Chapter 26

1. Chapter 26 Opening a Checking Account

2. Advantages of Checking Account • Convenience – spend money through paper (checks) or the EFT systems. • Safety – from physically being damaged, or from careless spending • Proof of Payment – once the check is cashed, it is a legal proof of payment • Record of Finances – the bank will provide a record of finances, demonstrating how necessary it is to keep track of all deposits and credits

3. Types of Checking Accounts • Regular Checking Accounts – best when planning on writing a lot of checks. • There is not a service charge on most regular checking accounts. • Minimum balance – stated amount that the account must not fall below. • Average monthly balance – the sum of the daily balance divided by the number of days in the month. This average needs to stay above a certain point, in order to avoid a service charge.

4. Additional Charge • Service Charge – a fee a bank charges for handling a checking account.

5. Types of Checking Accounts • Interest Checking Accounts – These accounts make it possible for a checking account to earn interest on the amount kept in the bank. • However, if this is the account that you want, there is normally a minimum balance or minimum average monthly balance of at least $500.

6. Money Market Rate • The interest rate that big users of money, such as governments and large corporations, pay when they borrow money. • As this rate changes, so does the rate the banks pay holders of certain accounts.

7. Other Types of Checking Accounts • Credit Union – provide checking accounts for its members. • Members are called Shareholders when they have money on deposit. • Their checks are called Sharedrafts. • With these accounts, interest rates may vary and the number of sharedrafts per month may be limited.

8. Opening a Checking Account • Signature Card – The official card which the depositor signs, and the bank keeps, in order to use it as an official signature. • Joint Account – when two people and more have an account together. • Deposit Slip – a form on which you list all items you are depositing currency, coins, and checks.

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11. Endorsing Checks for Making Deposits • Endorsement – • is written evidence that you received payment or that you transferred your right of receiving payment to someone else.

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13. Purposes of Endorsements • 1 – Endorsements allow the recipient of the check to cash, deposit, or transfer it to someone else. • 2 – Endorsements serve as legal evidence that the receiver cashed or transferred the check to someone else.

14. Purposes of Endorsements • 3 – Endorsements mean that the endorser will pay the check in case the next owner of the check cannot collect the money.

15. Placement of Endorsement • The bank has a stamp that they must put on the back of the check • The signature of the endorser must sign in the designated area of the check • If the check is not signed in the right spot, it is not legible, or incomplete, the check may be returned.

16. Types of Endorsements • Blank Endorsement • consists of only the endorsers name. • makes a check payable to anyone who has the check. • Special Endorsement • includes the name of the person to whom the check has been transferred.

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19. More types of Endorsements • Restrictive Endorsements • limits the use of the check to the purpose given in the endorsement. • For deposit only – the check may only be deposited in your account.

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21. Recording the Deposit • Deposits can be made… • At the bank • At an ATM • Or sent through the mail

22. Recording the Deposit • Checkbooks contain forms on which a depositor writes a record of deposits made and checks written. • Check Stub • Attached to each check • Check Register • Booklet designed to record and keep track of funds in a checking account.

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