Checks & Payment Methods CHAPTER 17, SECTION 3

The following are some of the benefits that checking accounts provide for consumers. Convenience and ease of making payments Safety to make payments with less risk than using cash Proof of payment A record of finances for managing your money

The First Deposit  Opening a checking account starts with signing a signature card. This document is used to verify your signature.  The bank compares the signature on checks to the one on the signature card.  Sometimes two or more people have an account together called a joint account.

Signature Card

Types of Endorsements  Before you deposit a check, it must be endorsed. This involves writing your name on the back of the left end of the check.  An endorsement is written evidence that you received payment of that you transferred your right of receiving payment to someone else.  Your endorsement must be make in the 1 1/2 –inch space on the left side of the check.  There are 3 different endorsements that have different purposes.  Bank Endorsement  Full Endorsement  Restrictive Endorsement

Blank Endorsement

Full Endorsement

Restrictive Endorsement Two Signature RequiredRestrictive Endorsement

Writing a Check Write checks in order by number so you know which checks have been paid Write the date on the proper space. Write the payee’s name on the line following Pay to the Order of. Write the dollar amount in words on the line below the payee’s name. Write the purpse of the payment on the line at the bottom of the check. Sign your checks with the same signature you wrote on your signature card. Write the amount of the check in figures after the printed dollar sign.

Proper Check Writing 1. Write checks only on the forms provided by your bank. 2. Write checks in ink. 3. Only write checks if money is available. 4. Use the current date. 5. Avoid making checks payable to “Cash” or to “Bearer”. 6. Always fill in the amount. 7. Void checks on which you make errors. 8. Record every payment from your checking account, whether the payment is by check or EFT.

Stopping Payment  In certain situations, you may not want your bank to pay a check that you have written. To do so, you will fill out a stop payment order, a written notice that tells the bank not to pay a certain check.  Because banks charge a high fee for stopping payment on a check, use this process only for good reason.

The Reconciliation Process As a depositor, you will need to review the record of your account that the bank keeps. At regular intervals, usually monthly, the bank will send you a report on the status of your account known as a bank statement.

While bank statement formats vary, most present the following information…  The balance at the beginning of the month.  The deposits made during the month.  The checks paid by the bank during the month.  Any automated teller transactions made during the month.  Any electronic fund transfers (EFT) or special payments the bank has made.  Service charges for the month, including charges for such special services as stopping payment on a check.  Any interest earned on the account.  The balance at the end of the month.

Find Differences  You keep your own record of your checking account, usually in a check book register. The bank statement is the bank’s record of your account.  The document created to show how the two balances were brought into agreement is called the bank reconciliation.  Bringing the balances into agreement is known as reconciling the bank balance.  The bank prints forms for reconciling on the backs of bank statements.

The balance shown on your records and the bank statement may be different. Here are some common reasons why…  Some of the checks you wrote may not have cleared (been paid). These are called outstanding checks.  You may have forgotten to record a transaction in your register, such as an ATM deposit or automatic bill payment.  A service charge may appear on the bank statement.  You may have mailed a deposit to the bank that has not yet been received.  Interest earned may have been added.  You may have recorded the amount of a check incorrectly in the check register. You may have added or subtracted incorrectly.

Calculate Adjusted Balance To determine the true balance in your account, take the following steps: Subtract the total of the outstanding checks from the bank statement balance. 1. Add any deposits in transit to the balance statement balance 2. Subtract service charges, fees, and automatic payments from your checkbook balance. 3. Add any interest earned to your check register balance. 4.4.

Other Types of Payments Certified Checks A certified check is a personal check for which a bank has guaranteed payment. Cashier’s Checks A cashier’s check is a check that a bank draws on its own funds. Traveler’s Checks Traveler’s checks are special forms designed for making payments when away from home. Money Orders A money order is a form of payment that orders the issuing agency to pay the amount printed on the form to another party.

Types of Money Orders  Several types of organizations commonly sell money orders.  A bank money order is sold by a bank stating that money is to be paid to a specific person or business.  A postal money order purchased from the U.S. Post Office can be sent safely through the mail. It can be cashed only after the payee signs it.  An express money order is issued by various organizations including traveler’s check companies, travel agencies, and many supermarkets, pharmacies, and convenience stores.  A telegraphic money order involves buying a message to direct a telegraph office to pay a sum of money to a certain person or business.