1. Checking Account Simulation
Understanding Checking Accounts

2. What is a Checking Account?
Tool used to transfer funds deposited into the account to make a cash purchase
Could also be named a transaction account
Common financial service used by many consumers
Available at depository institutions
Traditionally called banks

3. Checking Accounts continued
Services and fees will vary depending upon the financial institution
Research the financial institution and type of account before choosing
Many financial institutions offer telephone and internet banking services to customers

4. Benefits Can help to manage money Written record of expenses
Check register
Makes bill paying more convenient
Reduces the need to carry large amounts of cash
Most liquid of cash management tools
Considered cash

5. How Do They Work?
Money is deposited into the account with a deposit slip
Pay the transaction by:
Writing a check
Using an ATM and/or debit card
Using electronic banking

6. Characteristics Funds are easily accessible through: A check
Automated teller machine (ATM)
Debit card
Telephone
Internet

7. What is a Check? Used at the time of purchase as the form of payment
Piece of paper pre-printed with the account holder’s:
Name
Address
Financial institution
Identification numbers
To completed check, fill in the:
Amount
Payee
To whom the check was written
Date
Signature

8. Bouncing a Check
Check written for an amount over the current balance held in the account
‘Bounces’ due to insufficient funds
Assessed a substantial fee by both the financial institution and the payee
Can cause harm to credit report
Financial institutions report to credit bureaus the account holder’s failure/success to manage his/her checking account properly
Used as a guide for future inquiries for credit

9. Other Checking Components
Register
Place to immediately record all monetary transactions for a checking account
Written checks, ATM withdrawals, debit card purchases, deposits, fees, etc.
Checkbook
Contains the checks and the register to track monetary transactions

10. What is an ATM? Automated teller machine (ATM)
Also called cash machines
Electronic computer terminals offering automated, computerized banking
Allows customers to perform transactions just as they would through a teller
Deposits, cash withdrawals, account transfers, check account balances

11. ATMs continued
Transactions at an ATM are automatically posted to account
Immediately record all transactions into the checkbook register
Good option for evenings or weekends when financial institutions are closed

12. ATM Availability
Available most places around the U.S. giving customers access to money when away from home
Can also be found worldwide
Found in a variety of places including:
Financial institutions
Supermarkets
Convenience stores
Shopping centers

13. ATM Fees ATMs are owned by different financial institutions
Fees may be charged to the account for ATM use
Fees range from $0.50 to $5.00
Usually free to account holders of the financial institution

14. ATM Card
Card given to account holder to make financial transactions at ATMs
In the shape of a credit card, but can only be used in designated places
Must use personal identification number (PIN) to access the account
A protected number given or chosen by the account holder to allow access to the account

15. PINs
Required at ATM as a safety measure so other people cannot access the account with the only the ATM card
Choose a PIN which is not easily identified
For example – phone number, birthday
Instead of requiring a PIN, some ATMs may read a person’s face, fingerprint, or eye’s iris to confirm identity

16. What is a Debit Card?
Looks like a credit card, but is connected to the cardholder’s checking account for transactions
Money is automatically withdrawn from account when transaction occurs
Prevents overdrafts
Transaction cannot be completed without sufficient funds

17. Debit Cards continued Some are dual function cards
One card performs both functions for ATMs and debit cards
Clarify whether or not the card is an ATM card, a debit card, or both

18. Using a Debit Card To make a purchase
Debit card is swiped like a credit card
Cardholder signs a printed receipt
Record transactions immediately into check register
Most can be used at retail establishments accepting major credit cards
Many have the Visa or MasterCard logo

19. Debit Cards continued Pros Cons Convenient Small
Can be used like a credit card
Allows a person to carry less cash
Does not allow overspending
Can lose track of balance if transactions are not immediately written down
Opens checking account up to credit card fraud
If lost, anyone can use it
Someone else can gain access to account if card is found and PIN is learned

20. Types of Accounts Available
Financial institutions offer different types of checking accounts
All have own characteristics
Research all of the requirements and restrictions before opening the account
Basic types/guidelines include:
Regular checking
Free checking
Special checking
Interest-Earning checking

21. Regular Checking No monthly charge if minimum balance is maintained
No interest is given
Unlimited check writing

22. Free Checking No charges or fees for using the account
No minimum balance required
Unlimited check writing
Usually for a specific group:
Students
Seniors

