Checking Account Management 101
Course Topics Chapter 1 (pg. 3-5) Checking Account Fundamentals Chapter 2 (pg. 6-7) ChexSystems Chapter 3 (pg. 8-12) Smart Money Management Chapter 4 (pg. 13-16) Check Writing Using Registers Chapter 5 (pg. 17-18) ATM/Debit Cards Chapter 6 (pg. 19-21) Stop Payments ACH Withdrawals Chapter 7 (pg. 22-25) Statement Reconciliation Chapter 8 (pg. 26-28) Choosing and Sharing Accounts Overdraft Protection Chapter 9 (pg. 29) Identity Theft Glossary (pg. 30-32) Activities Exam (side pockets)
Chapter 1 Checking Account Fundamentals What is the most important fact about having a checking account? • The most basic and important fact of checking account • management is to make sure there is enough money to • cover your transactions at the time the check is written. • What happens when you do not have sufficient funds to • cover a check you wrote? • If you write a check for more that what is in your account, • the check will be rejected when it comes in for payment. • It will be sent back to the person who deposited it and your • Credit Union will charge you a non-sufficient funds fee (NSF) • for “bouncing” the check. • 3. The person you wrote it to will also charge you an NSF fee. • The person you wrote the check to can electronically • withdrawal their NSF fee from your account using the • information off the bottom of your check. • You may even be subject to court proceedings that can • result in fines and be required to take special money • management classes.
Chapter 1 What are some tools that would help you manage your checking account? • Check registers • Statements • Telephone and on-line services • Fee Schedules • Overdraft protection • Direct deposit
Chapter 1 Golden Rules Rule #1 Always remember that you, not your Credit Union, are responsible for monitoring your account activity Rule #2 Always discontinue automatic payments before closing your account Rule #3 Always notify your Credit Union if you change your name or address Rule #4 Never give your personal identification number (PIN) or account number to someone else Rule #5 Never use other people’s checks, or let others use yours Rule #6 Never write a post-dated check because it can be cashed before the intended date Rule #7 Never give your account information to someone over the telephone or internet unless you intend money to be withdrawn from your account.
Chapter 2 ChexSystems Is anyone familiar with the ChexSystems service? ChexSystems is a check verification service and consumer credit reporting agency like Experian, Equifax and TransUnion. The difference is instead of reporting how you handle credit, ChexSystems provides your Credit Union information on how you handled checking or savings accounts at other financial institutions. ChexSystems reports in the last five years: -check overdrafts -unsatisfied balances -depositing fraudulent checks -suspicious account handling Here is what you do if you have been reported Step 1: Obtain your report ChexSystems Attn: Consumer Relations 12005 Ford Road, Suite 600 Dallas, TX 75234 (800) 428-9623 www.chexhelp.com
Chapter 2 Step 2: Resolve the debt If your report contains a record of an outstanding debt and you have received collection notices from ChexSystems Collection Agency, you can send your payment directly to them at the address provided on the notice. In all other cases you can go directly to the bank or credit union and take care of the debt directly. Make sure you get a letter from the collection agency, bank or credit union to show debt is paid in full. Any outstanding debts owed will keep reporting on ChexSystems for up to five years. Step 3: Dispute incorrect information Contact ChexSystems if you believe your file contains errors. Make sure to have a copy of your report on hand when disputing information.
Chapter 3 Smart Money Management • To be able to keep a positive checking account history, • knowing where and how much you spend is very important. • Juggling bills, what you spend and paychecks can lead to • confusion and overdrafts can occur, not to mention time • consuming. • You should: • Never write a check and count on the “float” time. Checks are clearing faster with Check 21 and can clear the same day you write them. • Know how much your monthly income is and when you get paid. • Develop an accurate spending plan to track your expenses. • Regularly review your financial situation.
Chapter 3 Creating a Spending and Savings plan will help with your checking account maintenance and knowing how much you spend to how much you make. Step #1 Income First examine how much income you receive.
Chapter 3 Step #2 Expenses Keeping track of what you spend everyday is very important. It gives you a picture of what you actually spend and can help prevent overdrafts.
Chapter 3 Step #3 Debts By knowing what you owe, you’ll be better prepared to make sure the funds are available to make the payments and tackle your debt.
Chapter 3 Step #4 Savings A key part to good financial management is saving for expenses and goals, helping you avoid the temptation of writing a check for more than what is in your account. You can request your Credit Union to setup an automatic transfer on a scheduled day so what you don’t see, you won’t spend. Small amounts saved over time can grow quickly. You can also talk to your employer about having so much from every paycheck sent to your Credit Union savings account.
