Checking Accounts & Banking Services

Purpose

• Checking account: an account that allows depositors to write checks to make payments

• Check: written order to a bank to pay the stated amount to a person or business (payee) named on it

• Also called a demand deposit – Money can be withdrawn at any time– “on

demand”

• Only the depositor can write checks on the account

• Financial institutions often charge a fee or require a minimum balance

Purpose

Purpose

• Process– Payee cashes check

– Bank that cashes it returns it to your bank

– To reimburse the payment, your bank withdraws the money from your account and sends it to the other bank

– Your bank stamps the back of your check indicating that it has cleared

• Successfully completed its trip through the system

Purpose

• Canceled check: check that bears the bank’s stamp, indicating it has cleared

• Because of the stamp, you can use your canceled checks as proof of purchase or payment

Purpose

• Advantages– Provides convenient way to pay bills– Writing a check is safer than using cash– A checking account has a built-in record

keeping system that you can use to track expenses and create budgets

– You have access to other bank services• Online banking• ATM

Purpose

• Responsibilities

– You must write checks carefully and keep an accurate record of checks written and deposits made

– You must verify the accuracy of the bank statement you receive each month

– You must maintain sufficient funds in your account to cover all the checks you write

Purpose

• Responsibilities– http://www.youtube.com/watch?v=b8kh

2Qx5LV0

Purpose

• Some banks do not return cancelled checks– truncation

Purpose

• Overdraft: a check written for more money than your account contains

• Bank stamps the check NSF- – non-sufficient funds

• “Bounced”• Bank will charge you a fee– Usually around $25

Opening an Account

• Fill out and sign an authorization form

• This provides an official signature to verify against forgery

• Most banks require a minimum deposit amount

Purpose

• You are floating a check when you realize your account contains insufficient funds, but you write a check anyway, hoping that a deposit will clear before the check is cashed.

• Risky now

Purpose

• Check Kiting:–Writing a check off of an account with

NSF and then depositing a check into that account from another account that also has NSF

– ILLEGAL!

Parts of a Check

• Check Number– Checks are number for easy

identification– Checks are usually pre-numbered

Parts of a Check

• ABA number– American Bankers Assoc. number

– Appears in a fraction

• Top half indentifies the location and district of the bank the check is drawn from

• Bottom half helps in routing the check to the specific area and bank on which it is drawn

Parts of a Check

• ABA number

Parts of a Check

• Name and Address– The maker is the person authorized to

write check on the account– You should have this printed on your

checks– You can add phone number, DLN, or SSN• However, because of identity theft it is

recommended that you don’t put your DLN or SSN

Parts of a Check

• Name and Address

Parts of a Check

• Date–When you write the check– Do not postdate checks• Future date a check

– Banks will not cash a check before the date written on it• May not honor a check after 6 months

Parts of a Check

• Date

Parts of a Check

• Payee–Whom the check is made payable

• Numeric Amount– Amount of dollars and cents being paid,

written in numbers

Parts of a Check

• Written Amount– Shows the amount of dollars and cents

being paid, written in words–Write the word “and” to separate dollar

amounts from cents• Replaces the decimal point

– Leave no space between the words– Draw a line from the end of the word to

the word “Dollars”

Parts of a Check

• Written Amount– 12/100 means 12 cents, which is 12

one-hundredths of a dollar

Parts of a Check

• Signature– If the bank suspects fraud the teller can

compare the check to your signature authorization form

Parts of a Check

• Account Numbers– Appears in bank coding at the bottom of

the check

Parts of a Check

• Routing Number– Bank’s identification code for electronic

sorting and routing of checks

Parts of a Check

• Memo– Provides a place to write the purpose of

the check– Not mandatory

Parts of a Check

Using Your Account

• Writing Checks1. Always use a pen; one with dark ink2. Write legibly3. Sign your name exactly how it appears

preprinted on the check and signature card

4. Avoid mistakes• Void the check and write a new one

5. Be certain you have deposited adequate funds to cover each check you write

John Smith pays a bill to Duke Energy for $154.96 on November 1, 2011.

Jane Doe pays for gas at Huck’s. She got $45.00 worth of gas on 10/31/11.

Tom buys pizza at Pizza Hut for $19.08.

Endorsing Checks

• A check cannot be cashed until it has been endorsed.

• When two or more people are the payee, all payees must endorse.

Endorsing Checks

• To endorse:

– The payee named on the front signs the back of the check in ink.

– There is usually a space, but if there is not, this should be no more than

1 ½ inches from the trailing edge

Endorsing Checks

• Three types of endorsements:

– Blank– Special– Restrictive

Endorsing Checks

• Blank Endorsement– Signature of the payee written exactly

as his/her name appears on the front

Jane Public

Endorsing Checks

• In a blank endorsement, if your name is spelled incorrectly on the front, you will write the incorrect version and then the correct version right below it

Mrs. Balt

Endorsing Checks

• Special Endorsement

Mrs. Bault

Endorsing Checks

• Restrictive Endorsement– Restricts or limits the use of the check• Example “For Deposit Only”• Safer than Blank Endorsement for mailing

deposits or night deposits• If the check is lost, the finder cannot cash it

Endorsing Checks

• Restrictive Endorsement

Mrs. Bault

Endorsing Checks

Endorsing Checks

• Special Endorsement, or endorsement in full, is an endorsement that transfers the right to cash a check to someone else.

• Consists of the words “Pay to the order of (new payee’s name)” and the signature of the original payee

Deposits

Deposit means to add money to an account.

Deposit slips can be found in the back of your checkbook and at the bank.

Most banks will require your signature on a deposit slip.

What does a deposit slip look like?

Making Deposits

• You should complete a form every time you deposit money into your account.

• You will have to sign a form to withdraw money from your account.

Making Deposits

• Preparing a Deposit Slip:– Insert the date of the transaction

– In the cash section, write the total of currency and coin you are depositing

–Write the amount of each check you are depositing

Making Deposits

• Preparing a Deposit Slip (cont’d):– Total the currency, coin, and check

amounts.

–Write this figure on the subtotal line

– If you want cash back fill in the “Less Cash Received” line with the amount

Making Deposits

• Preparing a Deposit Slip (cont’d):– Subtract the cash received from the subtotal

– Write the final amount on the net deposit line

– If you get cash back you will need to sign your deposit slip

– You will receive a receipt after your transaction. Keep this for your records

Making Deposits

Making Deposits

Making Deposits

• John Smith wants to deposit:– A $100 bill– A $25 check (#101)– A $25 check (#390)

Making Deposits

• Jane wants to deposit:– A $58.76 check

(#523)– A $456.07 check

(#1937)– And get $100 cash

back

On September 5, 2015, you deposited $25 in cash and one check for $98.72 into account 158975. You took no cash back.

On February 20, 2015, you deposited three checks into account 778590: one for $50, one for $62. 45, and one for $100. You wanted $75 back in cash.

On May 3, 2015, you deposited $5 in cash and two checks, one for $46.33 and one for $87.20 into account number 9003021. You wanted to keep $25 in cash.

On September 5, 2015, you deposited $25 in cash, and 1 check for $98.72 into account 158975. You took no cash back.

On February 20, 2015, you deposited 3 checks, one for $50, one for $62. 45, and one for $100 into account 778590. You wanted $75 in cash back.

On May 3, 2015, you deposited $5 in cash, a check for $46.33, and a check for $87. 20 into account number 9003021. You wanted to keep $25.

Check Registry

A register is a record of withdrawals and deposits made into an account.

Example

Assignment

Complete the check register assignment.