23. Special Checking
Generally for people who write only a few checks and keep a low balance
Basic account which pays no interest
Monthly service charge or fee for each transaction
May have restrictions on number of transactions each month

24. Interest-Earning Checking
Pays interest on money in account
Usually the lowest interest rate of all the cash management tools
Minimum balance required
Unlimited check writing
Called a share draft at credit unions

25. Opening a Checking Account
Most applications are completed on a computer to process quickly
Customer may have to complete a brief hand-written application to be entered into the computer by new accounts personnel
Customer must have:
Picture identification
Name, address, phone number, and social security number

26. Opening continued
If customer is approved, he/she completes a signature card
Contains account information about the new account and his/her signature
Used to verify the signature for each signed transaction for the account to prevent fraud
Completion of the signature card means the customer agrees to all terms and conditions of the account

27. Signature Card example

28. Opening continued
If offered, customers may choose to have an ATM and/or debit card for the account
May be required to complete another form
An initial deposit must be made
Amount will vary among different financial institutions and type of account

29. Ordering Checks
New customers are provided starter checks to use until the ordered checks arrive
Generic checks with account number and financial institution pre-printed
Customer information is hand written
Many businesses do not accept starter checks
Take this into consideration before making the initial deposit
Ordered checks may take 5 to 10 business days to arrive

30. Ordering continued Personal information on checks Name Address
Optional: phone number, driver’s license number
DO NOT put the account holder’s social security number on the check for security reasons

31. Ordering continued Design of the check is customer’s choice
Customer pays for checks
Price depends on the style
Style of the check does not change how a check works
Some financial institutions may offer basic checks free of charge
Single or duplicate checks are available

32. Ordering continued Single Duplicate (carbon copy)
No records of written checks
Each check must be logged in the register immediately to track transactions
Provides a written record of each check with the carbon copy
Convenient in case the check was not recorded into register immediately

33. Endorsing a Check Endorsement Three types
Signature on the back of the check from receiving person approving it for deposit
A check must be endorsed to be deposited
Three types
Blank
Restrictive
Special
Safest way to endorse the check is to wait until going to the financial institution to deposit or cash the check

34. Blank Endorsement Receiver of the check signs his/her name
Anyone can cash or deposit the check after has been signed

35. Restrictive Endorsement
More secure than blank endorsement
Receiver writes “for deposit only” above his/her signature
Allows the check to only be deposited

36. Special Endorsement
Receiver signs and writes “pay to the order of (fill in person’s name)”
Allows the check to be transferred to a second party
Also known as a two-party check

37. Making a Deposit Deposit slip
Contains the account holder’s account number and allows money (cash or check) to be deposited into the correct account
Located in the back of the checkbook
Complete a deposit slip to make a deposit
Give to financial institution along with cash and/or check
Checks must be endorsed to be deposited
Deposited amount must be recorded in the check register to keep the balance current

38. Completing a Deposit Slip
Date
The date the deposit is being made

39. Completing a Deposit Slip
Signature Line
Sign this line to receive cash back

40. Completing a Deposit Slip
Cash
The total amount of cash being deposited

41. Completing a Deposit Slip
Checks
List each check individually
Identify each check on the deposit slip by abbreviating the name of the check writer

42. Completing a Deposit Slip
Checks
If more checks are being deposited than number of spaces on the front, use the back
List each check
Add the total, enter it on the front

43. Completing a Deposit Slip
Total from Other Side
The total amount from all checks listed on the back

44. Completing a Deposit Slip
Subtotal
The total amount of cash and checks

45. Completing a Deposit Slip
Less Cash Received
The amount of cash back being received
This amount is not deposited into account

46. Completing a Deposit Slip
Net Deposit
The amount being deposited into the account
To calculate the amount, subtract the cash received from the subtotal

47. Writing a Check To pay for items using a checking account
A check is given as a form of payment
Must be completed and given to the person or business
Pre-printed items on a check
Name and address of account holder
Name and address of financial institution
Check number
Identification numbers (account, routing)

48. Writing a Check Personal Information Account holder’s name and address
May include a phone number, not required
DO NOT list a social security number for safety reasons

49. Writing a Check Check Number Numbers used to identify checks
Printed chronologically

50. Writing a Check
Date
The date the check is written

51. Writing a Check Pay to the Order of
The name of the person or business to whom the check is being written

52. Writing a Check Amount of the Check in Numerals
The amount of the check written numerically in the box
Write the cents smaller and underline
Write the numbers directly next the dollar sign to prevent someone else from adding numbers to change the amount

