Chapter © 2010 South-Western, Cengage Learning Checking Accounts and Banking Services Checking Accounts Banking Services and Fees 9

© 2010 South-Western, Cengage Learning SLIDE 2 Chapter 9 Lesson 9.1 Checking Accounts GOALS Describe the purpose of a checking account and the forms associated with it. Explain how to use a checking account. Discuss the types of checking accounts.

© 2010 South-Western, Cengage Learning SLIDE 3 Chapter 9 Checking Account Basics A checking account allows you to write checks to make payments. A check is a written order to a bank to pay the amount stated to the person or business named on it. A checking account is also called a demand deposit, because the money may be withdrawn at any time—that is, “on demand.” Only you, the depositor, also known as the maker, can write checks on the account

© 2010 South-Western, Cengage Learning SLIDE 4 Chapter 9 Checking Account Basics Checks follow a process through the banking system. The payee cashes your check. The bank that cashed the check returns it to your bank. Your bank withdraws the money from your account and sends it to the other bank. Your bank then stamps the back of your check, indicating that it has cleared, which means it has been processed by the bank A canceled check is a check that has cleared your account. It is used as proof of payment should a dispute arise (continued)

© 2010 South-Western, Cengage Learning SLIDE 5 Chapter 9 Checking Account Basics Many banks no longer send paper checks to other banks for processing. To make processing faster and more efficient, they exchange check information electronically by transmitting an image of the check, called a substitute check. A substitute check can be used in the same way as an original check. (continued)

© 2010 South-Western, Cengage Learning Checking Account Basics A checking account offers several advantages It provides a convenient way to pay your bills. Writing a check is often safer than using cash, especially when making major purchases, paying bills, or buying through the mail. It has a built-in record keeping system that you can use to track expenses and create budgets. It gives you access to other bank services, such as loans, online banking, and 24-hour access to your money through automated teller machines (ATMs) SLIDE 6 Chapter 9 (continued)

© 2010 South-Western, Cengage Learning Checking Account Basics As an account holder, you should write checks carefully and keep accurate records. You should check the accuracy of the bank statement you receive each month. Merchants can also use electronic check conversion to convert a check into a debit transaction instead of processing the check. The check is either destroyed or returned to you immediately after the transaction is processed. SLIDE 7 Chapter 9 (continued)

© 2010 South-Western, Cengage Learning SLIDE 8 Chapter 9 Checking Account Basics You must also maintain enough money in your account to cover all the checks you write. A check written for more money than your account contains is called an overdraft. A bank that does not honor a check usually stamps the check with the words “not sufficient funds” (NSF) and returns the check to the payee’s bank. When this occurs, the check has bounced. Your bank will charge you a fee for each NSF check processed. (continued)

© 2010 South-Western, Cengage Learning SLIDE 9 Chapter 9 Checking Account Basics Floating a check is writing a check and hoping to deposit money to cover it before the check clears. Floating a check is very risky because today’s electronic systems allow checks to process very quickly. Floating a check is illegal in most states. Intentionally writing bad checks can result in penalties and hurt your credit record. (continued)

© 2010 South-Western, Cengage Learning SLIDE 10 Chapter 9 Opening a Checking Account To open a checking account, you must fill out and sign a signature authorization form This provides an official signature that the bank can compare to the signature you write on your checks Most banks also require you have an initial deposit of $50 or more

© 2010 South-Western, Cengage Learning Parts Of A Check Check number Numbered for easy identification ABA number The American Bankers Association number appears in fraction form in the upper right corner of each check. Top half of fraction identifies the location and district of the bank from which the check is drawn Bottom half of fraction helps in routing the check to the specific area and bank on which it is drawn Name and Address of Maker Also known as drawer The person authorized to write checks on the account SLIDE 11 Chapter 9

© 2010 South-Western, Cengage Learning Parts Of A Check Date The date the check is written Do not post date Payee The person or company to whom the check is made payable Numeric Amount Write the amount neatly and as close to the dollar sign as possible Clearly distinguish between dollar and cents Written Amount Show the amount of dollars and cents being paid in words Write the word “and” to separate dollar amounts from cents SLIDE 12 Chapter 9 (continued)

