provides a history of your use of credit. Specifically, it's a file maintained by a credit reporting agency that contains information about a person, such as where the individual works and lives; information reported to the credit reporting agency by creditors regarding money borrowed and payments made; and public record information, such as whether the person has filed for bankruptcy Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

31 Topic 3: Opening an Account, Continued Activity Instructor note: Refer participants to the Choosing an Account Checklist on page 19 of the Participant Presentation, and discuss its purpose. After the discussion, ask them to use the checklist to compare the accounts offered by two financial institutions shown on pages of the Participant Presentation. See instructor s copies on the following pages. Choosing an Account Checklist Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

32 Topic 3: Opening an Account, Continued Activity (continued) Financial Institution A Example courtesy of TDBank Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

33 Topic 3: Opening an Account, Continued Activity (continued) Financial Institution B Example courtesy of CitiBank Continued on next page Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

34 Topic 3: Opening an Account, Continued Activity (continued) Financial Institution B (continued) Example courtesy of CitiBank, continued Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

35 Topic 4: Additional Banking Services Overview This topic discusses addition services offered by financial institutions. Time 10 minutes Additional Banking Services Instructor note: Ask participants to turn to page 23 of the Participant Presentation. Discuss the additional banking services below. Term Automated Teller Machine (ATM) Debit Card Direct Deposit Definition An automated teller machine (ATM), is a machine you can use 24 hours a day to make deposits, withdrawals, and transfer money. Unlike a check cashing company, the financial institution doesn't have to be open for you to use an ATM. There are literally dozens of ATMs in any given neighborhood or community. When you use an ATM, you use a card issued by the financial institution and a personal identification number, or PIN. The PIN is used for security purposes so no one else can access your account. Some financial institutions may charge usage fees for the use of their ATMs. A debit card is a plastic card, sometimes called a "check card." It usually has the name of your financial institution printed on it. The card allows you to pay for goods and services in stores or online at merchants that accept these cards, but it is NOT a credit card. When you use a debit card, the money comes directly out of your bank account and reduces your account balance. The debit card also functions as an ATM card. With direct deposit, your paycheck or benefit check is electronically transferred and directly deposited into your bank account. The amount of money deposited is available immediately. Continued on next page Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

36 Topic 4: Additional Banking Services, Continued Additional Banking Services (continued) Term Loan Money order Online banking Safe deposit boxes Telephone banking Definition A loan is money you borrow from the financial institution with a written promise or note to pay it back later. With a loan, financial institutions charge you fees and interest to borrow money. Similar to a check, a money order is used to pay bills or make purchases when cash is not accepted. Usually, you pay a fee to get a money order so shop around for the best price. Remember to keep copies of money order receipts used to pay bills for at least 12 months. This is important if you have not established a credit history and you go to apply for a mortgage. The receipts can serve as documentation of how you pay your rent and other bills. Online banking is a bank service that allows you to make payments, check account balances, transfer money between accounts, obtain account history, stop payments on a check, and obtain general bank information at any time from any computer with Internet access. A fireproof locked box which is available in various sizes for a yearly rental fee. It provides you with a secure compartment within the bank's vault for the storage of valuables, such as passports, important documents, jewelry, etc. The keys remain solely under the client's control. Telephone banking allows you to use the telephone to check your account balances, transfer money between accounts, check on your recent deposits or withdrawals, and stop payment on a check. Continued on next page Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

37 Topic 4: Additional Banking Services, Continued Additional Banking Services (continued) Term Wire transfer Definition Wire transfer is a method of electronically transferring money from one financial institution to another. It's a particularly important way of transferring funds to relatives who live in another country. The fees charged by financial institutions to wire money to countries outside the United States are usually less expensive than check cashing businesses. Additional Banking Services Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

38 Module Conclusion Module Summary Summarize this module by reviewing the key points below with your participants. Key points from Module 4: Banking Services - An Important Step: Module 4 Summary Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

39 Appendix A: Glossary Term Automated Teller Machine (ATM) Bank Branch manager Convenience Cost Credit Credit Report Definition An automated teller machine (ATM) is a machine you can use 24 hours a day to make deposits, withdrawals, and transfer money. Unlike a check cashing company, the financial institution doesn't have to be open for you to use an ATM. There are literally dozens of ATMs in any given neighborhood or community. When you use an ATM, you use a card issued by the financial institution and a personal identification number, or PIN. The PIN is used for security purposes so no one else can access your account. Some financial institutions may charge usage fees for the use of their ATMs. A federally regulated financial institution that offers you a place to keep your money and uses it to make more money. Banks make loans, cash checks, accept deposits, and provide other financial services. The Branch Manager in a financial institution: Supervises the bank operations. Helps fix problems that the other employees can t solve, and is the person you ask for if you have a concern. Keeping your money in a financial institution offers convenience in that you can typically get to your money quickly and easily. Using a financial institution is usually less expensive than using other businesses, such as check cashing businesses, to cash your check. Credit is the concept of using tomorrow's money to pay for something you get today. Credit is a promise to repay a debt for goods and services. Credit may be extended via several means, including credit cards, personal loans, car loans, and home mortgages. A credit report provides a history of your use of credit. Specifically, it's a file maintained by a credit reporting agency that contains information about a person, such as where the individual works and lives; information reported to the credit reporting agency by creditors regarding money borrowed and payments made; and public record information, such as whether the person has filed for bankruptcy. Continued on next page Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

