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Checking Account Simulation. Understanding Checking Accounts. What is a Checking Account?. Tool used to transfer funds deposited into the account to make a cash purchase Could also be named a transaction account Common financial service used by many consumers Available at banks.

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Checking account simulation

Checking Account Simulation

Understanding Checking Accounts


What is a checking account
What is a Checking Account?

  • Tool used to transfer funds deposited into the account to make a cash purchase

  • Could also be named a transaction account

  • Common financial service used by many consumers

  • Available at banks


Checking accounts continued
Checking Accounts continued

  • Services and fees will vary depending upon the financial institution

    • Research the financial institution and type of account before choosing

  • Many financial institutions offer telephone and internet banking services to customers


Benefits
Benefits

  • Can help to manage money

  • Written record of expenses

    • Check register

  • Makes bill paying more convenient

  • Reduces the need to carry large amounts of cash

  • Most liquid of cash management tools

    • Considered cash


How do they work
How Do They Work?

  • Money is deposited into the account with a deposit slip

  • Pay the transaction by:

    • Writing a check

    • Using an ATM and/or debit card

    • Using electronic banking


Characteristics
Characteristics

  • Funds are easily accessible through:

    • A check

    • Automated teller machine (ATM)

    • Debit card

    • Telephone

    • Internet


What is a check

Piece of paper pre-printed with the account holder’s:

Name

Address

Financial institution

Identification numbers

To completed check, fill in the:

Amount

Payee

To whom the check was written

Date

Signature

What is a Check?

  • Used at the time of purchase as the form of payment


Bouncing a check
Bouncing a Check holder’s:

  • Check written for an amount over the current balance held in the account

    • ‘Bounces’ due to insufficient funds

  • Assessed a substantial fee by both the financial institution and the payee

  • Can cause harm to credit report

    • Financial institutions report to credit bureaus the account holder’s failure/success to manage his/her checking account properly

      • Used as a guide for future inquiries for credit


Other checking components
Other Checking Components holder’s:

  • Register

    • Place to immediately record all monetary transactions for a checking account

      • Written checks, ATM withdrawals, debit card purchases, deposits, fees, etc.

  • Checkbook

    • Contains the checks and the register to track monetary transactions


Atm fees
ATM Fees holder’s:

  • ATMs are owned by different financial institutions

  • Fees may be charged to the account for ATM use

  • Fees range from $0.50 to $5.00

    • Usually free to account holders of the financial institution


Atm card
ATM Card holder’s:

  • Card given to account holder to make financial transactions at ATMs

  • In the shape of a credit card, but can only be used in designated places

  • Must use personal identification number (PIN) to access the account

    • A protected number given or chosen by the account holder to allow access to the account


Types of accounts available
Types of Accounts Available holder’s:

  • Financial institutions offer different types of checking accounts

    • All have own characteristics

    • Research all of the requirements and restrictions before opening the account

  • Basic types/guidelines include:

    • Regular checking

    • Free checking

    • Special checking

    • Interest-Earning checking


Regular checking
Regular Checking holder’s:

  • No monthly charge if minimum balance is maintained

  • No interest is given

  • Unlimited check writing


Free checking
Free Checking holder’s:

  • No charges or fees for using the account

  • No minimum balance required

  • Unlimited check writing

  • Usually for a specific group:

    • Students

    • Seniors


Special checking
Special Checking holder’s:

  • Generally for people who write only a few checks and keep a low balance

  • Basic account which pays no interest

  • Monthly service charge or fee for each transaction

  • May have restrictions on number of transactions each month


Interest earning checking
Interest-Earning Checking holder’s:

  • Pays interest on money in account

    • Usually the lowest interest rate of all the cash management tools

  • Minimum balance required

  • Unlimited check writing

  • Called a share draft at credit unions


Opening a checking account
Opening a Checking Account holder’s:

  • Most applications are completed on a computer to process quickly

    • Customer may have to complete a brief hand-written application to be entered into the computer by new accounts personnel

  • Customer must have:

    • Picture identification

    • Name, address, phone number, and social security number


Opening continued
Opening continued holder’s:

  • If customer is approved, he/she completes a signature card

    • Contains account information about the new account and his/her signature

    • Used to verify the signature for each signed transaction for the account to prevent fraud

  • Completion of the signature card means the customer agrees to all terms and conditions of the account



Opening continued1
Opening continued holder’s:

  • If offered, customers may choose to have an ATM and/or debit card for the account

    • May be required to complete another form

  • An initial deposit must be made

    • Amount will vary among different financial institutions and type of account


Ordering checks
Ordering Checks holder’s:

  • New customers are provided starter checks to use until the ordered checks arrive

    • Generic checks with account number and financial institution pre-printed

    • Customer information is hand written

  • Many businesses do not accept starter checks

    • Take this into consideration before making the initial deposit

    • Ordered checks may take 5 to 10 business days to arrive


Ordering continued
Ordering continued holder’s:

