HUMS 202 Notes PDF

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Summary

A very thorough document of all the notes from each slide in 11 HUMS 202 modules. They show up basically word for word on the tests/quizzes taken as well. These notes are from the course taught by Dr. Street. ...

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Module 1  Insured financial institutions operate under federal and state laws and regulations  Accept deposits, make loans, pay checks, and provide other financial services  Two major types: o Banks/thrifts o Credit unions  Unlike banks, credit unions are owned by their members (must become a member of a credit union to save or borrow money there)  Deposits in banks and thrifts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) o If the bank were to fail, your money (up to the insured amount) would be returned to you  Deposits in most credit unions are insured by the National Credit Union Administration (NCUA)  Customer service representative o Helps you open account o Explains bank services o Answers general questions o Provides written information explaining the bank products o Refers you to people who can help you more  Bank teller o Deposits your money o Cashes your checks o Refers you to people who can help you more  Loan officers o Take applications for loans offered at a bank o Provide written information about loan products o Help you fill out a loan application  Branch managers o Supervise all bank operations that take place at the branch and fixes problems that other employees can't solve  Checking accounts allows you to pay bills and make purchases with the money deposited in the account o Access your funds by writing a check, using a debit card, online bill pay, or an ATM  Savings accounts earn interest (percent of your balance that the bank pays you for keeping money at the bank), and is generally not used for everyday transactions  Stocks, bonds, and mutual funds are examples of non-deposit investment products o Not FDIC insured, so you could lose some or all of the money invested, or not gain as much profit as expected  Maintaining a bank account o Open the account o Make deposits or withdrawals o Record transactions, interest, and fees o Keep track of your balance  Monthly maintenance fees are charged for keeping the account open  Overdraft fees are charged when you withdraw more money than you have  Remittances are types of money transfers that go to a bank or a person in another country  Money orders are used to pay bills or make purchases when cash isn't accepted  Privacy notices are given when you open an account and every year afterwards and explain:

What personal financial information the company collects Whether that information will be shared with other companies What can be done to limit the sharing How the company protects the information You can opt out of sharing some financial information if you so choose o o o o

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Module 2  Home refinancing replaces an existing home loan by paying it in full and replacing it with a new home loan o A cash-out refinance loan allows you to borrow more money than is owed on the loan being replaced o Homeowners refinance their homes to get a lower interest rate, get money for home repairs, or for other personal investments  Equity is the current market value of your home minus what you owe (mortgage loan balance) for the house o A lender may let you borrow up to a certain percentage of your home's value (usually up to 80 percent) o Home equity loans allow you to borrow money that is secured by your home  Can be a lump sum, typically at a fixed interest rate (sometimes called home improvement loans)  Home equity line of credit works like a credit card in that you can borrow as much as you need up to a pre-set credit limit (limit is variable)  Capacity for the present and future ability to meet your payments  Capital refers to the value of your assets and net worth  Character for how you have paid your bills and debts in the past  Collateral refers to the property or assets to secure the loan Module 3  Benefits of a checking account o Convenience o Cost o Safety o Better money management  Provide you with quick and easy access to your money o Paychecks, income tax refunds, and public assistance benefits can be directly deposited into your account  Checking accounts are usually less expensive than other services like buying money orders or check-cashing services  Must regularly monitor transactions, including: o Depositing/withdrawing money o Writing a check or using your debit card to pay bills and make purchases o Having money deposited directly into your account  Free/Low Cost Checking Account: o Charge is often no more than $5 a month, but the fee may be waived if you use direct deposit or use your ATM or debit card a minimum number of three times a month  Electronic Only/ATM Checking o Requires you to use direct deposit and is best if you handle most transactions online

Verify fees, otherwise you may be charged for not making a minimum number of online transactions Regular Checking: o Usually a minimum balance required to waive the monthly service fee o Normally offers unlimited check writing privileges Interest Bearing Checking o Generally have to maintain a high minimum balance in order to earn interest and avoid fees  Negotiable Order of Withdrawal (NOW) account  Money Market Deposit Account (MMDA) Most common fees include o Monthly service fees o Minimum balance fees o ATM user fees o Overdraft or non-sufficient funds fees o Stop payment fees Parts of a check register o Check number o Date o Description of transaction o Payment/debit o Deposit/credit o Balance 3 ways to deposit money into your account o Direct deposit o ATM deposit o Cash or check deposit through a teller o

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Module 6  TILA (Truth in Lending Act)- requires lenders to disclose total cost of your loan, including finance charge and APR o Gives consumers right to cancel certain types of home loans within three days o Includes the APR, finance charge, amount financed, and total payment  Truth in Savings Act- helps shop for the best account for your needs o Requires finance institutions to disclose info. In writing if you ask, or before you open an account  Interest rate you earn  How much money you have to deposit into the account to open it  Fees you might be charged o Requires bank to send you statements on regular basis to summarize what happened in your account for that period  ETFA (Electronic Fund Transfer Act)- rights, liabilities, and responsibilities of: o Customers that use ETF services o Banks that offer these services, including use of:  ATMS  Debit cards  Phone/computer transactions

