1. Checking Account and Banking Services

2. Objectives Understand the purpose, uses, and advantages of a personal checking account. Understand the purpose, uses, and advantages of a personal checking account. Prepare checking account documents, including a signature card, checks, deposit slips, checkbook register, and bank reconciliation. Prepare checking account documents, including a signature card, checks, deposit slips, checkbook register, and bank reconciliation. Explain check endorsements and describe the types of checking accounts available to consumers. Explain check endorsements and describe the types of checking accounts available to consumers. Define the various banking services available and fees charged to consumers. Define the various banking services available and fees charged to consumers.

3. Purpose of a Checking Account A banking service wherein money is deposited into an account and checks, or drafts, can be written to withdraw money from the account as needed. A banking service wherein money is deposited into an account and checks, or drafts, can be written to withdraw money from the account as needed. A checking account is a demand deposit account because you can demand portions of your deposited funds at will. A checking account is a demand deposit account because you can demand portions of your deposited funds at will. Safer than carrying cash around. Safer than carrying cash around. Built in record keeping tool Built in record keeping tool –Canceled checks (checks that have been processed by the bank) can be used as proof of purchase –Tracks money spent and deposited, useful in budgeting

4. Responsibilities of Checking Account Holder Write checks carefully and keep accurate records of checks and deposits Write checks carefully and keep accurate records of checks and deposits Reconcile with bank statement each month Reconcile with bank statement each month Keep cancelled checks as proof of purchase for income tax records Keep cancelled checks as proof of purchase for income tax records Maintain sufficient funds in your account to cover all checks written Maintain sufficient funds in your account to cover all checks written –A check that cannot be covered is called an overdraft (bounced check) –Usually a fee from your bank (if covered) or the payee (if bank doesn’t cover check) –Floating a check is when you write a check even though you know you don’t have enough money in your account, but plan on depositing funds before the check clears Purposely overdrawing your account is a felony punishable by fine and/or imprisonment Purposely overdrawing your account is a felony punishable by fine and/or imprisonment

5. Opening Your Checking Account Fill out and sign a signature card (fig. 9-1 p207) Fill out and sign a signature card (fig. 9-1 p207) –Provides bank with information and an official signature to compare with checks Other information provided for use in proving identity of customer (ex. mother’s maiden name) Other information provided for use in proving identity of customer (ex. mother’s maiden name)

6. Using Your Checking Account Parts of a check Parts of a check –Check number –ABA (routing) number  Top half identifies location and district  Bottom half helps in routing checks to specific area and bank –Maker’s Preprinted Name and Address –Date –Payee –Numeric Amount –Written Amount –Drawer or Maker –Account Number –Memo

7. Parts of a Check Date Numeric Amount Check Number ABA # Maker’s Preprinted Name and Address (usually here) Payee Written Amount Account Number Maker’s Signature memo

8. Writing Checks Always use pen Always use pen Write legibly Write legibly Sign name as it appears on check and signature card Sign name as it appears on check and signature card Avoid mistakes, void check if mistake is written Avoid mistakes, void check if mistake is written Be sure adequate funds are in account before writing check Be sure adequate funds are in account before writing check Don’t leave empty space on amount lines Don’t leave empty space on amount lines Use memo line for record keeping Use memo line for record keeping

9. Making Deposits Insert Date of transaction Insert Date of transaction Write the amount to be deposited Write the amount to be deposited –Write the currency and coin amount –Write the amount of each check and check number –Total all amounts –Fill out “Less Cash Received” if needed –Sign deposit slip at teller if receiving cash back

10. Using a Checkbook Register Checkbook register is a record of deposits and withdrawals for a checking account Checkbook register is a record of deposits and withdrawals for a checking account See fig 9-4 p.211 for check register See fig 9-4 p.211 for check register –Write check number –Date –Payee –Write amount of transaction in debit/credit column and the balance column and calculate new balance –Use the column with a check for reconciliation

11. Reconciling Your Checking Account Reconciliation is the process of matching your checkbook register with the bank statement (balancing) Reconciliation is the process of matching your checkbook register with the bank statement (balancing) Most bank statements provide a reconciliation form Most bank statements provide a reconciliation form Formula: Formula: –Statement balance + outstanding credits – outstanding checks = checkbook balance video

