Ch 9: Checking Accounts and Other Banking Services
Purpose of a Checking Account What is a Check? A Checking account is an account that allows depositors to write checks to make payments A check is a written order to a bank to pay the stated amount to the person or business named on the check (payee) A checking account is also called a demand deposit because money can be withdrawn at any time (on demand)
Checking Accounts Banks may require a minimum balance in your checking account. Why? Fees may apply if you drop below the minimum balance Other fees may apply: Overdraft
Advantages of a Checking Account Convenience Safer than cash. It is harder to steal and get cash from a check than just stealing cash Built-in Record keeping system. You must keep records of the checks you write and this helps you keep track of where your money is going.
Opening a Checking Account You must sign a Signature Authorization Form Provides an Official Signature that the bank uses to compare to verify that your signature was not forged
A. Drawer s Information Parts of a Check
Parts of a Check B. ABA Number
Parts of a Check C. Date
Parts of a Check D. Check Number
E. Payee Parts of a Check
Parts of a Check F. Amount of Check
G. Written Amount of Check Parts of a Check
H. Drawer s Bank Information Parts of a Check
I. Memo Line Parts of a Check
Parts of a Check J. Drawer s Signature
K. Routing Number Parts of a Check
L. Account Number Parts of a Check
Parts of a Check M. Check Number (same as the other check number)
Completed Check Example Sarah Smith 314 Memphis Villas Brooklyn, Ohio 44144 (216) 351-9577 12/5/2014 Billy Jones Fifty five dollars and 75 / 100 ------------------------ 55.75 Computer Repair Sarah Smith
Writing Checks Always use Pen Write Legibly, Start at the edge of each line, cross out any blank spaces Sign your name exactly as it appears on the check; No shortened names or nicknames If you make a mistake, Write VOID across the check and write a new check Make sure you have enough money in your account to cover the check
Check Register Your Personal Record of Transactions Be sure to fill out the check register immediately when writing a check
Debit Cards Debit Cards work like electronic checks; the money is deducted from your checking account. Debit cards may look like credit cards, but they are different. Debit cards use the money in your checking account. Credit cards are loans; you borrow the money and pay it back plus interest.
Deposit Slip # 2-74 100 00 350 00 July 1, xx 450 00 --------- 450 00 Deposit slips are used when you add money into your account.
Check Clearing What happens to a Check after you write it? Visit the following website and create a flowchart describing the path a check takes to clear. Label each object in your chart! http://www.howstuffworks.com/check-processing.htm
Check Clearing A check that has cleared is a check that Has been returned to your bank and the funds have been deducted from your account A Cancelled check is a check that Has cleared, has been stamped by your bank, and returned to you A truncated check is a check that Is cancelled, but the bank does not return to you. A check that is written for more money than is in the checking account is called an Overdraft Floating a check means Writing a check for more than the amount you currently have in the account; hoping your deposit clears before the check clears
Reconciling a Your Account When you receive your monthly statement, you will notice that the balance on the statement does NOT match the balance in your check Register. Why? Reconciling is the process of matching your checkbook register balance with the statement balance This will account for outstanding fees, checks, and deposits
Bank Reconciliation Check Book Register Balance 824.00 Plus Outstanding Deposits: 0.00 Minus Outstanding Fees: 0.00 Reconciled Balance: 824.00
Finding Outstanding Deposits, Checks 36.12 7/1 20.00 7/15 220.50 Find the Outstanding Checks & Deposits by going through the statement and checking off the checks that have cleared in your Check Register. The ones that you did not check off are outstanding.
Endorsements An Endorsement is the signature of the Payee on the back of the check. Checks MUST be endorsed before they can be cashed. Blank Endorsements are the most common type
Joint Accounts A Joint account is opened by two or more people Both people can draw on the account You can set it up so that both people must sign the checks or you can set it up where either person can sign checks If one person dies, the other becomes the sole owner of the account
Other Methods of Payment When you don't want to send cash, but your check isn't acceptable, consider: 1. Certified Check Your own check guaranteed by the bank.your money is set aside to pay the check. A certified check will not bounce. 2. Cashier's Check A check drawn by the bank on its own funds.you must pay cash for it, or have it taken from your checking or savings account. A cashier's check will not bounce.