© 2010 South-Western, Cengage Learning Parts Of A Check Signature Write your name in cursive the same way you did on your signature card Account and Routing numbers These numbers appear at the bottom of each check Memo In the bottom left corner of check Provides a place to write the purpose of the check SLIDE 13 Chapter 9 (continued)

© 2010 South-Western, Cengage Learning SLIDE 14 Chapter 9 Parts of a Check Check Number ABA Number Name and Address of Maker Date PayeeNumeric Amount Written Amount Signature Account and Routing Numbers Memo

© 2010 South-Western, Cengage Learning SLIDE 15 Chapter 9 Using Your Checking Account Writing checks Always use a pen with dark ink Write legibly Keep numbers and letters clear and distinct Sign your name as it appears preprinted on the check and on the signature card Avoid mistakes If you make a mistake, you must write VOID across the face of the check to cancel it Then write a new check Be certain you have deposited adequate funds in your account to cover each check you write.

© 2010 South-Western, Cengage Learning SLIDE 16 Chapter 9 Using Your Checking Account Writing checks Always use a pen with dark ink Write legibly Keep numbers and letters clear and distinct Sign your name as it appears preprinted on the check and on the signature card Avoid mistakes If you make a mistake, you must write VOID across the face of the check to cancel it Then write a new check (continued)

© 2010 South-Western, Cengage Learning SLIDE 17 Chapter 9 Using Your Checking Account Paying bills online Safer than sending checks through the mail Faster because money leaves your account right away Convenient Saves money on postage and cost of checks (continued)

© 2010 South-Western, Cengage Learning SLIDE 18 Chapter 9 Using Your Checking Account Making deposits Complete a deposit slip each time you want to put money into your account 1.Insert the date of the transaction 2.In the “Cash” section, write in the amount of currency (paper money) and coins you are depositing. 3.If you are depositing checks, write the amount of each check, together with the check’s ABA number (top part of fraction), in the “Checks” section of the slip 4.Total the currency, coin, and check amounts. Write this figure on the subtotal line. 5.If you wish to receive some cash at the time of your deposit, fill in the desired amount on the “Less Cash Received” line. (continued)

© 2010 South-Western, Cengage Learning SLIDE 19 Chapter 9 Using Your Checking Account 6.If cash is received, subtract it from the subtotal. Write final amount of the deposit on the “Net Deposit” line 7.If you will receive cash, write your signature on the line above the words “Sign here for less cash in teller’s presence” 8.The teller will give you either a copy of this deposit slip or a receipt. Keep for your records. (continued)

© 2010 South-Western, Cengage Learning SLIDE 20 Chapter 9 Using Your Checking Account Using a checkbook register A checkbook register is a booklet used to record checking account transactions. 1.Record the current amount in your account at the top of the “Balance” column 2.As soon as you write a check, make an online payment, or make a deposit, record the transaction in your register 3.Write the preprinted check number in the first column. If the transaction is not a check, make up a code to represent the kind of transaction. 4.Write the month, day and year of the transaction in the Date column 5.Enter the name of the payee on the first line of the “Description” section. Write the purpose of the check on the second line. (continued)

© 2010 South-Western, Cengage Learning SLIDE 21 Chapter 9 Using Your Checking Account Using a checkbook register A checkbook register is a booklet used to record checking account transactions. 6.If the transaction will reduce your balance, write the amount in the “Payment/Debit” column. If the transaction will add to your balance, record the amount in the “Deposit/Credit” column 7.If the bank charges a fee, record the result in the “Fee” column. 8.Add the amount of the check to the check fee, and record the result in the “Balance” column. 9.Subtract debit amounts from the previous balance. Add credit amounts to the previous balance. 10.Put a check mark once it is cross referenced with your bank statement. (continued)

© 2010 South-Western, Cengage Learning SLIDE 22 Chapter 9 Endorsing Checks A check generally cannot be cashed until it is endorsed. To endorse a check, the payee signs the top part of the back of the check in ink. There are three major types of endorsements. Blank endorsement Special endorsement Restrictive endorsement

© 2010 South-Western, Cengage Learning SLIDE 23 Chapter 9 Blank Endorsement A blank endorsement is the signature of the payee written exactly as his or her name appears on the front of the check.