  • Personal information on checks

    • Name

    • Address

    • Optional: phone number, driver’s license number

    • DO NOT put the account holder’s social security number on the check for security reasons


Ordering continued1
Ordering continued holder’s:

  • Design of the check is customer’s choice

    • Customer pays for checks

      • Price depends on the style

    • Style of the check does not change how a check works

    • Some financial institutions may offer basic checks free of charge

  • Single or duplicate checks are available


Ordering continued2

No records of written checks holder’s:

Each check must be logged in the register immediately to track transactions

Provides a written record of each check with the carbon copy

Convenient in case the check was not recorded into register immediately

Ordering continued

SingleDuplicate(carbon copy)


Endorsing a check
Endorsing a Check holder’s:

  • Endorsement

    • Signature on the back of the check from receiving person approving it for deposit

    • A check must be endorsed to be deposited

  • Three types

    • Blank

    • Restrictive

    • Special

  • Safest way to endorse the check is to wait until going to the financial institution to deposit or cash the check


Blank endorsement
Blank Endorsement holder’s:

  • Receiver of the check signs his/her name

  • Anyone can cash or deposit the check after has been signed


Restrictive endorsement
Restrictive Endorsement holder’s:

  • More secure than blank endorsement

  • Receiver writes “for deposit only” above his/her signature

    • Allows the check to only be deposited


Special endorsement
Special Endorsement holder’s:

  • Receiver signs and writes “pay to the order of (fill in person’s name)”

  • Allows the check to be transferred to a second party

    • Also known as a two-party check


Making a deposit
Making a Deposit holder’s:

  • Deposit slip

    • Contains the account holder’s account number and allows money (cash or check) to be deposited into the correct account

    • Located in the back of the checkbook

  • Complete a deposit slip to make a deposit

    • Give to financial institution along with cash and/or check

    • Checks must be endorsed to be deposited

  • Deposited amount must be recorded in the check register to keep the balance current


Completing a deposit slip
Completing a Deposit Slip holder’s:

  • Date

    • The date the deposit is being made


Completing a deposit slip1
Completing a Deposit Slip holder’s:

  • Signature Line

    • Sign this line to receive cash back


Completing a deposit slip2
Completing a Deposit Slip holder’s:

  • Cash

    • The total amount of cash being deposited


Completing a deposit slip3
Completing a Deposit Slip holder’s:

  • Checks

    • List each check individually

      • Identify each check on the deposit slip by abbreviating the name of the check writer


Completing a deposit slip4
Completing a Deposit Slip holder’s:

  • Checks

    • If more checks are being deposited than number of spaces on the front, use the back

    • List each check

    • Add the total, enter it on the front


Completing a deposit slip5
Completing a Deposit Slip holder’s:

  • Total from Other Side

    • The total amount from all checks listed on the back


Completing a deposit slip6
Completing a Deposit Slip holder’s:

  • Subtotal

    • The total amount of cash and checks


Completing a deposit slip7
Completing a Deposit Slip holder’s:

  • Less Cash Received

    • The amount of cash back being received

    • This amount is not deposited into account


Completing a deposit slip8
Completing a Deposit Slip holder’s:

  • Net Deposit

    • The amount being deposited into the account

    • To calculate the amount, subtract the cash received from the subtotal


Writing a check
Writing a Check holder’s:

  • To pay for items using a checking account

    • A check is given as a form of payment

    • Must be completed and given to the person or business

  • Pre-printed items on a check

    • Name and address of account holder

    • Name and address of financial institution

    • Check number

    • Identification numbers (account, routing)


Writing a check1
Writing a Check holder’s:

  • Personal Information

    • Account holder’s name and address

    • May include a phone number, not required

    • DO NOT list a social security number for safety reasons


Writing a check2
Writing a Check holder’s:

  • Check Number

    • Numbers used to identify checks

    • Printed chronologically


Writing a check3
Writing a Check holder’s:

  • Date

    • The date the check is written


Writing a check4
Writing a Check holder’s:

  • Pay to the Order of

    • The name of the person or business to whom the check is being written


Writing a check5
Writing a Check holder’s:

  • Amount of the Check in Numerals

    • The amount of the check written numerically in the box

    • Write the cents smaller and underline

    • Write the numbers directly next the dollar sign to prevent someone else from adding numbers to change the amount


Writing a check6
Writing a Check holder’s:

  • Amount of the Check in Words

    • The amount of the check written in words on the second line

    • Start at the far left of the line, write the amount in words, followed by ‘and’, and the amount of cents over 100; draw a line from the end of the words to the word ‘dollars’


Writing a check7
Writing a Check holder’s:

  • Memo

    • Space used to identify the reason for writing a check; optional

    • Good place to write information requested by a company when paying a bill, generally the account number


Writing a check8
Writing a Check holder’s:

  • Signature

    • The account holder’s signature agreeing to the transaction


Writing a check9
Writing a Check holder’s:

  • Identification Numbers

    • First - routing numbers to identify the account’s financial institution

    • Second - account number

    • Third - check number


Check 21
Check 21 holder’s:

  • Check Clearing for the 21st Century Act (Check 21)

    • Current trend that changes how money is withdrawn from customers account and deposited into businesses account


How check 21 works
How Check 21 Works holder’s:

  • Prior to Check 21

    • Paper checks physically moved from customer to business to various banks and the transfer of money from customer’s bank to business’ bank took days

  • After Check 21

    • Paper checks are scanned into a computer system at the place of business and immediately returned to the customer. This electronic copy of the check is called a substitute check. The substitute check is then transferred electronically to various banks and the transfer of money customer’s bank to business’ bank takes hours


Check register
Check Register holder’s:

  • Place to immediately record all monetary transactions for a checking account

    • Written checks, ATM withdrawals, debit card purchases, deposits, fees, etc.

  • Used to keep a running balance of the account

  • Remember -

    • Record every transaction!


  • Check register1
    Check Register holder’s:

    • Date

      • The date the check was written or transaction was made


    Check register2
    Check Register holder’s:

    • Number

      • The number of the written check; if a debit card or ATM was used, write DC or ATM


    Check register3
    Check Register holder’s:

    • Description of Transaction

      • The person/business the check was written to or where the debit card was used

      • Gray line can be used to write the memo


    Check register4
    Check Register holder’s:

    • Payment/Debit(-)

      • Amount of the transaction

      • Deducted from the balance


    Check register5
    Check Register holder’s:

    • Deposit/Credit(+)

      • Amount of the transaction

      • Added to the balance


    Check register6
    Check Register holder’s:

    • √ T

      • A box used to track whether the check has cleared on the monthly bank statement when reconciling at the end of each month


    Check register7
    Check Register holder’s:

    • Fee (if any)

      • Any extra fees charged to the account

      • Listed on the bank statement


    Check register8
    Check Register holder’s:

    • Balance

      • The running total of the checking account

      • Calculated by adding or subtracting each transaction

      • Keep this updated


    Monthly statement
    Monthly Statement holder’s:

    • Lists each monetary transaction and the current account balance for a specified time period

    • Includes:

      • Dates

      • Identification for each transaction (number or type, date, amount)

      • Transaction amounts for withdrawals and/or deposits

      • Interest earned (if applicable)

      • Fees or charges (if applicable)


    Monthly statement continued
    Monthly Statement continued holder’s:

    • If customer holds more than one account at the same financial institution

      • May receive one statement for both

        • For example: a checking and a savings account

      • May be mailed separately


    Reconciling a checking account
    Reconciling a Checking Account holder’s:

    • Reconcile

      • Balance the checkbook register each month to the balance shown on the statement

    • Do this every month to ensure the correct balance in the checkbook

      • Knowing the correct balance can help to avoid bouncing checks


    Steps for reconciling
    Steps for Reconciling holder’s:

    • Make sure every transaction listed on the statement matches the check register

    • Place a check next to each item once it has been double-checked between the statement and register

      • Do this for both withdrawals and deposits

    • Identify any outstanding transactions in the check register

      • Items which have not cleared through the financial institution and are not listed on the statement


    Steps for reconciling continued
    Steps for Reconciling continued holder’s:

    • Start with checking account balance on the statement

    • Add any outstanding deposits

    • Subtract any outstanding withdrawals

    • Compare this result with the current balance in the check register

      • They should be the same


    Reconciling example
    Reconciling Example holder’s:

    • Statement balance $204.00

    • Add $154.01+

      • Outstanding deposits

        • 8/30 - $154.01

    • Subtract $44.75-

      • Outstanding withdrawals

        • #299 - $19.75

        • #300 - $25.00


    Reconciling example continued
    Reconciling Example continued holder’s:

    • Total $313.26

    • Remember - this figure should be the same as the check register

    • If not, double-check the math, look for mistakes

      • Make sure all service fees and charges have been added to the check register


    Checking account safety
    Checking Account Safety holder’s:

    • If a checkbook, ATM, and/or debit card becomes lost or stolen

      • Immediately report it to the financial institution

      • File a report with the police

    • Reported lost/stolen checkbook:

      • Financial institutions generally do not hold the account holder liable for any fraudulent charges


    Safety continued
    Safety continued holder’s:

    • Reported lost/stolen ATM/debit card:

      • Within 2 business days

        • Cardholder is only liable for $50.00

      • Longer than 2 business days

        • Could be liable for up to $500.00

      • Varies depending upon the financial institution

        • May not charge the account holder anything if the correct steps were taken to report the lost/stolen card


    Conclusion
    Conclusion holder’s:

    Research before choosing a financial institution and checking account!

    Follow the precautions to prevent checking account fraud!

    Report a lost/stolen checkbook, ATM, and/or debit card immediately!


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