Checking accounts
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Checking Accounts. Basic Banking Information. Banks vs. Credit Unions Both offer basic banking services Checking and saving accounts, loans, etc. Credit cards, mortgages, foreign currencies, etc. Banks

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Basic banking information
Basic Banking Information

  • Banks vs. Credit Unions

    • Both offer basic banking services

      • Checking and saving accounts, loans, etc.

      • Credit cards, mortgages, foreign currencies, etc.

    • Banks

      • Community, regional or national for-profit business corporations owned by private investors and governed by the board of directors chosen by the stockholders

    • Credit Unions

      • Non-profit financial cooperatives owned by their members and governed by a board of directors elected by and from those members

      • Usually there is a common bond among members

        • Live in the same geographical area

        • Belong to the same organization

What is a checking account
What is a Checking Account?

  • Common financial service used by many consumers

  • Funds are easily accessed

    • Check

    • ATM (automated teller machine)

    • Debit card

    • Telephone

    • Smart Phones

    • Internet

  • Services and fees vary depending upon the financial institution

Why do people use checking accounts
Why Do People Use Checking Accounts?

  • Reduces the need to carry large amounts of cash

  • Convenience – useful for paying bills

  • Spending Plan Tool

    • Keeps a record of where money is spent

  • Safety – using checks is safer than carrying cash

What is a check
What is a Check?

  • Handwritten or computer-generated order

  • Specifies the amount of money to be paid

  • And the name of the person or company who should receive the funds

What is a check1
What is a Check?

  • 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 check
Writing a Check

  • 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 check1
Writing a Check

  • Check Number

    • Numbers used to identify checks

    • Printed chronologically

Writing a check2
Writing a Check

  • Date

    • The date the check is written

Writing a check3
Writing a Check

  • Pay to the Order of

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

Writing a check4
Writing a Check

  • 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 check5
Writing a Check

  • 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 check6
Writing a Check

  • 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 check7
Writing a Check

  • Signature

    • The account holder’s signature agreeing to the transaction

Writing a check8
Writing a Check

  • Identification Numbers

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

    • Second - account number

    • Third - check number

Depositing a check
Depositing a Check

  • True or False?

    • A check is like cash and can be used immediately after you get it

  • False

    • Checks need to be endorsed first

      • Signature on the back of a check to approve it to be deposited or cashed

      • 3 kinds of endorsement

Blank endorsement
Blank Endorsement

  • Receiver of the check signs his/her name

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

Restrictive endorsement
Restrictive Endorsement

  • More secure than blank endorsement

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

    • Allows the check to only be deposited

Special endorsement
Special Endorsement

  • 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

  • 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

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

  • Deposits can be made with a bank teller or at ATM

    • Although with new technology at ATMS, they are often not needed

Completing a deposit slip
Completing a Deposit Slip

  • Date

    • The date the deposit is being made

Completing a deposit slip1
Completing a Deposit Slip

  • Signature Line

    • Sign this line to receive cash back

Completing a deposit slip2
Completing a Deposit Slip

  • Cash

    • The total amount of cash being deposited

Completing a deposit slip3
Completing a Deposit Slip

  • 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

  • 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

  • Total from Other Side

    • The total amount from all checks listed on the back

Completing a deposit slip6
Completing a Deposit Slip

  • Subtotal

    • The total amount of cash and checks

Completing a deposit slip7
Completing a Deposit Slip

  • 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

  • Net Deposit

    • The amount being deposited into the account

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

Other checking account terms
Other Checking Account Terms

  • Electronic Funds Transfer (EFT)

    • The movement of funds using computer systems, telephones, or electronic terminals or smartphone

      • Direct Deposit - Automatic transfer of your paycheck from your employer’s account to your checking account

      • Automatic payment of an outgoing monthly bill such as a gym’s membership fee or a monthly utility bill

Other checking account terms1
Other Checking Account Terms

  • Online Banking

    • Allows account holders to access their account information, view transaction history and perform banking transactions via the internet or their mobile phone

    • In 2012, 68% of consumers with regular internet access had used online banking

    • Benefits:

      • Available 24x7

      • No checks need to be written

      • Service is usually free to account holders

Balancing your checking account
Balancing your Checking Account

  • Every time you use your checking account – which includes Debit Card transactions and ATM withdrawals – you should write down what you did in your checkbook register

Checking account register
Checking Account Register

  • Place to record all monetary transactions for a checking account

    • Deposits, checks, ATM use, debit card purchases, additional bank fees

  • Used to keep a running balance of the account

  • Remember

    • Record every transaction!

  • Check register
    Check Register

    • Date

      • The date the check was written or transaction was made

    Check register1
    Check Register

    • Number

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

    Check register2
    Check Register

    • 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 register3
    Check Register

    • Payment/Debit(-)

      • Amount of the transaction

      • Deducted from the balance

    Check register4
    Check Register

    • Deposit/Credit(+)

      • Amount of the transaction

      • Added to the balance

    Check register5
    Check Register

    • √ 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 register6
    Check Register

    • Fee (if any)

      • Any extra fees charged to the account

      • Listed on the bank statement

    Check register7
    Check Register

    • Balance

      • The running total of the checking account

      • Calculated by adding or subtracting each transaction

      • Keep this updated

    Balancing your checking account1
    Balancing your Checking Account

    • At the end of each month you will receive a bank statement which tells you how much money you have in your account as of the statement date

      • Deposit or credit – money you put into your account

      • Debit – withdrawal from your account

      • Balance or Reconcile – compare the amount of money in an account, equal to the net of credits and debits at that point in time for that account

    Balancing your checking account2
    Balancing your Checking Account

    • Account Balance = Start of the month account balance+ Total amount of deposits made during the month- Total amount of checks written/withdrawals made during the month

    Reconciling a checking account
    Reconciling a Checking Account

    • 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

    • View the monthly bank statement and check register

    Checking accounts

    Add any outstanding deposits transactions that have not cleared the bank
    Add any outstanding deposits – transactions that have not cleared the bank

    Calculate the Subtotal

    Checking accounts

    Compare the total with the checkbook register. If the totals are different, double check the math and make sure all service fees and bank charges are recorded in the check register.

    Balancing your checking account3
    Balancing your Checking Account cleared the bank

    • Example on your own:

      • Imagine you have a part-time job and you earn a paycheck every two weeks. You must use that money to pay some of your own expenses including school lunches and your monthly cell phone bill. In addition, you use the money in this account for day-to-day expenses such as leisure activities and purchasing items you want such as clothing, music, video games, etc.

      • Suppose that your end of the month account balance in March was $143.68. This will be your start of the month balance for April. During April you make two deposits into the account when you receive your paychecks. The first is for $105.24 and the second is for $108.78. You write nine checks totaling $289.44.

      • What will your account balance be at the end of April?

    Insufficient funds
    Insufficient Funds cleared the bank

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

      • ‘Bounces’ due to insufficient funds, or not enough money in the account to cover the check written

    • A fee will be charged to the account holder

    • Harm future opportunities for credit

    Overdrafts and overdraft protection
    Overdrafts and Overdraft Protection cleared the bank

    • Overdrawn – having a negative balance in your account

    • Overdraft Penalty – a fee to cover the cost of processing your bad check

      • Typically $25 or more per instance

    • How to avoid overdraft fees?

      • Write down all your transactions!