Checking Accounts. There are three basic types of banks.

Transcription

1 Checking Accounts What s Next Project (DUE: Thursday 2/25 for periods 2 and 4; Friday 2/26 for period 7) Scoring will be based on highlighting/annotating key content and completing ALL activity pages accurately. There are three basic types of banks. Commercial Banks Most common bank. Commercial banks provide a wide variety of services including savings and checking accounts, and loans. Commercial banks are governed by a board of directors and regulated by state or federal government. Savings and Loan Association This type of bank used to provide mainly home loans using the money from the customer's savings accounts. Currently, S & L banks can provide all of the services as a commercial bank except that all checking accounts offered must pay interest. An advantage of using an S & L is that their interest rates on savings accounts are usually higher. Credit Union A credit union is a bank that is formed by a group of people who work for the same company, are in the same field, or have something else in common. For example, most cities have credit unions for teachers. One problem with credit unions is that if you do not belong to that particular group, you cannot bank there. However, if you can join the union and open up a savings account with a minimum balance ($5-$50, in general), there are many advantages. The bank is owned by the members, so profits are divided among the members. Interest rates on the savings accounts tend to be higher than commercial banks. Credit unions offer checking accounts in conjunction with the savings account. Loans are given at a lower rate of interest than commercial banks. The two most common services used by bank customers: savings accounts and checking accounts. Savings accounts A good way to stay out of financial problems is to save money for things you want to buy and have extra money on hand for emergencies. One way to keep that money safe and even get more money is to put the money away in a savings account at a bank. Putting the money into the bank is safe because up to $100,000 of the money is insured. The bank pays people to keep their money in savings accounts. The amount the person gets paid depends on the interest rate and how much money they have in their account. The amount of the money in the savings account increases as it accumulates interest and as the person deposits more money into the account. When you need money you can go to the bank and withdraw as much of the money as you want (unless the bank has a minimum balance requirement). Money can also be transferred into the person's checking account.

2 Checking accounts Checking accounts are different from savings accounts in two basic ways. First, checking accounts generally do not earn interest. Second, when a person wants to buy something, he writes a check instead of withdrawing money and paying with cash. The advantage of having a checking account is that a person does not have to carry a lot of cash to make purchases or pay bills. If you lose your checkbook, you call the bank to let them know and your money is safe. If you lose a big wad of money, your only hope is that an honest person finds it. Because money is taken directly from your checking account when you write a check, it is important to be able to keep track of your balance. Your balance is how much money you have left in your account. If your balance is $50 and you write a check for $75, you have just "bounced" a check. In addition to depositing enough money into the account to cover the check, you will have to pay a fee of $15-$25 for trying to spend more than you have. Writing a check without enough money in your account is illegal. Banks charge the fee for the inconvenience, but if you do not make efforts to deposit enough money to cover your checks and stop bouncing checks, businesses can report you to law enforcement. Most people keep a savings and checking account at the same bank. If your checking account is low and you need groceries or some other necessity, you can transfer money from your savings account into your checking account until you get paid and can deposit your pay check into your checking account. The first step in using a bank is going to the bank and opening up an account. In general, you need to bring a few things. First, you need to bring money or a check made out to you that you can deposit. Second, you will need your Social Security number or possibly your Social Security card. The last item you need is a formal picture identification. Be prepared to fill out forms. They will want to know your address, phone number, and possibly some current employment information. They may ask for your mother's maiden name for security purposes. Your signature will also be required. Once an account is set up, then it is the person's responsibility to keep up with how much money is in each account. The balance of a savings account increases with deposits and interest earned and decreases when a withdrawal is made. The balance of a checking account increases with deposits and decreases as checks are written. When making deposits, a bank usually has a form or a slip that the customer fills out to indicate how much money is being deposited. Some banks have the person present a bank card that has the person's account number on it as well. Show the students what a deposit slip looks like and review what to fill out on the slip.

