1. Why It’s Important
Paying with checks is the most common and safest medium of exchange.

2. Opening an Account
Checking accounts are sometimes called demand deposits because each check a customer writes is an order to the bank to release money from the account on demand.

3. Types of Accounts Most banks offer several types of checking accounts.
A wise consumer investigates all the kinds of accounts available, as well as their advantages and costs.

4. Regular Account
A regular checking account is designed for customers who write a few checks each month and don’t keep a minimum amount of money in the account.

5. Regular Account Some accounts require a minimum balance.
If the balance falls below the minimum, a service charge is deducted from the account.

6. Interest-Bearing Account
An interest-bearing account is a checking account that earns interest on your account’s balance.

7. Interest-Bearing Account
An interest-bearing account usually has a minimum balance requirement with an unlimited number of checks allowed each month.

8. Interest-Bearing Account
The minimum balance might be much higher than for a regular checking account.

9. Joint Account
A joint account is an account shared by two people who are equally responsible for the account.
With a joint checking account, either person can write checks on the account.

10. Which type of account requires the smallest amount of money to open?
Figure
29.1
TYPES OF CHECKING ACCOUNTS
This chart shows the different types of checking accounts available at one bank.
Which type of account requires the smallest amount of money to open?

11. Signature Card
A signature card is a record of your signature used by the bank to verify your identity.
The signature card helps prevent other people from cashing your checks.

12. Signature Card
The signature you put on your card is the same one you have to use when you sign your checks.

13. What is the main purpose of a signature card?
Fast Review
What is an advantage and a disadvantage of an interest-bearing account?
What is the main purpose of a signature card?

14. Overdraft Protection
One risk of having a checking account is writing checks for more money than you have in your account, or overdrawing your account.

15. Overdraft Protection Banks charge a fee for a returned check.
The business you wrote the check to will probably also charge a fee.

16. Overdraft Protection
Overdraft protection is a line of credit for overdrawn checks.
You pay a service fee for the overdraft protection and interest on the overdrawn amount until it is repaid.

17. Stop Payment
A stop payment is an order for a bank not to cash a particular check.
Banks charge a fee to stop payment on a check.

18. Debit Cards
A debit card is like a credit card but money is taken directly from your checking account when you use it rather than charging the amount to a credit account.

19. Online Checking
Online banking allows you to check your accounts, transfer money, or pay bills at any time of the day over the Internet.

20. Online Checking
Online checking is less expensive for banks, so service fees are often lower than a traditional account.

21. Online Checking
Banks offer the option of scheduling automatic payment of your bills from your checking account.

22. How is a debit card different from a credit card?
Fast Review
What happens if a customer has insufficient funds in a checking account to pay a check?
How is a debit card different from a credit card?

23. Account Records
An advantage of a checking account is that it enables you to keep records of your financial transactions.

24. Writing a Check
The party to whom the check is written and who is cashing the check is the payee.

25. Writing a Check
The party who wrote the check and is paying the money, or drawing it from an account, is called the drawer.

26. Writing a Check
The bank or financial institution where the drawer has an account is the drawee.

27. Writing a Check
Your check register is your checkbook log where you keep track of all your checking transactions.

28. Depositing a Check
To deposit a check in your account you need to fill out a deposit ticket.
Many ATM machines don’t require a deposit ticket.

29. Depositing a Check
To deposit or cash a check requires an endorsement, or the signature of the payee on the back of the check.

30. Depositing a Check
To endorse a check, follow these rules for your protection:
Endorse the check on the back
Use a black pen so your signature can’t be erased
continued

31. Depositing a Check
Sign your name exactly as it’s written on the front of the check
If you’re depositing a check rather than cashing it, write “For Deposit Only” above your signature.

32. Bank Statements
A bank statement is the bank’s record of all the transactions in your checking account.

33. Michael and Conchetta Chung received this bank statement.
Figure
29.2
SAMPLE BANK STATEMENT
Michael and Conchetta Chung received this bank statement.
What were the totals for checks written and for deposits for the month?

34. Bank Statements
A bank statement includes a record of all withdrawals, deposits, interest, and fees.

35. Bank Statements
A bank statement also includes a record of all canceled checks, or checks you’ve written that have been cashed.

36. What are the three different parties on a check?
Fast Review
What are the three different parties on a check?
Why should you write “For Deposit Only” on the back of a check?

37. Graphic Organizer Graphic Organizer Paying by Check Write the check NOIs
there
enough money
in your account? NO
YES
The bank charges you a fee and returns the check to the business. The business also charges you a fee.
The bank withdraws funds from your account and pays the check.

38. Bank Reconciliation
Bank reconciliation is the process of seeing whether your records agree with the bank’s records for your account.

39. Balancing Your Checkbook
The first step to reconciling your account is to see whether the bank has processed all your checks and deposits.

40. Balancing Your Checkbook
Outstanding checks are checks that have been written but haven’t yet been cashed.

41. Balancing Your Checkbook
Deposits that haven’t been recorded on the bank statement should be added to the bank statement balance.

42. Balancing Your Checkbook
The service fee should be subtracted from the balance in your check register.

43. Balancing Your Checkbook
If your account earns interest, add the interest shown on the bank statement to your check register.

44. Balancing Your Checkbook
If the balances on your bank statement and in your check register are the same, you have reconciled (or brought into agreement) your check register balance with the bank statement balance.

45. Finding Errors
If the balances on your bank statement and in your check register don’t agree, check your own account records to see whether you wrote the correct amount for each check and deposit.

46. Finding Errors Check all your additions and subtractions.
Check to see whether you carried the correct balance forward for each new page of your check register.

47. Finding Errors
Recheck to see that you have correctly identified all of the outstanding checks and deposits that haven’t been processed by the bank.

48. Finding Errors
Check the bank’s additions and subtractions.

49. Fast Review
What is the difference between a cancelled check and an outstanding check?
continued

50. Fast Review
What charges do you need to add and subtract from your check register to reconcile it with your bank statement?

51. When you write a check at the store, what do you think the store does with it?
continued

52. What do you think an intermediary bank does?
What’s the purpose of the routing number on a check?
continued

53. How do you know when a check has cleared?