Checking Account and Banking Services

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Chapter 9

• Checking Account and Banking Services

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Objectives

• Understand the purpose, uses, and advantages of a
  personal checking account.
• Prepare checking account documents, including a
  signature card, checks, deposit slips, checkbook
  register, and bank reconciliation.
• Explain check endorsements and describe the types
  of checking accounts available to consumers.
• Define the various banking services available and
  fees charged to consumers.

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Purpose of a Checking Account

• 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.
• A checking account is a demand deposit account
  because you can demand portions of your deposited
  funds at will.
• Safer than carrying cash around.
• Built in record keeping tool
• Canceled checks (checks that have been processed
  by the bank) can be used as proof of purchase
• Tracks money spent and deposited, useful in
  budgeting

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Responsibilities of Checking Account Holder

• Write checks carefully and keep accurate records
  of checks and deposits
• Reconcile with bank statement each month
• Keep cancelled checks as proof of purchase for
  income tax records
• Maintain sufficient funds in your account to
  cover all checks written
• A check that cannot be covered is called an
  overdraft (bounced check)
• Usually a fee from your bank (if covered) or the
  payee (if bank doesnt cover check)
• Floating a check is when you write a check even
  though you know you dont have enough money in
  your account, but plan on depositing funds before
  the check clears
• Purposely overdrawing your account is a felony
  punishable by fine and/or imprisonment

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Opening Your Checking Account

• Fill out and sign a signature card (fig. 9-1
  p207)
• Provides bank with information and an official
  signature to compare with checks
• Other information provided for use in proving
  identity of customer (ex. mothers maiden name)

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Using Your Checking Account

• Parts of a check
• Check number
• ABA (routing) number
• Top half identifies location and district
• Bottom half helps in routing checks to specific
  area and bank
• Makers Preprinted Name and Address
• Date
• Payee
• Numeric Amount
• Written Amount
• Drawer or Maker
• Account Number
• Memo

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Parts of a Check
Makers Preprinted Name and Address (usually here)
Check Number
Written Amount
Date
Numeric Amount
Payee
memo
Makers Signature
Account Number
ABA
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Writing Checks

• Always use pen
• Write legibly
• Sign name as it appears on check and signature
  card
• Avoid mistakes, void check if mistake is written
• Be sure adequate funds are in account before
  writing check
• Dont leave empty space on amount lines
• Use memo line for record keeping

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Making Deposits

• Insert Date of transaction
• Write the amount to be deposited
• Write the currency and coin amount
• Write the amount of each check and check number
• Total all amounts
• Fill out Less Cash Received if needed
• Sign deposit slip at teller if receiving cash
  back

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Using a Checkbook Register

• Checkbook register is a record of deposits and
  withdrawals for a checking account
• See fig 9-4 p.211 for check register
• Write check number
• Date
• Payee
• Write amount of transaction in debit/credit
  column and the balance column and calculate new
  balance
• Use the column with a check for reconciliation

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Reconciling Your Checking Account

• Reconciliation is the process of matching your
  checkbook register with the bank statement
  (balancing)
• Most bank statements provide a reconciliation
  form
• Formula
• Statement balance outstanding credits
  outstanding checks checkbook balance

video
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Endorsements

• A check cannot be cashed or deposited without
  first being endorsed
• Types of endorsements
• Blank signature of payee (p. 215)
• Special used when payee signs check over to a
  third person (p. 215)
• Restrictive limits use of check (p. 216)
• Most common is for deposit only
• Best type to use
• If using a blank endorsement, dont endorse check
  until you are at the bank

video
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Types of Checking Accounts

• Special Account
• Used if only a small number of checks are written
  each month
• Low monthly service fee with a charge for each
  check written or a charge after a preset limit of
  checks have been written
• Standard Account
• Set monthly fee, but no per-check fee
• Fees can often be avoided if minimum balance is
  maintained
• Extra services such as free travelers checks,
  ATM card, safe deposit box, etc. are often
  packaged with this type of account

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Types of Checking Accounts contd

• Interest Bearing Account
• Interest is paid if minimum average daily balance
  is maintained
• Interest rates are usually low, 1-5 depending on
  economy so this is not a good investment option
  but is a good way to avoid service charges and/or
  monthly fees
• Share Draft Accounts
• Checking account at a Credit Union
• Usually low or no monthly fees

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Banking Services

• A full-service bank offers every possible kind of
  service from checking accounts to credit cards,
  safe-deposit boxes, loans (all types), and ATM
  machines
• FDIC (Federal Deposit Insurance Corporation)
  protects deposits up to 100,000 per account
  holder

video
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Banking Services contd

• Certified Checks
• A personal check that the bank guarantees or
  certifies to be good
• Amount of check is immediately deducted from
  account
• Certified is stamped on the check and a bank
  official initials the check
• The bank puts a hold on the account for the
  amount of check so the money will be there
• Often a fee is charged

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Banking Services contd

• Cashiers Check
• A check written by a bank on its own funds
• Can be paid for with a withdrawal from an account
  or cash
• Often used for large transactions to avoid
  carrying cash around
• Used if you want to be anonymous because the
  banks name is on the check not yours
• There is usually a fee

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Banking Services contd

• Money Orders
• Used for transactions when cash is not accepted
  and you dont have a checking account
• Can be purchased at banks, post offices, and some
  convenience stores
• Debit Cards
• Allow for immediate deductions from a checking
  account (check card)

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Banking Services contd

• Safe-Deposit Boxes
• Annual rental fee
• Safe place to store valuables and important
  documents (birth certificates, deeds, mortgages,
  vehicle titles, jewelry, collectibles, etc)
• Must provide proof of identification and usually
  sign a form for comparison to signature card
• Loans and Trusts
• A trustee is a person or institution that holds
  or manages property for the benefit of someone
  else (usually a minor or elderly person)

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Banking Services contd

• Discount Brokerage Services
• Allow for stock transactions at a discounted rate
• No advice or counseling is provided
• Transactions are cleared through checking or
  savings account
• Bank Credit Cards
• Visa and Mastercard
• Annual fees are sometimes charged
• Interest is paid on any unpaid balance

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Banking Services contd

• Automated Teller Machines (ATMs)
• Allow for 24 hour service
• Deposits, withdrawals and transfers
• Stop Payment Orders
• A request that the bank not cash or process a
  specific check
• Used for lost or stolen checks
• Usually a substantial fee (gt 10)

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Bank Fees

• Banks charge fees to cover the cost of operation
• If you get a loan, you are often charged a loan
  fee
• If the bank acts as a trustee there is usually a
  fee
• Banks can charge non-customers for check cashing,
  using their ATMs, etc.
• Under the Truth in Savings Act (1993) an checking
  account advertised as free must have no hidden
  charges
• No fees for check writing, no minimum balance,
  etc
• Can charge for checks or ATM transactions

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Summary

• video