3 Checking Accounts There are many payments for which you will be unable to use cash or debit cards. You will often need to pay bills using a checking account. A checking account is a bank account into which you deposit money that you can spend using checks instead of cash. A check is a document that you give to a person or business you want to pay. That person then brings your check to a bank. Information on the check tells your bank to take money out of your checking account and transfer it to that person or business. TIP Always use blue or black ink to write a check. Never use pencil, and avoid other colors of ink. TIP Never sign a check unless you have filled in all the information.

4 Steps to Writing a Check Writing information on a check properly is essential to making sure your bank transfers the correct amount of money. Mistakes on a check can cause the check to be returned to you, or it can cause the bank to take out a different amount of money than you had intended. For this reason, you should follow several basic steps every time you write a check. Keep in mind that the specific details of a check can vary from bank to bank, but all checks have the same basic format. Step 1: Write the date. You can write the date in any format as long as it is clear. Include the month, the day, and the year. Step 2: Write the name of the person or company receiving your check. The check will have a line on which to write this information. Before the line, you will find the words Pay to the order of or Payable to. Be sure to use full names rather than nicknames and abbreviations unless otherwise indicated. Step 3: Write the dollar amount in the box that begins with a dollar sign ($). Write the amount as a decimal number with dollars and cents. For example, $ Try not to leave any blank space in the box. If there is extra space, simply draw a line through it. This prevents someone else from adding numbers to your amount. Step 4: Write the amount of the check using words for the dollar part and a fraction for the cents. The bottom of the fraction is always 100 because there are 100 cents in a dollar. Separate dollars and cents with the word and. For example, thirty-two and 18/100. Once you have done this, draw a straight line to fill up the remaining space. This prevents anything else from being written on the line to change the amount. Step 5: Most checks have a line at the lower left that has the words Memo or For. You can use this line to write what the check is for. You can fill this in or leave it blank. It is not required by the bank. Step 6: Sign your name on the line in the lower right part of the check. You cannot print your name. You must sign in script or cursive writing. Include your first name, last name, and middle initial if you use one. A check is not valid unless you sign it. You should try to sign your name in the same general way every time.

5 Practice: Writing a Check Complete the following task. Pretend that you are Susie Student and fill out the two blank checks to pay these bills. (Each check is worth 5 points for having the following done correctly: date, pay to the order of, dollar amount, written amount, and signature) 1) Susie Student needs to pay $48.26 to Zappy Electric Company 2) Susie Students needs to pay $ to Reliable Car Leasing.

6 More Practice Writing Checks (These checks are worth 6 points each because you need to include what the check is for. Use your own name for the signature). On check #5439: Today s date pay Jeremy Page $10.00 for 2 CD s On check #5440: Today s date pay Mountain Supply $32.19 for a new tire On check #5441: Today s date pay Hanover Shoppe $8.45 for a hair cut

7 Using a Bank Account Register Each time you make a deposit or withdraw money from a bank account, the amount of money in your account changes. You need to keep track of any changes to your account. This is of particular importance for a checking account. You cannot write checks adding up to more money than is in your account. If you do, your check will be returned to you for insufficient funds. You may have heard the term bounce. When there is not enough money in a checking account to pay a check, the check is said to bounce. You are then charged a fee for writing the check. The person who received the check is also charged a fee. To avoid fees for returned checks, you need to keep track of the checks you write. Your checkbook comes with a register, which is a table you can use to calculate the amount of money in your checking account. At the top right-hand part of the register, you write the starting balance for your account. Your balance is the amount of money in your checking account at a given time. If you take money out of or put money into your account, you must change the balance. STEP 1: Although registers differ, you generally write the number of the check in the first column. You may also note if you made a withdrawal (WDL), a deposit (DEP), or a purchase with a debit card (DEBIT). Some registers have separate columns for this information. STEP 2: Next to the check number, write the date on which you made the transaction. Space is limited, so writing the month/day is usually enough. STEP 3: The next column is where you describe the transaction. For example, you might write the name of the person or company you wrote the check to or the source of the money for a deposit. STEP 4: In the Payment/Debit column, write any amount removed from the account. It might be by check, withdrawal, or A TM card. Show the exact payment, including dollars and cents. Once you have written the amount, subtract it from the existing balance. Write the new amount in the column labeled Balance. STEP 5: Write any deposits you make in the Deposit/Credit column. Once you have written the amount, add it to the existing balance. Write the new amount in the column labeled Balance. TIP Don t write future dates on a check, known as postdating, if you don t have the funds at the time. If the check is cashed early, it will bounce. TIP Write only one transactions on each line in the register.