53. Writing a Check Amount of the Check in Words
The amount of the check written in words on the second line
Start at the far left of the line, write the amount in words, followed by ‘and’, and the amount of cents over 100; draw a line from the end of the words to the word ‘dollars’

54. Writing a Check
Memo
Space used to identify the reason for writing a check; optional
Good place to write information requested by a company when paying a bill, generally the account number

55. Writing a Check Signature
The account holder’s signature agreeing to the transaction

56. Writing a Check Identification Numbers
First - routing numbers to identify the account’s financial institution
Second - account number
Third - check number

57. Check 21 Check Clearing for the 21st Century Act (Check 21)
Current trend that changes how money is withdrawn from customers account and deposited into businesses account

58. How Check 21 Works Prior to Check 21 After Check 21
Paper checks physically moved from customer to business to various banks and the transfer of money from customer’s bank to business’ bank took days
After Check 21
Paper checks are scanned into a computer system at the place of business and immediately returned to the customer. This electronic copy of the check is called a substitute check. The substitute check is then transferred electronically to various banks and the transfer of money customer’s bank to business’ bank takes hours

59. Check Register
Place to immediately record all monetary transactions for a checking account
Written checks, ATM withdrawals, debit card purchases, deposits, fees, etc.
Used to keep a running balance of the account
Remember -
Record every transaction!

60. Check Register
Date
The date the check was written or transaction was made

61. Check Register
Number
The number of the written check; if a debit card or ATM was used, write DC or ATM

62. Check Register Description of Transaction
The person/business the check was written to or where the debit card was used
Gray line can be used to write the memo

63. Check Register Payment/Debit(-) Amount of the transaction
Deducted from the balance

64. Check Register Deposit/Credit(+) Amount of the transaction
Added to the balance

65. Check Register
√ T
A box used to track whether the check has cleared on the monthly bank statement when reconciling at the end of each month

66. Check Register Fee (if any) Any extra fees charged to the account
Listed on the bank statement

67. Check Register Balance The running total of the checking account
Calculated by adding or subtracting each transaction
Keep this updated

68. Monthly Statement
Lists each monetary transaction and the current account balance for a specified time period
Includes:
Dates
Identification for each transaction (number or type, date, amount)
Transaction amounts for withdrawals and/or deposits
Interest earned (if applicable)
Fees or charges (if applicable)

69. Monthly Statement continued
If customer holds more than one account at the same financial institution
May receive one statement for both
For example: a checking and a savings account
May be mailed separately

70. Reconciling a Checking Account
Reconcile
Balance the checkbook register each month to the balance shown on the statement
Do this every month to ensure the correct balance in the checkbook
Knowing the correct balance can help to avoid bouncing checks

71. Steps for Reconciling
Make sure every transaction listed on the statement matches the check register
Place a check next to each item once it has been double-checked between the statement and register
Do this for both withdrawals and deposits
Identify any outstanding transactions in the check register
Items which have not cleared through the financial institution and are not listed on the statement

72. Steps for Reconciling continued
Start with checking account balance on the statement
Add any outstanding deposits
Subtract any outstanding withdrawals
Compare this result with the current balance in the check register
They should be the same

73. Reconciling Example Statement balance $204.00 Add $154.01+
Outstanding deposits
8/30 - $154.01
Subtract $44.75-
Outstanding withdrawals
#299 - $19.75
#300 - $25.00

74. Reconciling Example continued
Total $313.26
Remember - this figure should be the same as the check register
If not, double-check the math, look for mistakes
Make sure all service fees and charges have been added to the check register

75. Checking Account Safety
If a checkbook, ATM, and/or debit card becomes lost or stolen
Immediately report it to the financial institution
File a report with the police
Reported lost/stolen checkbook:
Financial institutions generally do not hold the account holder liable for any fraudulent charges

76. Safety continued Reported lost/stolen ATM/debit card:
Within 2 business days
Cardholder is only liable for $50.00
Longer than 2 business days
Could be liable for up to $500.00
Varies depending upon the financial institution
May not charge the account holder anything if the correct steps were taken to report the lost/stolen card

77. Conclusion
Research before choosing a financial institution and checking account!
Follow the precautions to prevent checking account fraud!
Report a lost/stolen checkbook, ATM, and/or debit card immediately!