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Payments. Banking & Finance. Bellringer. Online Chapter 9 Pretest Activity: 3 minutes. You want to buy a new book or video game. Depending on where you buy the item from, what are your payment options?. Negotiable Instruments. Define a negotiable instrument

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Banking & Finance



  • Online Chapter 9 Pretest


Activity 3 minutes

Activity: 3 minutes

  • You want to buy a new book or video game. Depending on where you buy the item from, what are your payment options?

Negotiable instruments

Negotiable Instruments

  • Define a negotiable instrument

  • Compare and contrast types of negotiable instruments

Biz kid video

Biz Kid$ Video

What is a negotiable instrument

What Is a Negotiable Instrument?

  • Transferrable, signed document that represents the promise to pay a specific amount of money in the future or on demand

  • Easier to transport

  • More convenient than cash for large purchases

  • Proof that payment was made

Elements of a negotiable instrument

Elements of aNegotiable Instrument

  • Authorized signature

  • Specific amount

  • Unconditional promise to pay

  • Payment date

  • Payee

What is the bank s role

What is the bank’s role?

  • Negotiable instrument is created by a maker

  • Maker (drawer) signs to validate it

  • Maker authorizes withdrawal of cash

  • Drawee (party who pays) is the bank

Video learn the parts of a check

Video: “Learn the Parts of a Check”

Path of payment

Path of Payment



  • What elements must be in a negotiable instrument?

  • If a date is not specified in a negotiable instrument, when is it paid?

Types of negotiable instruments

Types of Negotiable Instruments



Written order directing a bank to pay a specific amount from deposited funds

Traveler’s checks

Money order

Cashier’s check

  • Orders of directs a payment to be made

  • Payees name

  • “pay to the order of”


Types of negotiable instruments1

Types of Negotiable Instruments

Bills of Exchange


Promissory Note: commercial version of an I owe you (IOU)

Certificate of Deposit: bank is the maker

  • Contains an unconditional order to pay a specific amount of money to the payee

  • Used in commerce, particularly international trade




  • What are the two types of negotiable instruments?

  • How is a money order different from a traveler’s check?

  • Why is a CD considered a negotiable instrument from the bank’s perspective?



Small group activity 3 minutes

Small Group Activity: 3 minutes

  • Who is responsible for making sure a negotiable instrument is valid?

  • Prepare to share.

Using checks

Using Checks

  • List the characteristics of a checking account

  • Describe the elements of a check

  • Distinguish between the common endorsement types

  • Explain how checks are processed

Checking accounts

Checking Accounts

  • Main purpose: ability to withdraw funds from a bank account by writing checks

  • Pay little or no interest

  • Liquidity is high

  • For consumers and commercial businesses

Endorsements via video

Endorsements via Video

Take notes on next 3 slides

Video notes for blank endorsements

Video Notes for Blank Endorsements

Video notes for restrictive endorsements

Video Notes for Restrictive Endorsements

Video notes for full endorsement third party

Video Notes for Full Endorsement (Third-Party)

Life cycle of a check

Life Cycle of a Check


Honoring a check







Aba Routing Number


Processing a check

Processing a Check

  • Clearing: process of approving a check and transferring funds from one account to another

  • Used to take several days

Processing a check back in the day

Processing a CheckBack in the Day

  • Drawer wrote the check and gave it to payee

  • Payee endorsed check and presented to bank

  • Payee’s bank mailed check to drawer’s bank

  • Drawer’s bank sent payment to payee’s bank

  • Cancelled check, cleared check, returned to drawer

Processing a check today

Processing a Check TODAY

  • Automated clearinghouse (ACH): system that processes checks

    • Drawer writes check and gives to payee

    • Payee endorses check and presents to bank

    • Bank sends image of check to the ACH

    • ACH transfers funds from drawer’s account to the payee’s account

Processing a check1

Processing a Check

  • Many banks no longer return cancelled checks

    • Substitute check: paper copy of front and back of original check

    • Images of checks and deposits viewed online

Research activity legal influences

Research Activity:Legal Influences

  • Red Cups: Federal Reserve Act of 1913

  • Blue Cups: Uniform Commercial Code of 1952

  • Yellow Cups: Expedited Funds Availability Act of 1987

  • Green Cups: Check Clearing Act for the 21st Century of 2004 aka Check 21 (image replacement document—IRD)

    Your group will provide 5 facts

    on the assigned legal development.



  • How is the drawee identified on a check?

  • Which type of endorsement is the least safe? Explain.

  • What is the purpose of a third-party endorsement?

  • What two steps did ACHs remove from the check-processing procedure?

  • How did IRDs remove bank and customer concerns about the use of electronic records?



  • List and describe the 3 types of endorsements.

Small group activity 3 minutes1

Small Group Activity: 3 minutes

  • Think of things for which you can prepay.

  • Prepare to share.

Other payment systems

Other Payment Systems

  • Define a payment system

  • Describe the common types of electronic funds transfers

  • Explain how cards are used as payment systems

Payment systems

Payment Systems

  • Methods of transferring funds without using cash

  • Global trade would grind to a halt with cash only

  • Electronic funds transfer most common

  • Any transfer of funds started by electronic means

Automated teller machines

Automated Teller Machines

  • Computerized machine that allows a customer to perform basic banking activities

  • Enter Cash card and PIN, follow prompts to conduct transaction

  • Free unless at a different bank from account

Direct deposits

Direct Deposits

  • Funds are added directly into a bank account by electronic means instead of a negotiable instrument being used.

  • 2 advantages

    • Funds are available immediately

    • Safe, eliminates need to transport a check

Wire transfers

Wire Transfers

  • Electronic transfer of funds from one location to another

  • Fastest and safest way to transfer

  • Federal Reserve Wire Network (FedWire): Verbal Explanation—write this down!

  • Clearing House Interbank Payment System (CHIPS): privately held, enables major banks around world to transfer funds to each other

Automatic payments

Automatic Payments

  • Preauthorized electronic funds sent from a customer’s account to a vendor’s account at regular intervals.

  • Generally for a set amount

Bill payment services

Bill-Payment Services

  • Electronic transfer of funds from a customer’s account to a vendor’s account must be requested by the customer or the vendor each time a payment is due.

  • More practical than automatic payments for bills that might vary in amount



  • Credit Cards: used to buy products or services on credit

  • Charge cards: like credit cards, but balance must be paid off monthly

  • Debit cards (check card): enables customer to electronically access funds in account



  • How are ATMs a source of income for the bank?

  • What are two advantages of direct deposit from an employee’s standpoint?

  • How does the Federal Reserve Wire Network participate in wire transfers?

  • What is the difference between automatic payments and a bill-payment service?

  • How is a debit card different from a credit card?

Common core listening activity

Common Core Listening Activity

  • View “Jordan Maxwell on the Law of the UCC: Uniform Commercial Code”

  • Write a report in which you summarize the speaker’s point of view, reasoning, use of evidence and rhetoric, word choice, points of emphasis, and tone. How do these contribute to the speaker’s overall message?

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