Chapter 29 Checking Accounts pp. 470-483

Learning Objectives Identify types of checking accounts. Describe some of the major services that banks provide Name the ways checking transactions are recorded. Explain how to reconcile a checking account.

Why It’s Important Paying with checks is the most common medium of exchange.

Opening an Account 1. Checking accounts are sometimes called ______________ because each check a customer writes is an order to the bank to release money from the _______________. demand deposits account on demand

Types of Accounts 2. Most banks offer several types of checking accounts. A wise consumer investigates all the _____________ available, as well as their __________________ kinds or accounts advantages and costs

Regular Account a few checks don’t keep a minimum amount of money 3. A regular checking account is designed for customers who write ______________ each month and ___________________ ______________ in the account. Some accounts require a ____________________. 5. If the balance falls below the minimum, a _________________ is deducted from the account. a few checks don’t keep a minimum amount of money minimum balance. service charge

Interest-Bearing Account 6. An interest-bearing account is a checking account that __________________________ _______________ earns interest on your account’s balance.

Interest-Bearing Account 7. An interest-bearing account usually has a _______________________ with an unlimited number of checks allowed each month. 8.The minimum balance might be much ___________than for a regular checking account. minimum balance requirement higher

Joint Account joint account 9. A _____________ is an account shared by _____________ who are equally responsible for the account. 10. With a joint checking account, __________________________ on the account. two people either person can write checks

Which type of account requires the smallest amount of money to open? Figure 29.1 TYPES OF CHECKING ACCOUNTS This chart shows the different types of checking accounts available at one bank. Which type of account requires the smallest amount of money to open?

Signature Card signature card verify your identity 11. A ______________ is a record of your signature used by the bank to ___________________. The signature card helps ________________________ from cashing your checks. The signature you put on your card is the _______________ you have to use when you sign your checks. verify your identity prevent other people same one

Signature Card Stacey E. Graham

Fast Review What is an advantage and a disadvantage of an interest-bearing checking account? 2. What is the main purpose of a signature card? It earns interest on the balance but requires a high minimum balance To verify your identity

Overdraft Protection 14. One risk of having a checking account is writing checks for ______________ than you have in your account, or ______________ your account. 15. Banks _______________ for a returned check. more money overdrawing charge a fee

Overdraft Protection wrote the check to 16. The business you _______________ will probably also charge a fee. 17. Overdraft protection is a _____________ for overdrawn checks. 18. You pay a _______________ for the overdraft protection and ___________on the overdrawn amount until it is repaid. wrote the check to line of credit service fee interest

Stop Payment stop payment 19. A ______________ is an order for a bank not to cash a particular check. 20. Banks _____________ to stop payment on a check. stop payment charge a fee

Debit Cards 21. A debit card is like a credit card but money __________________ ________________ when you use it rather than charging the amount to a credit account. is taken directly from your checking account

Online Checking 22. Online banking allows you to ___________________________ _____________ at any time of the day over the Internet. check your accounts, transfer money, or pay bills

Online Checking less expensive for banks Online checking is ___________ ____________, so service fees are often lower than a traditional account. 24. Banks offer the option of scheduling ____________________________ from your checking account. automatic payment of your bills

How is a debit card different from a credit card? Fast Review What happens if a customer has insufficient funds in a checking account to pay a check? How is a debit card different from a credit card? The check “bounces” or is returned to the person who tried to cash it. A debit card takes money directly from your checking account and you don’t pay interest on the purchase.

Account Records 25. An advantage of a checking account is that it enables you to keep records of your ___________________________ records of your financial transactions

Check Parts Date Check Written ABA Number payee drawee Bank Acct. Niki Lantz 34.00 Thirty-four and 00/100-------------------------------- Stacey E. Graham Nov 17 06 Bank of Lanc. County Lancaster PA Strasburg, PA ABA Number payee drawee Bank Acct. Number Drawer Bank Routing No.