Chapter 4 Check Writing & Using Registers Writing a check properly the first time will help avoid delays or checks being returned resulting in late fees. #1 #2 #3 #4 #6 #5 #9 #8 #7
Chapter 4 What is an endorsement? Endorsing Checks Checks have to be endorsed before someone else can cash them. Endorsing a check means making a specific notation on the back of the check so the Credit Union knows what to do with it. Blank Endorsement – if you want a check cashed or deposited into your account it must have your signature and account # Endorsements should be made on the opposite side of your name and address
Chapter 4 Restrictive Endorsement – the check can only be deposited into your account
Chapter 4 What is the purpose of a check register? Registers help you keep track of who you wrote a check to, where you made a debit or atm withdrawal, how much you deposited, if a check is missing, and your current balance. Step #1 Write beginning balance in upper right hand corner Step #2 When you write a check enter the check #, date the check is written, a description of who and what the check was for, and the transaction amount (you write the transaction amount twice, once to document and once to balance) Step #3 Subtract your current balance from the amount of the check and this will give you your new checking balance. Repeat for each new entry
Chapter 5 ATM/CuCheck Card What is the difference between an ATM card and a Visa debit card? • -ATM (Automated Teller Machine) cards allow you to withdraw • money from a savings or checking account by way of an • ATM machine 24 hours a day • -Visa Debit Cards take the place of writing a check and can be • used wherever Visa cards are accepted. They also can be • used to withdrawal from an ATM machine with your PIN • When you apply for an ATM or Visa Debit card you will • receive an agreement that explains how transactions will be • processed on your account. Reading and asking questions will • save you both time and frustration. • Never: • Let someone who is not authorized use your card • Write your PIN # on the card or keep with you. • Give your card # to someone unless you intend the money to be deducted Always: • Keep your PIN # safe and memorized • Report Lost/Stolen ATM/Debit cards ASAP to avoid fraud on your account
Chapter 5 Use the same techniques for documenting ATM/Debit card transactions as you would checks. Instead of writing the check #, write ATM or check card. Pay attention if there are fees associated with your ATM withdrawal or debit transaction, because they to will need to be accounted for.
Chapter 6 Stop Payments & ACH Withdrawals Stop payment, also known as cancelling a check, may become necessary. Stop payments prevent the check from being paid on your account if presented through banking channels. The Credit Union does charge a fee to process the stop payment which will be deducted from your checking account at the time the request is made. Stop payments generally remain on your account from six months to 1 year. To process your stop payment you will need to provide the check number, date it was written, who it was written to and the amount. If you choose to make a stop payment, it needs to be for a good reason, because you can cause criminal or civil liabilities since a check is a negotiable item. Name some reasons for needing to make a stop payment? -your mailed check never arrived to its destination -you suspect that your checks have been stolen -you wrote a check for a service or product and have a legitimate complaint about the product or service
Chapter 6 ACH, Automated Clearing House, is a withdrawal from your account electronically. A payee can accept your paper check but enter your Credit Union’s routing number and account number off the bottom of your check. You will be given your original check back. ORIGINAL It is very important to know who you have ACH payments setup with to be able to keep an accurate checkbook register.
Chapter 6 A stop payment can be made on an ACH but does not cancel the request. Cancelling ACH payments needs to be done with the person or company that originally setup the request. Some companies are also processing their NSF fees as an ACH payment. For example: ACH service fee $25 you might see on your account. Look back and see if an item was returned explaining the service fee
Chapter 7 Statement Reconciliation What is “Statement Reconcilliation”? • Your checking account statement will help you reconcile • (balance) your checkbook. You should reconcile your • statement every month which will help you find errors and • prevent identity theft. • Included in your checking account statement is: • The statement period for the activity in the account • The account number • The account summary • A detailed list of checks that have been cashed • The monthly maintenance charge for the account • (if applicable) • A list of your withdrawals • Deposits and other credits • ATM locations used • If any checks are out of sequence
Chapter 7 Step 1 Mark off in your checkbook register every item that appears on your statement. If there is an item on your statement not listed in your check register, determine if it is accurate. If the item is correct, list it in your check register. If the item is incorrect, call your Credit Union immediately to have it investigated. Step 2 Your Credit Union provides you with a monthly reconciliation worksheet with your statement. Enter the ending balance shown on your statement. Step 3 List the deposits and other credits that are in your checkbook register but are not on your statement. Add these to your ending balance. Step 4 List the checks, ATM withdrawals, fees and other debits that are on your checkbook register but not listed on the statement. Subtract these from your balance in Step 3 to get your new ending balance.
