Chapter 9 – Checking Accounts & Banking

Checking Account Check: written order to a bank to pay a specific amount to a person/business (payee) Canceled check: a check that has a bank’s stamp on it, showing it has cleared the bank Overdraft: a check written for more money than what is in your account Floating a Check: writing a check when you know you don’t have enough money in your account, hoping a deposit will clear before the check does

Advantages of a Checking Account Convenient for paying bills Safe than cash for major purchases, bills, and mail orders Built-in record keeping system Other services: – Instant loans – Online banking – 24-Hour access (ATMs) Checking Account = known as DEMAND DEPOSIT

Opening an Account Make initial deposit Can be a joint account Fill out a Signature Authorization Form – Compare signature on card to checks – Security identification question (ex. mother’s maiden name)

Paying Online Can list bills to be paid automatically Allow for lag time Some banks charge fees for this Assigned a PIN (Personal Identification Number)

Tips When Writing Checks Use pen Write legibly Do not put extra space between words/numbers Keep signatures consistent Avoid mistakes – if a mistake happens: “VOID” Make sure you have enough money!!

The Path of a Check Joe writes Suzie a $25 check. The check has now cleared and is a canceled check. Joe’s bank gets the check, takes $25 from Joe’s account, and sends it to Suzie’s bank to reimburse the payment. Suzie’s bank takes money from it’s bank, gives her the $25 cash. Suzie takes the check to her bank to cash it. Suzie’s bank then sends the check to Joe’s bank to be reimbursed.

A HG E D C B I J F A: Check Number B: Maker (Drawer)’s Name and Address (preprinted) C: Date F: Written Amount I: Routing Number (Banks Identification Number) J: Account Number (YOUR bank account number) 001 December 1, 12 Wal-Mart Twenty-Five and 23 / / 100 Groceries you r signature D: Payee E: Numeric Amount H: Signature G: Memo Check #1001 to Wal-Mart on December 1, 2012 for groceries for $25.23

Checkbook Register Booklet used to record all checking account transactions Keeps a running total of your account balance Types of Transactions: – Checks – Debit Card purchases – Deposits – Withdrawals (ATM)

1.Beginning Balance (OR balanced carried over) 2.Check Number (transaction code) 3.Date 4.Transaction Description 5.Amount of Payment OR Deposit 6.New running Total Beginning Balance: $ Aug. 9 – wrote a check #1001 to Kroger for $24.95 Sample Transactions Aug. 11 – bought random items at Wal-Mart for $25.97 using your Debit Card Aug. 16 – wrote a check # 1002 to IBHS for $15.00 Aug. 19 – deposited your paycheck of $ Aug. 22 – got gas at Casey’s with your Debit Card for $31.80 Aug. 29 – withdrew $40 from the ATM Aug. 29 – wrote check #1003 but made an error while writing the check so not using the check Aug. 31 – Deposited a check from your parents for $ Kroger - groceries IBHS Paycheck D Casey’s - gas DC Wal-Mart - random DC Withdraw ATM VOID Paycheck D

Depositing a 50 bill (cash), a check for $150 from your parents, and a check for $25 from IBHS on Dec. 1, You want to withdrawal $25 cash. STEPS: 1.Enter the Date 2.Enter any Cash you are depositing 3.Enter any Checks you are depositing 4.Total all Deposits 5.Less cash received? (withdrawing any money?) 6.Net Deposit (Amount to actually be deposited) 7.Sign ONLY IF you are withdrawing money December 1, parents IBHS your signature

Endorsing Checks Signing the back of a check so it may be cashed or deposited THREE TYPES Blank Endorsement: the signature of payee is written exactly as it is on the front of the check Simon Smith

Special Endorsement: transferring the right to cash the check to someone else Restrictive Endorsement: restricting or limiting the check to be deposited only into the account specified Pay to the Order of Sue Jones Simon Smith For Deposit only CEFCU Acct. # Simon Smith

Reconciling Your Bank Account Matching your checkbook register with the bank statement (or online statement) Outstanding debit transactions / checks: any debit transaction or check that is recorded in the register but has not yet cleared the bank Outstanding deposits: any deposit that is recorded in the register but has not yet cleared the bank Register balance = last line on reconciliation sheet

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Types of Checking Accounts An account opened by two or more people “ Joint Account” An account where anyone on the account has the right to the amount deposited if the other individual dies “ Survivorship Account” These accounts have low (or no) average daily balance requirements and no service fees “ Share Account”

These accounts have a set monthly service fee if an average minimum balance is not met but no per check fee “Standard Account” These accounts have flat rate service fees and fees for each check written “Special Account” These accounts offer interest on the amount in the account as long as the amount does not fall below a minimum average “Interest-Bearing Account” – Average-Daily-Balance Method: a fee is charged if the monthly average is below a certain $ amount