Writing a Check 26. The party to _______________ ___________ and who is cashing the check is the ___________. 27. The party __________________ and is paying the money, or drawing it from an account, is called the ____________. 28. The _______________________ where the drawer has an account is the ____________ whom the check is written payee. wrote the check drawer bank or financial institution drawee

Writing a Check check register 29. Your _______________ is your checkbook log where you keep ___________________________. check register track of all your checking transactions

Depositing a Check To deposit a check in your account you need to fill out a ________________ 31. To deposit or cash a check requires an _____________, or the signature of the payee on the back of the check.. deposit ticket. endorsement

Depositing a Check 32. To endorse a check, follow these rules for your protection: Endorse the check on the back Use a black pen so your signature can’t be erased Blank Endorsement Sign Here______________ _____________________ Restricted Endorsement

Depositing a Check exactly as it’s written 33. Sign your name ______________ __________ on the front of the check. This is called an _________ ____________. 34. If you’re depositing a check rather than cashing it, write ___________ _____________ above your signature. This is called a ____________________. blank endorsement “For Deposit Only” restricted endorsement

Bank Statements bank statement 35. A ______________ is the __________record of all the transactions in your checking account. bank statement bank’s

Michael and Conchetta Chung received this bank statement. Figure 29.2 SAMPLE BANK STATEMENT Michael and Conchetta Chung received this bank statement. What were the totals for checks written and for deposits for the month?

Bank Statements 36. A bank statement includes a record of all ______________________ ___________. 37. A bank statement also includes a record of all ________________, or checks you’ve written that have been cashed. withdrawals, deposits, interest and fees. canceled checks

What are the three different parties on a check? Fast Review What are the three different parties on a check? Why should you write “For Deposit Only” on the back of a check? The payee (person who is cashing the check, The drawer (person who wrote the check) and the drawee (the bank where the drawer has the account. If the check is lost it can only be used to deposit into your account

Graphic Organizer Graphic Organizer Paying by Check Write the check NO Is there enough money in your account? NO YES The bank charges you a fee and returns the check to the business. The business also charges you a fee. The bank withdraws funds from your account and pays the check.

Bank Reconciliation Bank Reconciliation 38. _______________ is the process of seeing whether _______ ___________________________ for your account. your records agree with the bank’s records

Balancing Your Checkbook 39. The __________ to reconciling your account is to see whether the bank has processed all your checks and deposits. first step

Balancing Your Checkbook Outstanding checks _________________ are checks that have been __________ _____________________. written but haven’t yet been cashed

Balancing Your Checkbook 41. Deposits that haven’t been recorded on the bank statement should be __________ to the bank statement balance. added

Balancing Your Checkbook service fee 42. The ______________ should be ____________ from the balance in your check register. subtracted

Balancing Your Checkbook earns interest 43. If your account _____________, ________the interest shown on the bank statement to your check register. add

Balancing Your Checkbook 44. If the balances on your bank statement and in your check register _________________________ (or brought into agreement) your check register balance with the bank statement balance. are the same, you have reconciled

Finding Errors 45. If the balances on your bank statement and in your check register don’t agree, check your own account records to see whether you __________________________ __________________________ wrote the correct amount for each check and deposit.

Finding Errors 46. Check all your _________________________. 47. Check to see whether you carried the ____________________ for each new page of your check register. additions and subtractions correct balance forward

Finding Errors 48. Recheck to see that you have _________________ all of the outstanding checks and deposits that haven’t been processed by the bank. correctly identified

Finding Errors bank’s 49. Check the ________ additions and subtractions.

Fast Review What is the difference between a cancelled check and an outstanding check? A canceled check has been cashed by the bank. An outstanding check is a check that has been written that hasn’t been cashed yet. continued

Fast Review What charges do you need to add and subtract from your check register to reconcile it with your bank statement? You need to add interest and subtract service charges.

When you write a check at the store, what do you think the store does with it? continued

What do you think an intermediary bank does? What’s the purpose of the routing number on a check? continued

How do you know when a check has cleared?

End of Chapter 29 Checking Accounts pp. 470-483

Key Words demand deposits interest-bearing account signature card overdrawing overdraft protection stop payment debit card continued

Key Words check register endorsement bank statement canceled checks bank reconciliation outstanding checks

Online Bill-Paying CheckFree provides the online bill-paying service for the majority of the United States’ largest banks. It works with the banks that want to provide online bill paying for their customers. continued

Online Bill-Paying CheckFree has little competition since others don’t want to build the required complex computer system. continued

Analyze What other vendors could CheckFree build relationships with in order to be successful?