Chapter 3 Banking Services

3.1 Checking Accounts

Deposit Slip A deposit slip is used to deposit their paychecks and other monies. Cash Including Coins: 285.85 Check: 322.94 Check: 1.45 Subtotal 610.24 Less Cash: 0 Total Deposited: 610.24

B. Cash Including Coins: 615.45 Check: 39.86 Check: 3.83 Subtotal 659.14 Less Cash: 0 Total Deposited: 659.14

Check Register When you write a check you are telling the bank to take money from your account. Check register is where deposits and checks are written. Calculate a running balance or new balance Deposits + Checks (-) Balance is the amount of money in account

C. 2,583.45 +1,220-825-96.40-12.78 = D. 129.74+500+1,236-196-950-87.83=

3.2 Electronic Banking

Electronic Banking Use telephone, computer, other technology Banks use computers to transfer deposits and checks, or “funds” from person to person and bank to bank called EFT Bank Identification Number

Automatic Teller Machine-ATM Personal Identification Number – PIN What can you do with an ATM? Personal Identification Number – PIN Direct Deposit-Have paychecks automatically transferred from work to employee bank account Debit Card- Allows you to pay for purchases without using cash or check-automatically withdrawn from checking account

782.88-85-86.54-50= 1,248.40+890.50-200-12.87-118.94=

3.3 Online Banking

Online Account Access Online banking allows you to do your banking online. Available balance is the amount available to spend 100+690-35-312.40-150-280 = 100-12.60 = B. 67+728-36.90-112.85-270-15-128-89.23-45.50 =

3.4 Check Register Reconciliation

Reconcile the Bank Statement Banks keep track of checking accounts and send the monthly report or bank statement to customers. Interest earned is $ paid to customers for the use of their $ Service charge is a deduction made by the bank for handling the checking account.

A canceled check is one that the bank has paid and then marked so it can’t be used again Outstanding checks means that the checks have been written but not yet received or paid by the bank Outstanding deposit is deposit made after the closing date of the bank statement. – not on the statement but in your register

Bank Statement Balance + Outstanding deposi - Outstanding checks New Bank Balance 1,383.53 --29.45 -87.39 +312.09 B. 793.57 +312.09 -174.85 -32.78

Reconcile the Check Register Check Register Balance + Interest Earned Service Charge + Any Errors New Check Register Balance *CHECK REGISTER AND BANK STATEMENT MUST BALANCE TO RECONCILE

C. 727.92 -18.90 +1.60 D. 457.38 -7.68

3.5 Other Reconciliation Problems

Reconcile the Checking Account Sometimes there are errors when calculating your checking account Compare checkbook register to bank statement item by item

S1: Compare the bank statement to the check register and note any differences between them. S2: Prepare a reconciliation form to reconcile the bank statement. S3: Reconcile the check register.

107.87 +0.43 -56.00 +32.95 -35.29 B. 812.45 -200 -80.17 624.77 -92.49

3.6 Savings Accounts

Simple Interest Interest-$ paid to an individual or institution for the privilege of using their $ Same as checking Deposit $ Withdrawal $ Record transactions

Interest can be added to your savings account Quarterly – 4x a year every three months 0.25 = ¼ = 3/12 Semiannually – 2x every six months 0.5 = ½ = 6/12 Annually – 1x a year 1 = 1/1 = 12/12 Monthly – 12 a year every month 0.083 = 1/12

Principal x Rate x Time = Interest P x R x T = I Time must be calculated out of one year Ex quarterly = ¼ or 0.25 semiannually = ½ or 0.5 annually = 1 monthly = 1/12 or 0.083 Change percent to decimal

2 ¼% = 2.25% = 0.0225 860 x 0.0225 x 0.25= P R T B. 3.1% = 0.031 350 x 0.031 x 0.5 = P R T

Compound Interest Interest is added into balance. – Becomes new principal P x R x T = I (Principal x Rate x Time = Interest) I + P = NP (Interest + Principal = New Principal) NP x R x T = I (New Principal x Rate x Time = Interest)

C. 700 x 0.03 x 0.25 = 5.25 + 700 = 705.25 705.25 x 0.03 x 0.25= 5.29 + 705.25 = 710.54 D. 400 x 0.025 x 0.5 = 5 + 400 = 405 405 x .025 x 0.5 =5.06 405 + 5.06 = 410.06 410.06 – 400 = 10.06

Compound Interest Tables Instead of formula can use a table Pg. 113 E. Annual 3 1 ¼% 1.037971 x 1,100 = 1,141.77 1,141.77 – 1,100 = 41.77

F. Annual 7 1% 1.072135 x 720 =771.94 771.94 – 720 = 51.94

What if not for full year? Interest x ¼ for quarterly Interest x ½ for semiannually Periods x 4 for quarterly Periods x 2 for semiannually

G. 5% x 0.25 = 1.25% 2 years x 4 periods a year = 8 1.104486 x 850 = 938.81 938.81-850 = 88.81 H. 2.5% x .5 = 1.25% 2 years x 2 periods a year = 4 1.050945 x 1,600 = 1,681.51 1,681.51 – 1,600 = 81.51

3.7 Money Market and CD Accounts Some special savings paid higher rate than regular savings

Certificate of Deposit CD – A time deposit or savings certificate Deposit a minimum amount Leave the money for minimum time or term End of term is maturity date Pay a penalty if withdrawal before term

Money Market Accounts Higher interest rates but more like a checking Minimum balance requirements Interest rate is fixed A small # of checks may be written

P x R x T = I A. 10,000 x 0.054 x 3 = 1,620 B. March 2,000 x 0.014 x 0.083 = 2.32 April 2,000 x 0.0132 x0 .083 = 2.19 2.32 + 2.19 = 4.51

Penalties on Certificates of Deposit By law charged a penalty for early withdrawal Penalty calculated on amount of $ withdrawn from CD Amount Withdrawn x Rate x Time = Penalty

C. 500 x 0.02 x 0.25 = 2.5 D. 1,000 x 0.047 x 1 = 47 1,000 – 47 = 953

Compare Savings Accounts E. Time Deposit 1,400 x 0.0235 x 0.5 = 16.45 16.45 – 15.13 = 1.32 F. 1,500 x 0.0326 x 0.25 = 12.23 x 3 = 36.68 36.68 - 31.37 = 5.31

Effective Rate of Interest Rate you actually earn by keeping money on deposit Also called Annual Percentage Yield (APY) Amount of Interest Earned for One Year = Amount of Money on Deposit

G. 4% x 0.25 = 1% 1 x 4 = 4 Periods 1.040604 x 2,000 = 2081.21 2,081.21 – 2,000 = 81.21 81.21 / 2,000 = 0.0406 4.06%

H. 5% x 0.5 = 2.5% 1 x 2 = 2 Periods 1.050625 x 6,000 = 6303.75 6303.75 – 6,000 = 303.75 303.75 / 6,000 = 0.0506 5.06%