12. Endorsements A check cannot be cashed or deposited without first being endorsed A check cannot be cashed or deposited without first being endorsed Types of endorsements Types of endorsements –Blank: signature of payee (p. 215) –Special: used when payee signs check over to a third person (p. 215) –Restrictive: limits use of check (p. 216)  Most common is “for deposit only”  Best type to use If using a blank endorsement, don’t endorse check until you are at the bank If using a blank endorsement, don’t endorse check until you are at the bank video

13. Types of Checking Accounts Special Account Special Account –Used if only a small number of checks are written each month –Low monthly service fee with a charge for each check written or a charge after a preset limit of checks have been written Standard Account Standard Account –Set monthly fee, but no per-check fee –Fees can often be avoided if minimum balance is maintained –Extra services such as free traveler’s checks, ATM card, safe deposit box, etc. are often packaged with this type of account

14. Types of Checking Accounts cont’d Interest Bearing Account Interest Bearing Account –Interest is paid if minimum average daily balance is maintained –Interest rates are usually low, 1-5% depending on economy so this is not a good investment option but is a good way to avoid service charges and/or monthly fees Share Draft Accounts Share Draft Accounts –Checking account at a Credit Union –Usually low or no monthly fees

15. Banking Services A full-service bank offers every possible kind of service from checking accounts to credit cards, safe-deposit boxes, loans (all types), and ATM machines A full-service bank offers every possible kind of service from checking accounts to credit cards, safe-deposit boxes, loans (all types), and ATM machines FDIC (Federal Deposit Insurance Corporation) protects deposits up to $100,000 per account holder FDIC (Federal Deposit Insurance Corporation) protects deposits up to $100,000 per account holder video

16. Banking Services cont’d Certified Checks Certified Checks –A personal check that the bank guarantees or certifies to be good –Amount of check is immediately deducted from account –“Certified” is stamped on the check and a bank official initials the check –The bank puts a “hold” on the account for the amount of check so the money will be there –Often a fee is charged

17. Banking Services cont’d Cashier’s Check Cashier’s Check –A check written by a bank on its own funds –Can be paid for with a withdrawal from an account or cash –Often used for large transactions to avoid carrying cash around –Used if you want to be anonymous because the banks name is on the check not yours –There is usually a fee

18. Banking Services cont’d Money Orders Money Orders –Used for transactions when cash is not accepted and you don’t have a checking account –Can be purchased at banks, post offices, and some convenience stores Debit Cards Debit Cards –Allow for immediate deductions from a checking account (check card)

19. Banking Services cont’d Safe-Deposit Boxes Safe-Deposit Boxes –Annual rental fee –Safe place to store valuables and important documents (birth certificates, deeds, mortgages, vehicle titles, jewelry, collectibles, etc) –Must provide proof of identification and usually sign a form for comparison to signature card Loans and Trusts Loans and Trusts –A trustee is a person or institution that holds or manages property for the benefit of someone else (usually a minor or elderly person)

20. Banking Services cont’d Discount Brokerage Services Discount Brokerage Services –Allow for stock transactions at a discounted rate –No advice or counseling is provided –Transactions are cleared through checking or savings account Bank Credit Cards Bank Credit Cards –Visa and Mastercard –Annual fees are sometimes charged –Interest is paid on any unpaid balance

21. Banking Services cont’d Automated Teller Machines (ATM’s) Automated Teller Machines (ATM’s) –Allow for 24 hour service –Deposits, withdrawals and transfers Stop Payment Orders Stop Payment Orders –A request that the bank not cash or process a specific check –Used for lost or stolen checks –Usually a substantial fee (> $10)

22. Bank Fees Banks charge fees to cover the cost of operation Banks charge fees to cover the cost of operation –If you get a loan, you are often charged a loan fee –If the bank acts as a trustee there is usually a fee Banks can charge non-customers for check cashing, using their ATM’s, etc. Banks can charge non-customers for check cashing, using their ATM’s, etc. Under the Truth in Savings Act (1993) an checking account advertised as “free” must have no hidden charges Under the Truth in Savings Act (1993) an checking account advertised as “free” must have no hidden charges –No fees for check writing, no minimum balance, etc –Can charge for checks or ATM transactions

23. Summary video video video