Chapter 7 Step 5 Your ending balance on your statement should match your balance in your checkbook register.
Chapter 8 Designating your new account If you share an account, decide who is going to be the account manager (responsible for balancing and reconciliation). With more that one person on the account, it can become confusing, so think carefully before adding a joint or co-signing on someone else’s account. If either person on the account misuses it, both of you are equally responsible. Consider all of your account options before deciding what is best for you. Individual – An account owned by one person. This is a good option for those who want total control over the account
Chapter 8 Joint – An account owned by two or more people, usually sharing a household and expenses. Each co-owner has equal access to the account. PROS -Deposits and withdrawals can be made without the other being present -In the event of primary member’s death, joint member becomes primary and can close the account. CONS -Joint person can withdrawal all funds -Judgments or garnishments against joint member can be removed from funds on the account -IRS, public aid, back taxes, or unpaid child support/alimony will freeze all funds in the account So ask yourself before adding your boyfriend/girlfriend, next door neighbor, or babysitter; do you know what that person has been up to. Youth – An account available to children under the age 18, usually with a parent or guardian. Child and parent/guardian have equal access to the account.
Chapter 8 What is Overdraft Protection? A feature that you may qualify for or be available to you to prevent any overdrafts on your checking account. Checking Linked to Savings (default on most accounts) Funds are automatically transferred from savings to checking to cover a check. There is a $2 transfer fee so the amount to cover the check plus the fee needs to be available to cover the check. Your $25 minimum balance is not available for overdraft protection. Line of Credit (application subject to credit review) If you overdraw, the line of credit will transfer in amounts of $25 or $50 increments plus a fee. The amounts may be transferred for more than what the check was written for. For example, if you wrote a check for $75 the line of credit will transfer $100. You pay interest on the amount transferred and will make a monthly payment on the amount transferred.
Chapter 9 Identity Theft Approximately 700,000 victims of identity theft occur every year. Not becoming one yourself requires diligence and responsibility. -Never give out your account number or routing number unless you know the person or company, and still be cautious. -Report lost/stolen checks and ATM/Debit cards immediately. -Reconcile your statement every month to find unauthorized transactions. -Use on-line banking to see checks that have cleared to verify you actually wrote them. -Make your Credit Union immediately aware if you suspect fraud.
Glossary All glossary words are in BOLD letters throughout the student guide. Automated Teller Machine (ATM): Computer-controlled terminals located on the premises of financial institutions or elsewhere, through which consumers may make deposits, withdrawals, or other transactions as they would through a teller. Also known as a money machine or cash machine. Bounced Check: A check that is written when there is not enough money in the account. Also known as a bad check. Balance: The amount of money in an account. Check: A document used for payment. Check Register: a form to keep track of checking account transactions. Checking Account: An account in which checks may be written against amounts on deposit. Credit Unions: Financial cooperative institutions of individuals with a common affiliation (such as employment, labor union membership, or place or residence). Credit Unions accept deposits of members, pay interest (dividends) on them out of earnings, and provide consumer installment credit to members.
Glossary Debit Card: A card used to make an electronic withdrawal from funds on deposit, as in purchasing goods or obtaining cash. Deposit: The money that is put into an account. Endorse: To sign a name on the back of a check in order to cash or deposit it. Insufficient Funds Fee: The fee that is charged by a Credit Union or business when a check does not clear. Memo: The area on a check that notes what the check was written to pay for. NSF: Not sufficient funds-when there is not enough money in an account to cover a check. Outstanding Check: A check that is still going through Credit Union processing. Overdraft: When an account goes below zero-there is not enough money to cover the withdrawal.
Glossary Reconcile: The process of determining that a checkbook balance matches the Credit Union’s balance for an account. Reconciliation: When an account holder verified that a checkbook balance is the same as the financial institutions balance for the account. Reconciliation form: A form that helps an account holder reconcile an account. Statement: The papers that are sent every month from the Credit Union listing all of the activities in an account for the month. Transaction: When money goes into, or out of, an account. Can include deposits, withdrawals, payments, fees, ATM transactions or transfers. Withdrawal: The removal of money from an account. This can be by check, ATM, automatic payment or other methods.