Use Your Checking Account 7.2

Writing a Check  Always use ink  Date your check  Name the payee  Amount of check in words and numbers  Sign your name  Write a brief description

Record Checks in Check Register  Record each transaction Include Check No. Date Description Payment Fee, if any Subtract check amount from balance Calculate Your New Balance

Overdrawing  Writing a check for more money than you have in your account  “Bouncing a Check” “Bouncing a Check” Check returned due to “NSF” CheckSystems

Endorsing a Check  Sign your name when you are ready to cash the check—NOT BEFORE  Transfer to another person Sign back “Pay to the order of X”  Restricted endorsement Sign back “ For deposit only”

Check Clearing Process  Check deposits might not be immediately available  Check must “clear” Check deposited in Bank A. Bank A sends check to check writer’s bank (Bank B)  Bank B subtracts check amount from check writer’s account  Bank B sends the amount back to Bank A

Check 21 Check Clearing for the 21 st Century Act Check 21 federal law (2004)  Enable banks to handle more checks electronically check processing faster and more efficient.

Banks often must physically move original paper checks from the bank where the checks are deposited to the bank that pays them. transportation can be inefficient and costly. Check 21 Banks can capture a picture of the front and back of the check along with the associated payment information and transmit this information electronically

Checking Account Types and Costs  Basic Checking  Free Checking  Interest Bearing  Joint Checking  Student/Senior Checking  Lifeline Checking  Money Market Accounts

Basic Checking  This is for people who pay some bills and perhaps use a debit card to pay some daily expenses.  Some require direct deposit or a minimum balance to avoid monthly "maintenance" fees.  Limited to a certain number of checks per month; exceed that number and you'll pay a "per item" fee for each additional check you write.  You don't want to maintain a high balance in these accounts because you won't be paid interest.

Free Checking  For most people, this is the best checking account.  "no monthly service charges or per-item fees regardless of balance or activity."  In other words, write all the checks you like and keep your balance as low as you like without worrying about paying a fee.  Free checking doesn't mean you won't have to pay any fees. If you bounce a check, you'll pay a nonsufficient funds fee.

Interest Bearing  Requires a minimum balance to open  Need to maintain a higher balance to avoid fees. For example, a bank may require just $100 to open an account, but will charge $10 in service fees each month if you don't maintain a $1,500 balance. Interest usually is paid monthly, but these accounts pay a notoriously low interest rate. For most people it's simply not worth maintaining the required balance.

Joint Checking  An account owned by two or more people  Usually shares a household and expenses.  Each co-owner has equal access to the account. Most types of accounts, whether it's basic checking, savings or money market, allow for joint use. Good bookkeeping is essential with all checking accounts, but especially so with joint accounts. An overdrawn account usually results in steep fees for nonsufficient funds.

Express  Designed for people who prefer to bank by ATM, telephone or personal computer  Boasts unlimited check writing, low minimum balance requirements, and low or no monthly fees. The catch is you pay a fee for using a teller. You might get one or two free teller visits per month and then have to pay a fee for subsequent visits. These accounts are especially popular with students and younger customers who are on the go and don't want to spend a lot of time on banking transactions.

Student/Senior  Special checking deals if you are a student or if you're age 55 or older.  May include free checks, cashiers and traveler's check  Free automated teller machine use, better rates on loans and credit cards, or discounts on everything from travel to prescriptions.

Money Market  Combines checking with savings and/or investment opportunities to help you pursue higher earnings.  Requires a high minimum deposit to open -- usually $1,000 to $10,000 higher balances to avoid fees imposes tighter limits on checking transactions than other accounts. Pays more interest than basic checking or savings accounts. For people who can afford to maintain a high balance and do not write more than three to five checks each month.