Section 24.1

Chapter 24 Writing Checks Section 24.1 Checking Accounts Section 24.2 Other Payment Methods

What You’ll Learn How to describe the process of opening a checking account and some of the depositor’s rights (p. 522)

What You’ll Learn How to explain the proper way to write a check and discuss problems associated with checking accounts (p. 524) How to summarize the procedure for balancing a checkbook (p. 523)

Why It’s Important Knowing about checking accounts and writing checks will help you use your money wisely.

Legal Terms stale check (p. 522) outstanding checks (p. 523) bad check (p. 526) forgery (p. 527) uttering (p. 528)

Section Outline Using a Checking Account Opening a Checking Account Balancing Your Checkbook Writing Checks

Pre-Learning Question How would you use a checking account?

Using a Checking Account Checks are: the most common kind of negotiable instrument in use a safe way to send funds through the mail convenient receipts for the people who write them

Opening a Checking Account To open a checking account, you deposit money in a bank sign a signature card

Opening a Checking Account Then the bank agrees to pay money out, up to the amount you have deposited, when you write a check.

Opening a Checking Account A bank may refuse to pay a check that is more than six months old without incurring liability. Such a check is known as a stale check.

Balancing Your Checkbook You should balance, or reconcile, your bank statement as soon as possible after receiving it. Carefully compare the check register balance with the bank statement balance to make sure that they agree.

Balancing Your Checkbook Don’t forget to take into consideration outstanding checks, or checks you have written that have not yet been returned to the bank for payment.

Writing a Check Banks provide regular and special printed check forms. These checks display a series of numbers printed in magnetic ink that make it possible for computers to process the checks quickly and accurately.

24.1 A Personal Check

Parities to a Check A check is a draft drawn on a bank and payable on demand. Drawer—person who writes the check Drawee—bank ordered to pay the money Payee—person to whom the check is made payable

Avoiding Negligence To avoid negligence, you should write checks that cannot be changed easily or signed by a forger.

Steps for Writing a Check print the figures very close to the dollar sign keep all of the figures close together always start at the extreme left when writing amounts of money in words

Steps for Writing a Check draw a line through any extra space that remains after you’ve written the amount this prevents someone from putting in words and figures to alter the value of the check

Steps for Writing a Check be sure figures are the same as written amounts (if there is a difference, the bank will honor the written amount) write the name of the payee close to the words “Pay to the order of”

Steps for Writing a Check fill in all unused space with a line make a note of the reason for the check

Steps for Writing a Check sign your name so that it looks as much as possible like the one on the bank signature card never sign a blank check

Steps for Writing a Check never cross out or change a check once it has been written if you make a mistake, print VOID across the incorrect check and write a new check

Bad Checks A bad check is a check drawn on an account in which you have insufficient funds.

Bad Checks Writing a check on an account with insufficient funds is larceny or attempted larceny, unless it is accidental.

Forged Checks A forged check is a check that is signed by someone other than the drawer without the drawer’s authority. Forgery is a crime, subject to a fine and imprisonment.

Forged Checks You are guilty of a crime if you knowingly offer a forged check, even if you did not personally commit the act of forgery.

Forged Checks When an offeror deliberately submits a forged instrument to another, the resulting crime is called uttering.

Stopping Payment of a Check You may order your bank to stop payment on a check that has not yet been paid by the bank.

Stopping Payment of a Check However, if the check is given in payment of an amount actually owed, you still owe the amount of the debt.

Fill in the blanks in the statements below. A _____ check is one that is signed by someone other than the drawer without the drawer’s authority.

ANSWER Forged

A _____ check is one that is more than six months old.

ANSWER Stale

A _____ check is one that is drawn on an account in which there is insufficient funds.

ANSWER Bad

ANSWER A _____ check is one that has been written but not yet returned to the bank for payment.

ANSWER outstanding

Reviewing What You Learned How is a checking account opened? Section 24.1 Assessment Reviewing What You Learned How is a checking account opened?

Reviewing What You Learned Answer Section 24.1 Assessment Reviewing What You Learned Answer By depositing money in the bank and signing a signature card.

Reviewing What You Learned Describe the proper way to write a check. Section 24.1 Assessment Reviewing What You Learned Describe the proper way to write a check.

Reviewing What You Learned Answer Section 24.1 Assessment Reviewing What You Learned Answer When handwriting a check, place the figures very close to the dollar sign and keep all figures close together. Always start at the extreme left when writing amounts of money in words.

Reviewing What You Learned Answer Section 24.1 Assessment Reviewing What You Learned Answer Draw a line in any part of the space not needed for the amount. This prevents someone from putting in words and figures to alter the value of the check.

Reviewing What You Learned Answer Section 24.1 Assessment Reviewing What You Learned Answer Write the name of the payee close to the words “Pay to the order of” and fill in all unused space with a line. Make a note of the reason for the check.

Reviewing What You Learned Answer Section 24.1 Assessment Reviewing What You Learned Answer Sign your name so that it looks as much as possible like the one on the bank signature card.

Reviewing What You Learned Answer Section 24.1 Assessment Reviewing What You Learned Answer Never sign a blank a check. Never cross out or change a check once it has been written.

Reviewing What You Learned Section 24.1 Assessment Reviewing What You Learned Summarize the process of balancing your checkbook.

Reviewing What You Learned Answer Section 24.1 Assessment Reviewing What You Learned Answer Compare the check register balance with the bank statement balance to be sure they agree. When balancing the account, it is necessary to take into consideration outstanding checks.

Critical Thinking Activity Banking Fees Section 24.1 Assessment Critical Thinking Activity Banking Fees Why do you think banks charge a fee to process an order to stop payment?

Critical Thinking Activity Answer Banking Fees Section 24.1 Assessment Critical Thinking Activity Answer Banking Fees Answers may vary but should recognize that the bank is charging for the time that its employees spend processing the order.

Legal Skills in Action Calculating Costs Section 24.1 Assessment Legal Skills in Action Calculating Costs You deposit a $100 check from your friend Ted into your checking account and then write a $46.18 check to pay for groceries.

Legal Skills in Action Calculating Costs Section 24.1 Assessment Legal Skills in Action Calculating Costs Four days later, you receive a notice from the bank that Ted’s check was bad and your account was debited $25 for the unpaid deposit.

Legal Skills in Action Calculating Costs Section 24.1 Assessment Legal Skills in Action Calculating Costs Because the funds from your deposit did not become available, your check was returned to the grocer unpaid. Your account is debited another $25 for the unpaid check.

Legal Skills in Action Calculating Costs Section 24.1 Assessment Legal Skills in Action Calculating Costs The next day you receive notice from your grocer that you must pay a fee of $25 for the returned check and replace it with a bank check or money order. You pay 75 cents for the money order.

Legal Skills in Action Calculating Costs Section 24.1 Assessment Legal Skills in Action Calculating Costs Calculate how much you really spent to purchase $46.18 worth of groceries.

Legal Skills in Action Answer Section 24.1 Assessment Legal Skills in Action Answer Calculating Costs $121.93. Original check amount, $46.18. Bank fees, $50. Grocer’s returned check fee, $25. Cost of money order, .75.

End of Section 24.1