HDFS 357 1st Edition Lecture 5 Outline of Last Lecture Chapter 5 Financial Services Savings Plans and Payment Accounts I II III Cash Management Strategy Savings Plans Evaluating Savings Plans Outline of Current Lecture IV V The Federal Reserve Payment Methods Current Lecture LECTURE 5 2 4 15 Opportunity cost of savings higher rate of return may be obtained at the cost of lower liquidity The Federal Reserve The Fed o Determines supply of money available and interest rates o To increase the money supply the Fed will decrease the interest rate to make it more attractive to borrow and spend money o To decrease the money supply the Fed will increase the interest rate FDIC o Federal Deposit Insurance Corporation o Insures deposits up to 250 00 per person per financial institution Payment Methods o Cash check debit cards and credit cards are the most common payment choices Checking Accounts o Needs to be evaluated based on Fees and charges Special services such as overdraft protection Freebies ATM fees waived check blanks o Online Banking Benefits Time savings Convenience No paper trail for identity thieves Online transfer of funds from one account to another Online bill pay Email notification regarding due dates Concerns Privacy and security Online scams phishing and email scams Other Payment Methods o Certified Check Personal check with guaranteed payment Bank certifies that there are funds available o Cashier s Check Check of a financial institution You pay bank they write check o Money Order Purchase at financial institution post office store Sent to an individual Beware of High Cost Financial Services o Page 147 o Pawn Shops o Check Cashing Outlets o Pay Day Loans you bring in pay stub and ask for a loan until next pay check o Rent To Own Centers o Refund Anticipation Loans o Auto Title Loans