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EFAA (Expedited Funds Availability Act)- limits the amount of time a bank can hold a check deposited into your checking account o Ask how quickly funds are available for withdrawal FDIC insures deposits in banks and savings associations o Covers o Checking/savings accounts Tips for buying non-deposit investment products o Take immediate action o Keep good records  Retain and maintain account statements and confirmations about investment transactions  Document convos with brokers o Invest wisely  Do it offline  Check for investment scams  Make checks payable to a company or financial institution, never an individual o Pick your broker carefully  Check background via FINRA (Financial Industry Regulatory Authority) Broker Check o Understand the risks  Make sure your representative knows your financial objectives and risk tolerance o Do your homework  Never invest in products you don't understand o Build emergency fund  Have an emergency fund ready in a federally insured savings account (or something readily accessible) to support you and family for 6 months before investing in non-deposit products Privacy Notices- explain how your financial institution handles and shares your financial info o Explains what info your financial institution collects and how much info it can share with others o Initial privacy notices- required when you open an account or become a customer of a financial company o Annual privacy notices- required yearly from each company you have an ongoing relationship with (like banks) o Notice of changes in privacy policies- required if a company changes its privacy policy and the changes aren't noted in the next annual privacy notice Companies share your info to offer you more services, introduce new products, and profit from the info they have about you Federal privacy laws give you the right to stop or opt out of most (but not all) sharing of your personal financial info Company might give your info o To firms that help promote and market products offered by the company itself or jointly with another company o To firms that provide data processing/marketing services to your company o When court ordered o Credit bureaus about your payment history on loans

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If you opt out, you limit the extent to which the company can provide your personal info to nonaffiliates o If you don't do it in 30 days, the company can share certain info about you o If you didn't opt out the first time after the company mails the notice, you can change your mind o Right to opt out doesn't apply to info you share before you opted out ID theft forms: o Pharming  Making fake website seem legitimate  More difficult to detect than phishing  Sometimes will show that you're at the correct site o Phishing o Skimming How to avoid ID theft o Protect SSN, credit card, and debit card numbers, PINs, and other personal info o Protect incoming and outgoing mail o Keep financial trash "clean" o Watch bank account statements and credit card bills o Avoid ID theft on internet o Review credit record annually If Wallet/Purse is lost or stolen o Call bank and credit card companies o Follow up on phone calls with card issuer with a letter disputing unauthorized transactions o Request new ATM card with new number and password o File police report ASAP and keep a copy if bank or insurance company needs proof of crime o Place fraud alert on credit report by calling any major credit reporting agency (Equifax, TransUnion, Experian)  Cautions credit grantors to check with you before approving loans or cards in your name o Contact major check verification companies (TeleCheck, Certegy) Auto insurance o Liability o Covers accidents, or if it is lost/stolen Disability insurance o Provides people with income if they can't work Life insurance o Protects dependents if you die unexpectedly Health insurance o Makes sure you can afford treatment if you're sick Homeowners insurance o Covers break-ins, liability, etc.

Module 7  Credit- ability to borrow money  Loan- money that is borrowed from lender that has to be paid back

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Interest- cost of borrowing money Important because: o Can be useful in emergencies o More convenient than carrying large amounts of cash o Can make large purchases and pay for them over time o Can affect ability to obtain employment, housing, and insurance depending on how you manage it Collateral- something to provide to the lender to secure a loan Guarantee- form of collateral (ex. Cosigning- when a person with no credit history asks another person to cosign a loan, the cosigner is equally responsible and has to pay the owed amount plus interest if the borrower defaults) Credit reports show: o Who you are o How much debt you have o Whether you make payments on time o Whether there is negative information about you in public records Credit agencies: o Maintain background data (SSN, address, previous addresses, employment, and previous employment) o Collect info about bankruptcy filings, court-ordered judgements, tax liens, and other public info from courthouse research o Receive info from creditors (usually creditors) about whether you're making loan and credit card payments on time o Provide a copy of your credit report to lenders or other who have a legitimate business reason to view your report List of inquiries- creditors and other authorized parties who requested and received your credit report Historical account summary- will show the max amount of money each creditor has agreed to loan you, how much you owe (outstanding balance), monthly payment account, timeliness of each payment, and any overdue sums Public record information- a report with info about you in public records, including: o Collection accounts o Bankruptcies o Evictions o Foreclosures o Tax liens o Civil judgements o Delinquent student loan payments o Late child support payments Consumer statement- you have the right to submit a 100 word statement explaining any negative info on your report Personal information- identifying info, including: o Name o SSN o Current and previous addresses o Phone number o Birth date

