BANKING and CHECKING Chapter 7

Why Do We Have Banks?

Banks Banks are a private business Banks are a private business How do banks earn their money? How do banks earn their money? Interest Rates Interest Rates Service Fees Service Fees Example: Example: Deposit $100 *.04% int. = $104 Borrow $100 *.06% int. = $106 Bank Income = $2

Banks Provide security Provide security Protects your purchasing power Protects your purchasing power The amount your money can buy The amount your money can buy Banks are regulated Banks are regulated FDIC FDIC Reserves Reserves

Banking Deposits are insured Deposits are insured FDIC – Federal Deposit Insurance Corporation FDIC – Federal Deposit Insurance Corporation $100,000 max $100,000 max Money lent to borrowers Money lent to borrowers People: houses, cars, etc. People: houses, cars, etc. Business: start-up, buildings equipment Business: start-up, buildings equipment Credit is verified to ensure payback Credit is verified to ensure payback

PARTS OF A CHECK Drawer = person writing the check Drawer = person writing the check Drawee = the bank that is instructed to pay Drawee = the bank that is instructed to pay Payee = person that the check is made out to Payee = person that the check is made out to

WHY Checks? Provide safety Provide safety Only the payee can cash Only the payee can cash Bank, not payee, is responsible for illegally cashed check Bank, not payee, is responsible for illegally cashed check Bank suffers loss Bank suffers loss Bank asks for identification Bank asks for identification If lost, can stop payment If lost, can stop payment Convenience Convenience Records of transactions Records of transactions

Opening a Checking Account Opening a Checking Account 18 yrs. or older 18 yrs. or older Joint Checking? Joint Checking? Complete signature card Complete signature card Protects against forgery Protects against forgery Valid Identification Valid Identification Minimum Deposit Minimum Deposit Social Security Number Social Security Number Proof of address Proof of address

Writing a Check Write in ink Write in ink Blue or Black ink Blue or Black ink Write in words, cents in fraction Write in words, cents in fraction Write at left of column, fill rest with line Write at left of column, fill rest with line Date check Date check Name of payee Name of payee Amount in words and numbers Amount in words and numbers Your signature Your signature July, Mrs. Monticello Fifty and 00/100 Signature Check Number Number Words Payee Date

Electronic Banking ATM’s Automated Teller Machine (ATM) Automated Teller Machine (ATM) Make deposits Make deposits Withdraw cash Withdraw cash Transfer money Transfer money Check account balances Check account balances Pay bills Pay bills Convenience Convenience Usage fees Usage fees Use Responsibly Use Responsibly Need the following: Need the following: ATM card ATM card Personal Identification Number (PIN) Personal Identification Number (PIN)

More Terms Debit Cards (Check Cards) Debit Cards (Check Cards) Don’t have to carry or write checks Don’t have to carry or write checks Can’t overdraw Can’t overdraw Stores appreciate because they receive payment immediately Stores appreciate because they receive payment immediately Direct Deposit Direct Deposit Non-negotiable check Non-negotiable check Automatic Withdrawal Automatic Withdrawal Will automatically withdraw on specific day each month Will automatically withdraw on specific day each month

Card Cautions!!!! Keep your card in a safe place Keep your card in a safe place Memorize your ID Memorize your ID Never give it out Never give it out Never say it out loud Never say it out loud Keep all receipts! Keep all receipts! Record transactions Record transactions Notify bank immediately if card lost Notify bank immediately if card lost

Certified Check Personal check Personal check Stamped and signed by bank officer Stamped and signed by bank officer Charges a fee - $5-$20 Charges a fee - $5-$20 Withdrawals money to ensure you have funds Withdrawals money to ensure you have funds

Cashier’s Check Checks written from bank’s account Checks written from bank’s account Signed by bank’s cashier Signed by bank’s cashier Bank makes check to payee Bank makes check to payee $25 fee approximately $25 fee approximately Down payments on houses, cars, large amounts Down payments on houses, cars, large amounts Confidence knowing from bank Confidence knowing from bank

Money orders Less expensive ($1-$10) Less expensive ($1-$10) Maybe you don’t have a checking account? Maybe you don’t have a checking account? Can be purchased from bank or other financial institute Can be purchased from bank or other financial institute Amex office Amex office Post office Post office Lists you as the drawer and is written to payee Lists you as the drawer and is written to payee

Traveler’s Checks Never good to carry large amounts of cash Never good to carry large amounts of cash Lost Lost Stolen Stolen Some businesses do not accept out-of- town checks Some businesses do not accept out-of- town checks Can be replaced quickly (serial #’s) Can be replaced quickly (serial #’s) Receipt given and used as a register Receipt given and used as a register Banks, Amex, travel agencies offer Banks, Amex, travel agencies offer Increments $20, $50, $100 Increments $20, $50, $100 Fee of 1% Fee of 1% 2 signatures required and ID upon usage 2 signatures required and ID upon usage

Safe Deposit Boxes $30/$40 annually $30/$40 annually Need ID, signature, key—very secure Need ID, signature, key—very secure Valuable, documents—non monetary items Valuable, documents—non monetary items