© 2010 South-Western, Cengage Learning SLIDE 24 Chapter 9 Special Endorsement A special endorsement, or an endorsement in full, is an endorsement that transfers the right to cash the check to someone else.

© 2010 South-Western, Cengage Learning SLIDE 25 Chapter 9 Restrictive Endorsement A restrictive endorsement restricts or limits the use of a check.

© 2010 South-Western, Cengage Learning SLIDE 26 Chapter 9 Bank Reconciliation The process of matching your checkbook register with the bank statement is known as bank reconciliation.

© 2010 South-Western, Cengage Learning SLIDE 27 Chapter 9 Reconciling Your Checking Account 1.Write ending balance from bank statement. 2.Add credits or deposits not on statement. 3.Total lines 1 and 2. 4.List checks, withdrawals, and debits made but not shown on statement. 5.Total outstanding checks/debit transactions. 6.Subtract line 5 from line 3. (Result should match checkbook balance)

© 2010 South-Western, Cengage Learning SLIDE 28 Chapter 9 Types of Checking Accounts Joint accounts Opened by two or more people Survivorship account Any person who signs on the account has the right to the entire amount deposited Special accounts For customers with small amount of activity each month

© 2010 South-Western, Cengage Learning SLIDE 29 Chapter 9 Types of Checking Accounts Standard accounts Has a small or no monthly service fee and no per check fee Required to maintain an average minimum balance in the account Interest-bearing accounts A checking account that earns interest Must maintain a minimum balance Money market account (continued)

© 2010 South-Western, Cengage Learning SLIDE 30 Chapter 9 Types of Checking Accounts Share accounts Checking accounts with low (or no) average daily balance requirements and no service fees Offered by credit unions (continued)

© 2010 South-Western, Cengage Learning 9.1 Assessment Complete 9.1 Assessment on page 198 of book. Use hand out to write answers on Write the letter of the matching vocab word for numbers 1 – 9. Use complete sentences to answer questions 10 – 15. SLIDE 31 Chapter 9

© 2010 South-Western, Cengage Learning SLIDE 32 Chapter 9 Lesson 9.2 Banking Services and Fees GOALS Describe banking services available at most financial institutions. List and explain fees charged by financial institutions for their services.

© 2010 South-Western, Cengage Learning SLIDE 33 Chapter 9 Banking Services A full-service bank is one that offers every possible kind of service, from savings and checking accounts to credit cards, safe deposit boxes, loans, and ATMs. Other services commonly offered are online banking, telephone banking, certified checks, cashier’s checks, money orders, and debit cards. Most banks offer FDIC (Federal Deposit Insurance Corporation) insurance, which protects the deposits of customers against loss up to $250,000 per account.

© 2010 South-Western, Cengage Learning SLIDE 34 Chapter 9 Guaranteed-payment Checks A certified check is a personal check that the bank guarantees or certifies to be good. A cashier’s check, also called a bank draft, is a check written by a bank on its own funds. Traveler’s checks are check forms in specific denominations that are used instead of cash while traveling.

© 2010 South-Western, Cengage Learning SLIDE 35 Chapter 9 Money Orders Banks sell money orders to people who do not wish to use cash or do not have a checking account. A money order is like a check, except that it can never bounce. There is a charge for purchasing a money order. You also can purchase money orders through the post office and local merchants.

© 2010 South-Western, Cengage Learning SLIDE 36 Chapter 9 Debit Cards A debit card is a plastic card that deducts money from a checking account almost immediately to pay for purchases. The debit card is presented at the time of purchase. When a debit card is used, the amount of the purchase is quickly deducted from the customer’s checking account and paid to the merchant.

