Checking Accounts and Banking Services

1
Checking Accounts and Banking Services

• Chapter Nine Notes

2
Checking Accounts

• A checking account is a banking service wherein
  money is deposited into an account and checks, or
  drafts, can be written to withdraw money from the
  account as needed.
• Only you, or people youve designated, can write
  checks on the account.

3
Checking Accounts

• Checking accounts can be a useful and convenient
  tool.
• Writing a check is often safer than using cash,
  especially when making a major purchase, or when
  paying bills through the mail.
• Obviously, online banking and payments are more
  and more popular BUT most of those transactions
  are still run through standard checking accounts.

4
Services and Fees

• Most banks offer MANY different types of checking
  accounts. When you go to open an account you
  should carefully weigh the accounts services and
  fees.
• Questions to ask
• Is there a monthly fee for the account?
• Do you need to keep a minimum balance?
• Does it allow you to setup direct deposit and
  online bill paying?
• Does it come with a debit card?
• Is there a limit to how many checks you can
  write?
• Is there a limit or a fee on your ATM
  transactions?

5
Examples of Fees and Services

• Examples of checking accounts offered and what
  services and fees they might include
• US Bank
• http//www.usbank.com/cgi_w/cfm/personal/products_
  and_services/checking/check_acct_compare.cfm
• Bank One
• http//www.bankone.com/answers/BolAnswersCompare.a
  spx?topyousegmentPFStopicCheckingitem
• Comparsion Website
• http//www.bankrate.com/brm/green/chk/basics1-intr
  o.asp?caret28

6
Canceled Checks

• Cancelled checks are those that the bank has
  already processed and paid out.
• Banks used to mail you back all of your cancelled
  checks. Now most banks just scan them in to a
  computer database and you can view them online.
• This way you can see which checks have cleared
  (been paid) and which checks have not cleared.
• For example, check this out
• https//www.michedcuhb.org/onlineserv/HB/Signon.cg
  i

7
Keeping Track of your Account

• In exchange for the convenience of using a
  checking account you accept certain
  responsibilities
• You must write checks carefully and keep an
  accurate record of checks written and deposits
  made.
• You must maintain sufficient funds in your
  account to cover all the checks youve written.
• When you dont have enough money in your account
  to cover a check that is called an overdraft (or
  bounced check).

8
Floating a Check

• One of the age-old tricks for those who live
  check to check is floating a check what is
  that?
• Well, thats when you KNOW you dont have enough
  money yet BUT you write the check anyway hoping
  that you will be able to make a deposit before
  the check is cashed.
• Floating a check is MUCH more difficult today
  because of computers. Banks are just much more
  efficient at processing checks then they used to
  be.
• FYI Purposefully overdrawing your account is a
  FELONY that can result in a fine, imprisonment or
  both. Of course, it would have to be a pretty
  severe case in order to be prosecuted!

9
Opening an account

• Need identification
• Need to fill out a signature card.
• This card provides the bank with important
  information most notably an official signature
  for those who are allowed to write checks on the
  account.
• Accounts could have a single drawer OR it could
  be a joint account with multiple drawers.
• This becomes very important if somebody ever
  tries to forge checks on your account!

10
Understanding your Check

• You should be able to look at a check and
  identify each of the following
• The Check Number usually in the upper right
  corner
• The ABA Number Usually appears as a fraction in
  the upper right corner below the check number.
  The top half of the fraction identifies the
  location of the bank (Ex Main Street, Ann Arbor)
  The bottom half identifies the bank (Ex Bank
  One)
• Preprinted name and address (thats an easy one)
• The Date line (another easy one)
• The Payee -- who you are writing the check to
• The Numeric Amount -- dollar amount written as a
  number
• The Written Amount dollar amount written as
  text
• The Signature Line make it an easy one
• Your account number usually big long number at
  bottom center
• Routing number usually big long number in the
  bottom left corner. This routes the check back to
  you bank.
• The Memo Line (or For line) allows you to
  explain what the check is for or to provide your
  account number to the company youre sending the
  check to.

11
Parts of a check
NAME ADDRESS
12
Writing a Check

• Always use a pen
• Write legibly its ok to use cursive or to
  print.
• Sign your name the same way you did on your
  signature card.
• Avoid mistakes if you make a big mistake you
  should void the check.
• Write the word VOID in big letters across the
  front of the check and save it for your records.
• Make sure you have enough money to cover the
  check before you send it out into the wild blue
  yonder.

13
Making Deposits

• Just as when you withdraw money from your
  account, you need to complete a form each time
  you deposit money into your account. This form is
  called a deposit slip.
• If you make the deposit through an ATM, the
  receipt IS YOUR DEPOSIT form. Its your only
  proof of the transaction.

14
Using a Checkbook Register

• A checkbook register is a record of all deposits
  and withdrawals from a checking account.
• If you use your checkbook register properly you
  will ALWAYS know the exact balance in your
  account.
• We will practice filling out a register in class!

15
Reconciling your checking account

• Better known as balancing your account
• A reconciliation is the process of comparing your
  monthly bank statement to your checkbook register
  to insure that the numbers match.
• The balance ALMOST never matches. WHY????
• You may have outstanding checks. Those are checks
  that youve written that havent cleared yet.
  This would make your bank statement look higher
  than your checkbook register.
• You may have outstanding deposits. These are
  deposits you made after the bank already printed
  and mailed you the statement.
• You may have ATM withdrawals or other service
  fees that you didnt record in your register BUT
  that the bank has already subtracted.
• You should balance your checkbook each month.
  Most Americans DO NOT and thats just poor money
  management. ?

16
Endorsing a check

• A check CANNOT be cashed until its been endorsed.
  
• To endorse a check, the payee named on the face
  of the check simply signs the back of the check
  in black/blue ink.
• Must be signed in the area provided! You cant
  just go crazy on the back of the check.
• There are three major types of endorsements.
• Blank Endorsement just sign your name
• Special Endorsement used when you are signing
  over the check to a third person
• Restrictive Endorsement used to limit the use
  of a check. For example, you can say for deposit
  only above your signature. This means that the
  check cannot be cashed only deposited.
• Examples of different endorsement types
• http//voc.ed.psu.edu/projects/CAPS/27CAPS.html
• This site is also a GREAT REVIEW of Chapter Nine
  Material! Check it out!

17
Loose Ends

• Other important topics mentioned in Chapter Nine
• ATM Machines Use Electronic Funds Transfer to
  update balances as you make cash withdrawals and
  deposits from machines all over the world.
• Debit Cards Special ATM Card that allows you to
  pay for transactions right out of your checking
  account by simply swiping the card. Very
  convenient! And much better than.
• Bank Credit Cards Bank sponsored credit card
  usually a MasterCard or Visa. If you qualify they
  will let you buy items on credit and pay for them
  later. At a high interest rate. We will go into
  MUCH greater detail about credit cards later this
  semester.
• Money Orders banks sell money orders to people
  who dont want to use cash but dont have a
  checking account. Its used like a check but it
  can never bounce because it must be paid for in
  advance. There is a charge for purchasing a money
  order!
• Certified Checks check that a bank verifies is
  GOOD! You go in, they check your account,
  immediately deduct the money and stamp
  certified on the front. This lets the business
  accepting the check breathe easier.