Checking Accounts USE A CHECKING ACCOUNT 1©2012 National Endowment for Financial Education | Lesson 5-1: Checking Accounts

Demand Deposits Funds can be withdrawn on demand by a customer without advance notice to bank or credit union Bank teller (in person) ATM (automated teller machine) Online (paying a bill) Phone (paying with debit card) Check Debit card ©2012 National Endowment for Financial Education | Lesson 5-1: Checking Accounts2

Downsides of cash… No (paper trail) proof that you paid. Tempting to waste cash on small, unnecessary purchases. If it’s stolen or lost…it’s gone for good.

Checking/Savings Account “Checks” Written order to tell bank who to pay and how much. Can’t write checks out of savings account for frivolous purchases. Banks often limit the amount of checks each month (typically 2 or 3).

Benefits of Using Checks You can easily mail checks. Proof of payment. Safety – if lost they can be replaced, Stop-order payment (when payer stops payment on check – typically there is a fee around $25 or $35).

Benefits of Using Checks, cont. Direct Deposit – provide employer with blank check and fill out paperwork. What is direct deposit? Checks are easily tracked if lost/stolen. Interest gained with a checking account – typically small. Delayed Deduction – amount won’t be deducted from your checking account until payee cashes check. ©2012 National Endowment for Financial Education | Lesson 5-1: Checking Accounts6

Electronic Check E-check – when funds are immediately transferred via electronically. Basically, an electronic message telling the bank to move money between your accounts (for example moving money from savings to checking). Deposit a check with phone: take a picture of both sides of your check (after you sign the back), confirmation when amount is deposited in your account (typically minutes).

1.Date 2.Payee (person/company you are writing check out to 3.Amount of payment (in numbers) 4.Total payment (in words) 5.Memo (description – good to do this as a reminder for you) 6.Payer’s signature 7.Routing numbers – used to identify the bank that holds the account funds 8.Checking account number 9.Check number (also in the upper right-hand corner)

Make the Deposit ©2012 National Endowment for Financial Education | Lesson 5-1: Checking Accounts9 XX / XX / 201X Your Name Your signature (when taking cash)

Endorsements Blank Endorsement Your signature Restrictive Endorsement 1) For deposit only Your signature 2) Mobile Deposit ©2012 National Endowment for Financial Education | Lesson 5-1: Checking Accounts10

Jason’s Transactions ©2012 National Endowment for Financial Education | Lesson 5-1: Checking Accounts11 CodeDateDescription of TransactionPayment (—)Deposit (+)Balance Mon Balance from previous page d/cMonPhone charger d/cMonPizza FeeMonNSF fee d/cMonFood FeeMonNSF fee ThurSchool fee FeeMonNSF fee d/c = debit card, fee = any fee, NSF = non-sufficient funds, w/d = withdrawal, dep = deposit

Zoe’s Bucks On March 29 th, during her lunch break, Zoe opens a checking account with her 1 st paycheck. She worked 40 hours over the past two weeks. Her paycheck totaled $280 after taxes. On the way home from work Zoe stops to fill her car with gas. Gas was $3.69 a gallon and she pumped 15 gallons. She swipes her debit card to pay for the gas. ©2012 National Endowment for Financial Education | Lesson 5-1: Checking Accounts12

On March 30, Zoe received her car insurance bill in the mail. She writes a check for $115 to pay the bills. Record the amount for check #101. ©2012 National Endowment for Financial Education | Lesson 5-1: Checking Accounts13

On April 2, the neighbors call to ask Zoe if she can babysit later that afternoon. She gladly accepts the job and spends 4 hours with the neighbor’s children. They pay her $15 an hour. She deposits the entire amount into her account. Zoe’s friends go to the movie later that night. The price of admission is $12, and she also buys popcorn and a soda for $6.50. She uses her debit card twice at the theatre. ©2012 National Endowment for Financial Education | Lesson 5-1: Checking Accounts14

On April 14, the professor in Zoe’s finance class tells the students that they will need to purchase a book by the next class. The cost is $175. She doesn’t have enough money in her checking account to pay for the book but she writes the check for it anyway. She is hoping that her next paycheck will be deposited before this check goes through (clears) the bank. ©2012 National Endowment for Financial Education | Lesson 5-1: Checking Accounts15

On April 8, she checks her account balance online and sees that she was charged $36 the previous day for overdrawing on her account. Unfortunately, her last check was deducted from her account prior to her deposited paycheck. During the past two weeks Zoe worked 42 hours at $7.50 an hour. From the total pay, $27 was taking out for taxes. Record the net pay that was automatically deposited into her account. ©2012 National Endowment for Financial Education | Lesson 5-1: Checking Accounts16

Balance Zoe’s Bucks ©2012 National Endowment for Financial Education | Lesson 5-1: Checking Accounts17 TransDate*Description of TransactionPayment (—)Deposit (+)Balance DepTuesDeposit paycheck d/cTuesGas ($3.69 x 15 gallons) WedInsurance premium d/cSatMovie d/cSatTheatre food DepMonBabysitting fee ($15 x 4 hours) MonBook NSFThursInsufficient funds fee DepFriPaycheck ($7.50 x42 hrs-$27 tax)

©2012 National Endowment for Financial Education | Lesson 5-1: Checking Accounts18 Your bank statement balance + Outstanding deposits - Outstanding payments and/or withdrawals Must = Amount you have in your check register

Hints to Find Math Errors »Look for a missing entry »Search for a duplicate entry for that amount »Check for a deposit mistakenly labeled as withdrawal or vice versa »Recheck work for an addition or subtraction error »Look for a transposed number (i.e. $125 mistakenly entered as $152) ©2012 National Endowment for Financial Education | Lesson 5-1: Checking Accounts19