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NDSU HDFS 357 - The Federal Reserve and Payment Methods

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LECTURE 5 2/4/15Opportunity cost of savings: higher rate of return may be obtained at the cost of lower liquidity.The Federal Reserve (The Fed)Determines supply of money available and interest rates.To increase the money supply, the Fed will decrease the interest rate to make it more attractive to borrow and spend moneyTo decrease the money supply, the Fed will increase the interest rateFDICFederal Deposit Insurance CorporationInsures deposits up to $250,00 per person, per financial institutionPayment MethodsCash, check, debit cards, and credit cards are the most common payment choicesChecking AccountsNeeds to be evaluated based on:Fees and chargesSpecial services, such as overdraft protectionFreebies- ATM fees waived, check blanksOnline BankingBenefitsTime savings/ConvenienceNo paper trail for identity thievesOnline transfer of funds from one account to anotherOnline bill payEmail notification regarding due datesConcernsPrivacy and securityOnline scams; phishing and email scamsOther Payment MethodsCertified CheckPersonal check with guaranteed paymentBank “certifies” that there are funds availableCashier’s CheckCheck of a financial institutionYou pay bank, they write checkMoney OrderPurchase at financial institution, post office, storeSent to an individualBeware of High-Cost ‘Financial Services’Page 147Pawn ShopsCheck-Cashing OutletsPay-Day Loans: you bring in pay stub and ask for a loan until next pay check.Rent-To-Own CentersRefund Anticipation LoansAuto Title LoansHDFS 357 1st Edition Lecture 5Outline of Last LectureChapter 5: Financial Services: Savings Plans and Payment AccountsI. Cash Management StrategyII. Savings PlansIII. Evaluating Savings PlansOutline of Current LectureIV. The Federal ReserveV. Payment MethodsCurrent 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 moneyo To decrease the money supply, the Fed will increase the interest rate- FDICo Federal Deposit Insurance Corporationo Insures deposits up to $250,00 per person, per financial institution - Payment Methodso Cash, check, debit cards, and credit cards are the most common payment choices- Checking Accountso Needs to be evaluated based on: Fees and charges Special services, such as overdraft protection Freebies- ATM fees waived, check blankso 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 Methodso Certified Check Personal check with guaranteed payment Bank “certifies” that there are funds availableo Cashier’s Check Check of a financial institution  You pay bank, they write checko Money Order Purchase at financial institution, post office, store Sent to an individual- Beware of High-Cost ‘Financial Services’o Page 147o Pawn Shopso Check-Cashing Outletso Pay-Day Loans: you bring in pay stub and ask for a loan until next pay check.o Rent-To-Own Centerso Refund Anticipation Loanso Auto Title


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