8 Practice: Using a Bank Account Register NUMBER/ Code DATE TRANSACTION DESCRIPTION PAYMENT/ DEBIT DEPOSIT/ CREDIT BALANCE $1, /5 Water Company , Deposit 11/6 Cash Deposit , Debit 11/6 Flower Shop , /8 Lawn Company , What is the starting balance? $ 2. What is the balance on 11/8? $ 3. What is the total dollar amount of deposits shown? $ 4. What is the total dollar amount of withdrawals shown? $ Now complete the check register by adding the following transactions on the register above /10 - Wrote check 191 for $24.30 to Current News Co /11 - Used a debit card to purchase $68.51 in groceries at All About Food /14 - Paycheck for $ from Quick Delivery Service was direct deposited into account /15 - Wrote check 192 for $ to Speedy Cars for car payment. 9. What is the ending balance after all of the transactions? $

9 Check Register Practice Worksheet ACTIVITY: Add the following transactions to the check register below. 1. Check number 0101 you bought gas at Speedway on June 6, 2011 costing $ Next you wrote a check to your dentist Dr. James the same day for $ Your next check was on June 8, 2011 for $24.98 for a book from Barnes and Noble. 4. While at the mall you went to Old Navy and bought a couple of tee shirts for a total of $ On June 9, 2011 you went to the ATM to get $20.00 to go to a movie. 6. After the movie you decided to go to Wal-Mart to pick up a few things that you need for school that cost you $ You got paid at your work so you deposited your check for $ on June 10, On June 12, 2011 you had to go to Johnston Photo to have senior pictures taken and they charged you a sitting fee of $ Your parents give you your allowance on June 13, 2011 so you deposit $ Make sure your check register reflects the final balance on June 13. NUMBER/ Code 0101 DATE TRANSACTION DESCRIPTION PAYMENT/ DEBIT DEPOSIT/ CREDIT BALANCE $165.16

10 Reconciling a Checkbook Register Once a month you will receive a statement from your bank. You may also be able to access your statement online if you set up this feature with your account. The statement shows any changes to your account during the statement period. This includes checks you have written, withdrawals you have made at an ATM, purchases you have made using a debit card, and any deposits you have made. It also shows any fees you may have been charged. When you receive your statement, you should reconcile your account. To reconcile a checking account means to make sure that your records match the records that the bank has. The first step to reconciling your account is to find out which transactions are listed on the statement. If your bank returns your canceled checks, put the checks in numerical order. Then find each check in your checkbook register. Put a check mark in the register to show that the check has been processed. Do the same for your bank card receipts and deposits. If you discover that you have forgotten to write down any transactions, write them in the register. Do not worry that they are out of order. Adjust your balance as necessary. Once your register is caught up, write the register balance on a sheet of paper. Subtract any bank charges from the balance. Add any deposits that were made too recently to appear on the statement. In addition, some checking accounts earn interest. Add any interest that was earned on the account. Then add in any checks that have not been processed yet. These are checks that appear in the register but do not have a check mark next to them. They are said not to have "cleared" yet. The balance you have calculated should match the ending balance on your bank statement. If it does not, go back to look for any places where you may have added or subtracted incorrectly. If you cannot find an error, contact your bank to see if a bank employee can help you.

11 Practice: Reconciling a Checking Account This is a portion of Kirk Green s checkbook register. Reconcile this register to the statement on the previous page. Be sure to check off the transactions from the statement in the column. NUMBER/ Code DATE TRANSACTION DESCRIPTION PAYMENT/ DEBIT DEPOSIT/ CREDIT BALANCE $4, /5 Locksmith , /9 Auto repair , /12 Paycheck , Debit Card 3/15 Clothing store , /21 Electric bill , /26 Paycheck , /29 Window repair , /31 Refund , /31 Class registration , Complete the reconcile worksheet on the next page.

12 Practice: Reconciling a Checking Account