Checking Accounts and Banking Services Chapter Nine Notes

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 you’ve designated, can write checks on the account.

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.

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?

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.aspx?top=you&segment=PFS&topic=Checking&item= Comparsion Website: http://www.bankrate.com/brm/green/chk/basics1-intro.asp?caret=28

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.cgi

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 you’ve written. When you don’t have enough money in your account to cover a check that is called an overdraft (or bounced check).

“Floating a Check” One of the age-old tricks for those who live check to check is “floating a check” … what is that? Well, that’s when you KNOW you don’t 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!

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!

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 (that’s 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 you’re sending the check to.

Parts of a check NAME ADDRESS

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.

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. It’s your only proof of the transaction.

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!

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 you’ve written that haven’t 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 didn’t record in your register BUT that the bank has already subtracted. You should balance your checkbook each month. Most Americans DO NOT and that’s just poor money management. 

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 can’t 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!

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 don’t want to use cash but don’t have a checking account. It’s 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.