1. Checking Accounts
Chapter 29
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2. Why do we need a checking account?
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3. Checks are the most common medium of exchange
About 93% of U.S. households have checking accounts
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4. How does it work? Money is deposited into an account
Checks are written to make purchases or pay bills
Money is released from the account and paid to the person on the check
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5. Demand deposit – money is released from the account on demand
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6. Checking Account Conveniences
You can carry less cash yet still buy what you need at most local stores
You can pay larger bills by mail
You will have a spending record, which would be helpful in analyzing where your money goes
You will have valid receipts
Your paycheck can be deposited directly into your account if your employer offers this service
You will have a clear understanding of how much money you have left, providing your math skills are reliable
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7. Checking Account Pitfalls
You may have to pay a monthly account fee, or maintain a certain account balance
You will need to pay for a set of checks, and the fancy ones will cost more
You will need to balance your account monthly when your statement arrives
If you overdraw your account, the fees could be sizeable—the average fee is about $25—and it could be a double whammy if the business you wrote the check to assesses a fee, too
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8. If you have an ATM or debit card, you may encounter additional fees
If you lose your checkbook and fail to notify the financial institution, you could lose all the funds in your account plus be held responsible for overdrafts
If you lose your ATM or debit cards and fail to notify within a certain timeframe, again you could be responsible for sizeable losses
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9. Opening an Account Open your account where it is convenient
“Comparison Shop” for your checking account
Account fees – monthly fees vary greatly. You may qualify for low- or no-fee checking by agreeing to a limited number of checks per month. Maintaining a certain balance in checking or savings may qualify you for lower account fees
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10. For overdrawing your account Returning your cancelled checks
Other fees – be clear about associated fees. Ask for a fee schedule of all account costs, such as:
For overdrawing your account
Returning your cancelled checks
Falling below a minimum balance
Conducting transactions with a teller
Stopping payments on a check or the account
Costs of checks
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11. Types of Accounts Regular Account Interest-Bearing Account
Designed for customers who write a few checks each month and don-t keep a minimum amount of money in the account.
Interest-Bearing Account
A checking account that earns interest on your account’s balance.
It usually has a minimum balance requirement with an unlimited number of checks allowed each month.
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12. Joint Account
An account shared by two people who are equally responsible for the account.
Often used by married couples or for businesses with more than one owner.
Either person can write checks on the account.
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13. Account Services Overdraft Protection Stop Payment Debit Cards
A line of credit for overdrawn checks. If you write a check for more than you have in the account, the bank will cover the check up to a certain amount.
Stop Payment
An order for a bank not to cash a particular check
Debit Cards
Like a credit card but money is taken directly from your checking account
Online Banking
Allows you to check your accounts, transfer money, or pay bills at any time of the day.
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14. The Flow of Money Deposit money into Checking account Account
Use Debit Card
at ATM to get
cash
Use Debit Card
to make
purchase
Write a
check
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15. Making Deposits To deposit or cash a check you must endorse the check.
Endorse the check on the back. Use the lines printed for the endorsement. Do not write below the lines.
Use a pen so your signature can’t be erased.
Sign your name exactly as it is written on the front of the check
If you are depositing a check rather than cashing it, write “For Deposit Only” above the signature. Include your account number.
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16. Endorsing a Check To receive as cash: Karen Gannon____________
Called a blank endorsement
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17. To deposit into your checking account:
For Deposit Only
Karen Gannon _______
Called a restrictive endorsement – entire check is deposited. No cash back.
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18. To deposit into your checking account:
Karen Gannon _______
Non-restrictive endorsement – cash back usually requested.
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19. Sign the check over to a third party:
Pay to the order of:
Stephanie Sturm
Karen Gannon _______
Special endorsement – check is signed over to someone else who then cashes the check.
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20. Making a Deposit
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21. Deposit #1 – You will deposit the following:
$50.00 in cash
Check #4568 for $100.00
Check #4565 for $150.00
No cash back
What is your Net Deposit?
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22. Deposit #2 – You will deposit the following:
Check #5601 for $1,500.00
Check #6523 for $50.00
Cash back is $250.00
What is your Net Deposit?
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23. Deposit #3 – You will deposit the following:
Check #2389 for $300.00
Check #6956 for $150.00
Check #2399 for $235.00
Cash back is $100.00
What is your Net Deposit?
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24. How to Write a Check
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25. Writing a Check Write all checks in ink
Always start writing at the far left of the line so no one can make changes
Write legibly. If the numbers are not clear or they differ from the written dollar amount, the written amount applies
Sign your name last and sign it the same way every time.
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26. Writing Dollars and Cents
When writing a check, you must write the amount of the check in numbers and words.
Examples:
$10.21 – Ten and 21/100
$1, – One thousand five hundred and 00/100
$ – One hundred twenty-five and 46/100
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27. Bank Statement – the bank’s record of all the transactions in your checking account. It includes a record of all withdrawals, deposits, interest, and fees. Canceled Check – Checks you have written that have been cashed.
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28. Step One
In your checkbook, make a checkmark in the appropriate box for each check returned or noted on your statement.
Make a checkmark in the appropriate box for each deposit made that is noted on your statement.
Make a checkmark in the appropriate box for each ATM transaction that is noted on your statement.
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29. Step Two
Record in your check register any transactions listed on your bank statement that were not recorded in your check register.
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30. Step Three Complete the Check Reconciliation Form
Write the ending balance shown on your bank statement
Subtract the total amount of checks that were recorded in your check registered but not yet cleared by the bank – referred to as checks outstanding.
Add the total amount of deposits made that were after the ending date of the bank statement – referred to as deposits outstanding.
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31. Summary
Bank Account Statement Ending Balance + Deposits Outstanding – Checks Outstanding = Ending Balance in Checkbook Register
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