Current and previous employers Spouse's name, if married Judgement- court confirmation of debt owed to a creditor and remains on your credit report for 7 years from the date it was filed o If not paid, your creditor can petition the court for a lien (claim) on specific assets you own Tax lien- claim against property or assets for unpaid taxes on those assets o If you don't pay your taxes, the taxing authority can make a claim against your home o Paid tax lien stays on your credit report for 7 years, but unpaid ones stay until they're paid Collection account- past due account that has been referred to a specialist to collect part or all of the debt Bankruptcy- people who follow bankruptcy rules will receive a discharge (they won't have to pay off certain debts) o Won't release  Student loans  Taxes  Fines  Alimony  Child support o Very negative impact on your credit o Will remain on credit report for 7 to 10 years o Can make it hard to obtain credit, buy a home, get life insurance, and get a job Credit reports don't contain o Checking/savings account balances o Income o Medical history o Business account info o Race, gender, religion, or national origin o Driving record Info in your credit report can determine o If you can get a job o Get a loan or other form of credit o Be able to rent an apartment and/or affect the amount of your security deposit o Get insurance Reasons a loan application may be denied o Bad credit history  Indicates that you're a higher risk and might not repay the loan o No credit history  An unknown risk since you have no experience with credit  Might offer other options or counteroffers like:  A higher rate to compensate for higher risk  Reconsideration of application if you have a cosigner  Opportunity to support application by presenting bills you have paid on time for rent, phone, or utilities  Presenting a bank savings statement that shows consistent deposits over time o o

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Credit scores- helps lenders predict how likely it is that you will repay a loan and make payments when they are due o Calculated based on:  Whether you pay your bills on time  Number and type of accounts you have (credit card, auto loans, mortgages, etc.) and how long they've been open  How much of your available credit you're currently using  Amount of outstanding debt and monthly payments  Whether there are collections against you FICO score- (Fair Isaac Corporation) primary credit scoring model and ranges from a low score of 300 to a max score of 850 o Weighs several factors to determine score  Past payment history- 35%  Outstanding debt- 30%  How long you have had credit- 15%  New applications for credit- 10%  Type of credit- 10% Vantage score- newer credit system offered by all three credit reporting agencies o Ranges from 501 to 990 o Groups scores into letter categories covering an approximately 100 point range (ex. Vantage grade would be an A if you had a score between 901 and 990 Better credit score = lower interest rate Ensure accuracy and consistency of info by getting credit report from all three agencies Inquiries can lower your credit score if they show that you've been applying for many new credit lines in a short period of time (as opposed to rate shopping for a mortgage or auto loan) o Suggests that you may be too deep in debt or are having financial troubles Checking your credit won't impact your credit score Shopping for mortgage or auto loans may cause multiple lenders to request your credit report, even though you're only looking for one loan o To compensate for this, the score ignores all mortgage and auto inquiries made in the 30 days prior to scoring o After 30 days, multiple inquiries relating to a mortgage or auto loan application in a typical shopping period are treated as one inquiry o Credit score isn't harmed by shopping around for the best car or home loan FCRA (Fair Credit Reporting Act- allows you to get a free copy of your credit report from each of the three major credit reporting agencies every year Can also get additional "free" reports if: o You lost your job or were laid off o Were recently denied a loan, insurance policy, or job based on info in your credit report o Are applying for unemployment or receive public assistance but are ready to begin job hunting o Have reason to believe that your report is inaccurate because of fraud or ID theft Can order your credit score at the same time as your credit report by contacting the three major credit reporting agencies directly, but credit score is not free o Comes with explanation of the factors that went into computing the score Other credit reporting companies will try to sell your credit score as part of a package of services

Be aware of any company that charges excessive fees for providing a credit score or advertises free credit score offers, but asks you to subscribe to a monthly service like credit monitoring o Consider the cost of services, whether you need them, or if you can find better deals somewhere else A lender must provide you with your credit score for free if your credit score led to o Application for credit being denied o Paying a higher interest rate or otherwise receiving less favorable terms Credit report agencies don't investigate accuracy of reported info unless you ask them to do it If there's an error, contact the credit agency, write a letter disputing the error, and keep a copy for your records o Agency is required to conduct an investigation within 30 days of receiving your letter ID theft- when thieves steal personal info, such as SSN, birth date, or credit card numbers o Could open a new credit card or bank account using personal info o If bad checks are written or bills aren't paid, they'll show up on your credit report Building credit history o Make regular deposits into a savings account o Keep debt levels low o Pay bills on time o Ask a friend or relative to cosign a loan for you o Make large down payments and negotiate credit payments o Charge merchandise at a local store  Lower credit limit and higher APR, but more willing to lend money o Apply for a small bank loan To repair credit: o Contact AnnualCreditReport.com to get a copy of your credit report o Report errors on your credit report to the agency in writing  Include copies (not originals) of documents that support your position  Keep copies of dispute letters and enclosures  Tell the creditor or other information provider in writing that you dispute an item o Contact lenders directly to discuss your financial situation and negotiate payment plans o Opt out of receiving unsolicited offers for credit cards to avoid the temptation of applying for more credit To find a reputable credit counseling agency o Interview several before signing contract o Check with state attorney general, local consumer protection agency, and the Better Business Bureau to see if customers filed complaints about said agency  Reputable agencies will send free info about themselves and services they provide without requiring you to give any details about your situation o Ask questions about services, fees, and a repayment plan Credit Repair Scams o Avoid companies that  Promise to erase bad credit/remove bankruptcies/bad judgements from credit...