© 2010 South-Western, Cengage Learning SLIDE 37 Chapter 9 Bank Credit Cards You can apply to a full-service bank for a bank credit card, such as a Visa or MasterCard. If you meet the requirements and are issued a card, you can use it instead of cash at any business that accepts credit cards. Banks offering national credit cards usually charge both an annual fee for use of the card and interest on the unpaid account balance.

© 2010 South-Western, Cengage Learning SLIDE 38 Chapter 9 Overdraft Protection Overdraft protection allows you to cover checks or withdrawals up to a specified amount, usually between $100 and $1,000, depending on the typical balance in your account. With overdraft protection, your checks will be covered even if you have insufficient funds in your checking account.

© 2010 South-Western, Cengage Learning SLIDE 39 Chapter 9 Automated Teller Machines An Automated Teller Machine is often called an ATM. To use ATMs, you must Have a card that is electronically coded Know your personal identification number (PIN) Getting cash is a common ATM transaction. Using a debit card you can withdraw cash from your checking or savings account. Using a Visa or MasterCard, you can receive a cash advance electronically.

© 2010 South-Western, Cengage Learning SLIDE 40 Chapter 9 Online and Telephone Banking Online and telephone banking services give you the ability to access your accounts from a computer or telephone anytime, day or night. Services include: Transferring money from one account to another Paying bills by authorizing the bank to disburse money Getting account balances Seeing which checks have cleared and which deposits have been entered

© 2010 South-Western, Cengage Learning SLIDE 41 Chapter 9 Online and Telephone Banking Most banks also allow and encourage electronic transfers of money. An electronic funds transfer (EFT) uses a computer-based system that enables you to move money from one account to another without writing a check or exchanging cash. (continued)

© 2010 South-Western, Cengage Learning SLIDE 42 Chapter 9 Stop Payment Orders A stop-payment order is a request that the bank not honor a specific check. The usual reason for stopping payment is that the check has been lost or stolen. Most banks charge a fee for stopping payment on a check.

© 2010 South-Western, Cengage Learning SLIDE 43 Chapter 9 Safe Deposit Boxes Financial institutions offer customers a safe deposit box to store valuable items or documents. They charge a yearly fee based on the size of the box. Keeping important documents and other items in a safe deposit box ensures that the items won’t be stolen, lost, or destroyed.

© 2010 South-Western, Cengage Learning SLIDE 44 Chapter 9 Safe Deposit Boxes Examples of items commonly kept in a safe deposit box include Birth, marriage, and death certificates Deeds and mortgage papers Stocks and bonds Jewelry Coin collections (continued)

© 2010 South-Western, Cengage Learning SLIDE 45 Chapter 9 Loans and Trusts Financial institutions also make loans to finance the purchase of cars, homes, home improvements, vacations, and other items. Banks can also provide advice for estate planning and trusts. Banks can act as trustees of estates for minors and others. A trustee is a person or an institution that manages property for the benefit of someone else under a special agreement.

© 2010 South-Western, Cengage Learning SLIDE 46 Chapter 9 Notary Public A notary public verifies a person’s identity, witnesses the person’s signature on a legal document, and then “notarizes” the signature as valid. Financial institutions typically have a person on their staff who is a notary public. This person provides notary services for account holders, usually without charge. For noncustomers, however, there is typically a small fee.

© 2010 South-Western, Cengage Learning SLIDE 47 Chapter 9 Financial Services Purchasing or selling savings bonds Investment brokerage services

© 2010 South-Western, Cengage Learning SLIDE 48 Chapter 9 Bank Fees Banks charge fees to their customers to help cover their operating costs. The best way to avoid fees is to choose the right kind of account. Shop around and find the account that is right for you. Be aware of the rules of your account, so that you don’t violate them and be required to pay high fees.

© 2010 South-Western, Cengage Learning SLIDE 49 Chapter 9 Examples of Bank Fees Loan fees Trustee fees Check cashing fees Per-check fees Monthly service fees Overdraft fees NSF check charges ATM transaction fees Safe deposit box fees Teller service fees Minimum balance fees Fees for guaranteed- payment checks Notary service fees Online bill payment fees Fees to return canceled checks