Checks & Payment MethodsCh. 17-3 PoB 2011

The First Deposit Starts with providing personal data and a sample of

your signature Signature Card – document usually requires your legal

name, address, phone, Social Security number, driver’s license number and e-mail address

Opening a Checking Account

Endorsement – is written evidence that you received payment or that you transferred your right of receiving payments to someone else Must be made in the 1 ½ inch space on the back left

side of the check

Types of Endorsements

Blank Endorsement – consists of only the endorser’s name

Full Endorsement (special endorsement) – allow you to transfer a check to another person You write the words: “Pay to the order of…” followed by

the name of the person or business; then followed by your signature

Restrictive Endorsement – limits the use of the check to the purpose given in the endorsement “For Deposit Only”

Types of Endorsements

Types of Endorsements

Drawer – is the owner of the account who signs the check

Payee – is the person to whom the check is written Drawee – is the bank that pays the check

Elements of a Check

Checkbook provides one of three formats for recording account activities Check Stub – is a form attached to the check by a

perforated line Check Register – is a separate book that allows you

to maintain a record of the checks written Duplicate Copy – may be automatically created when

you write the check Fill out the register before filling out the check so

that all information is recorded accurately

Check Register

1. Write checks in order by number 2. Write the date3. Write the payee’s name on the line following:

Pay to the Order of4. Write the amount of the check in figures after the

printed dollar sign5. Write the dollar amount in words on the line below

the payee’s name6. Write the purpose of the payment on the notes line7. Sign checks with the same signature as on your

signature card

Writing a Check

Parts of a Check

1. Write checks only on the forms provided by your bank

2. Write checks in ink3. Only write checks if money is available4. Use the current date5. Avoid making checks payable to “Cash” or to

“Bearer”6. Always fill in the amount7. Void checks on which you make errors8. Record every payment from your checking account,

whether the payment is by check, debit card, or automatic payments

Proper Check Writing

Stop Payment Order – a written notice that tells the bank not to pay a certain check Banks may charge a high fee Use this process for only good reasons Use if a check has been lost or stolen

Stopping Payment

As a depositor, you will need to review the record of your account that the bank keeps

At regular intervals, usually monthly, the bank will send you a report on the status of your account known as a bank statement

The Reconciliation Process

The balance at the beginning of the month The deposits made during the month The checks paid by the bank during the month Any automated teller transactions made during the

month Any electronic fund transfers (EFT) or special

payments the bank has made Service charges for the month Any interest earned on the account The balance at the end of the month

Bank Statement Information

When you bank statement arrives, compare the checks you wrote to those that have been paid by your bank Canceled Checks – checks that have been paid; may

not be returned by your bank Substitute Check – is a digital reproduction of the

original paper check

Determine Checks Paid

Monthly Account Statement

Bank Reconciliation – the document created to show how the two balances (statement and checkbook) were brought into agreement Reconciling the Bank Balance – bringing

the balances into agreement

Find Differences

Some of the checks you wrote may not have cleared (been paid) Outstanding Checks – checks not deducted from the

bank statement balance Forgotten transactions, not recorded Service charges Mailed a deposit that has yet to be received Interest earned Recorded check amounts incorrectly

Most Common Differences

Sample Bank Reconciliation Form

To determine the true balance in your account, take the following steps:1. Subtract the total of the outstanding checks from the

bank statement balance2. Add any deposits in transit to the balance statement

balance3. Subtract service charges, fees and automatic

payments from your checkbook balance4. Add any interest earned to your check register

balance

Calculate Adjusted Balance

Certified Check – is a personal check for which a bank has guaranteed payment

Cashier’s Check – is a check that a bank draws on its own funds and has a fee

Traveler’s Check – are special forms designed for making payments away from home

Other Types of Payments

Money Order – is a form of payment that orders the issuing agency to pay the amount printed on the form to another party Bank Money Order – is sold by a bank stating that

money is to be paid to a specific person or business Postal Money Order – purchased from the US Post

Office can be sent safely through the mail Express Money Order – is issued by various

organizations Telegraphic Money Order - involves buying a

message to direct a telegraph office to pay a sum of money to a certain person or business

Other Types of Payments

1. What are the three types of endorsements?2. What is the purpose of a check register?3. What are causes of difference between the

bank statement balance and a person’s check register?

4. How does a certified check differ from a cashier’s check?

Review