40 Appendix A: Glossary, Continued Term Customer Service Representative Credit Union Debit Card Deposit Direct Deposit Definition The Customer Service Representative in a financial institution: Is seated at a desk in the lobby and helps you open an account, explains services, and answers questions. Refers you to a person who can help you with other services. A federally regulated cooperative financial institution that is owned by the people who use its services. Credit unions serve groups that share something in common, like where they work or go to church. You have to become a member of the credit union to keep your money there. A debit card is a plastic card, sometimes called a "check card." It usually has the name of your financial institution printed on it. The card allows you to pay for goods and services in stores or online at merchants that accept these credit cards, but it is NOT a credit card. When you use a debit card, the money comes directly out of your bank account and reduces your account balance. The debit card also functions as an ATM card. Money you add to your bank account. With direct deposit, your paycheck or benefit check is electronically transferred and directly deposited into your bank account. The amount of money deposited is available immediately. Continued on next page Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

41 Appendix A: Glossary, Continued Term Financial Future Interest Rate Lender Loan Loan Officer Definition Building a relationship with a financial institution will allow you to write checks so that you can demonstrate a record of paying bills, save money, and perhaps get a loan or mortgage. It's possible to obtain a mortgage without having an established banking relationship. But you must keep all your receipts and accurate records of paying your rent and other bills. In addition, having a bank account will help you to establish and manage good credit. For example, if you choose to receive overdraft protection on your account a feature that automatically advances funds into your checking account to cover items that would cause a check or debit to bounce you could also receive a positive trade line reference in your credit file. A trade line is any credit account you might have, such as a loan, credit card, or mortgage. Interest rates are commonly thought of as the cost of borrowing money. The interest rate is expressed as a percentage. The amount of interest that is paid each year is determined by multiplying the amount of the loan by the percentage. Lender is the term used for the person or entity that is providing credit or a loan to a borrower at specific terms and conditions. The term lender can generally be used interchangeably with the term creditor. Money you borrow from a financial institution with a written promise to pay it back later. With a loan, financial institutions will charge you fees and interest to borrow the money. The Loan Officer in a financial institution: Takes applications for loans and helps you fill them out. Provides written information explaining loan products and answers questions. Continued on next page Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

42 Appendix A: Glossary, Continued Term Money Order Mortgage Online Banking Payday Loan Safe Deposit Boxes Safety Savings Security Definition Similar to a check, a money order is used to pay bills or make purchases when cash is not accepted. Usually, you pay a fee to get a money order so shop around for the best price. Remember to keep copies of money order receipts used to pay bills for at least 12 months. This is important if you have not established a credit history and you go to apply for a mortgage. The receipts can serve as documentation of how you pay your rent and other bills. A mortgage is a document that is signed by a borrower when a home loan is obtained and gives the lender the right to take possession of the property if the borrower fails to make loan payments. Online banking is a bank service that allows you to make payments, check account balances, transfer money between accounts, obtain account history, stop payments on a check, and obtain general bank information at any time from any computer with Internet access. Payday loans are short-term (e.g., two weeks), unsecured loans linked to a borrower's payday and past and current payroll. Interest rates on these loans are very high. A consumer usually pays a fee of $10 to $30 per $100 borrowed. A fee of $25 for every $100 is equal to an annual interest rate of 650 percent if the loan is paid on time. A fireproof locked box which is available in various sizes for a yearly rental fee. It provides you with a secure compartment within the bank's vault for the storage of valuables, such as passports, important documents, jewelry, etc. The keys remain solely under the client's control. Keeping your money in a financial institution keeps it safe from theft, loss, and fire. An account where you keep money for safekeeping or as an investment that earns interest. Most financial institutions are insured. This means that if for some reason the financial institution closes and cannot give its customers their money, the insuring organization, like the Federal Deposit Insurance Corporation (FDIC), will return the money to the customer. The FDIC will insure deposits of up to $250,000 per account holder. Continued on next page Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step

43 Appendix A: Glossary, Continued Term Security Guard Telephone Banking Teller Thrift Wire Transfer Definition The Security Guard in a financial institution: Is stationed in the lobby or front door to protect the vault, money, and other valuables from theft. Protects employees who work three and its customers from someone intending to commit a crime. Telephone banking allows you to use the telephone to check your account balances, transfer money between accounts, check on your recent deposits or withdrawals, and stop payment on a check. The Teller in a financial institution: Stands behind the counter and takes money, cashes checks, and answers questions. Refers you to the person who can help you with specialized services. A thrift is a federally regulated savings bank or savings and loan association that is similar to a bank and makes home loans. Thrifts were created to promote homeownership and must have a majority of their assets in housing-related loans. Wire transfer is a method of electronically transferring money from one financial institution to another. It's a particularly important way of transferring funds to relatives who live in another country. The fees charged by financial institutions to wire money to countries outside the United States are usually less expensive than check cashing businesses Freddie Mac CreditSmart Instructor s Guide Module 4: Banking Services An Important First Step