The Checking Account

1. The Checking Account The most widely used service that a bank offers. Money on demand!

2. Convenience • Safety to make payments with less risk than using cash. • Proof of payment • A record of finances for managing your money. Benefits of a checking account

3. The Checking Account • Checking Account – A banking service where money is • deposited into an account and checks can be written • to withdraw money from the account. AKA: Demand Deposit • Other ways to withdraw money from a checking account: • ATM withdrawals • Debit card transactions • On-line banking transactions • A check is a substitute for money. • Writing checks is safer than carrying cash!

4. The Checking Account • Opening Your Checking Account • Complete application • Complete Signature Card, which is used to verify your signature. • Make Deposit!

5. The Checking Account Making Deposits: If you are depositing checks into your checking account, the checks must be endorsed. To endorse means to transfer ownership. To endorse a check, you must sign the back of the check.

6. The Checking Account Three types of endorsements: 1. Blank endorsement: Simple signature on back. Sign check as it is written on check. 2. Restrictive endorsement: Restricts further transfers. A typical endorsement will read “For Deposit Only.”

7. The Checking Account • Three types of endorsements: • Special Endorsement. Transfer ownership to another • person. A typical special endorsement will read: • “Pay to the order of:”

8. The Checking Account • Using Your Checking Account • Making Deposits • Complete deposit slip • Date • List cash/currency • List checks separately • Indicate cash received back (if desiring cash back) • Indicate total deposit

9. The Checking Account • Using Your Checking Account • Parts of a check: • Check Number • ABA Number (American Banker’s Association) • Preprinted Name and Address • Date • Payee • Numeric Amount • Written Amount – Legal amount

10. The Checking Account • Using Your Checking Account • Parts of a check contd.: • Drawer is the maker of the check. • Payee is the person who the check is written to. • Drawee is the bank that pays the check. • Account Number • Memo line

11. The Checking Account Eight proper check writing habits 1. Write checks on the proper form 2. Use permanent ink 3. Only write checks if money is available 4. Use the current date 5. Avoid making checks payable to “Cash” 6. Always fill in the amount 7. Void checks on which you make errors. 8. Record every payment from your checking account.

12. The Checking Account Recording checking account activity Checkbook Register – A record keeping system used to keep track of checks that you have written, debit card transactions, ATM (Automatic Teller Machine) trans- actions (deposits and withdrawals), and on-line banking Transactions. You could also use a Check stub or duplicate copy. Any transactions that has affected your account should be Recorded in the checkbook register.

13. The Checking Account • Using a Checkbook Register, contd. • What should be included in your check register: • Check Number – if applicable • Date • Description of transaction (I.e., to whom check was • written, debit card transaction, etc.) • Amount • Balance – A MUST!

14. The Checking Account Debit Card Transactions Debit cards allow you to make payments for items at any place that a VISA/Mastercard is accepted. Payments are deducted directly from your checking account. Debit Cards are a faster & safer way of writing a check Debit Cards are NOT credit cards. Payment is deducted immediately. (Credit cards allow for “extra time” to pay and incur finance charges (interest).

15. The Checking Account The Bank Reconciliation! Bringing into agreement your bank statement balance and your check register balance!

16. The Checking Account The Bank Reconciliation Process Bringing into agreement your check register balance with the bank statement balance. The Path of a Check

17. The Checking Account The Bank Reconciliation Process Bringing into agreement your check register balance with the bank statement balance. Many bank customers wrongly assume that the account balance shown on the bank statement is the actual amount of money available. This is NOT true! You must reconcile your checkbook register with the bank statement to “prove your balance” and make sure that they are in agreement.

18. The Checking Account The Bank Reconciliation Process Bank Statements are received from the bank monthly and show all of the transactions that have occurred during the month. The bank’s balance and your checkbook register balance will usually NOT agree because of OUTSTANDING CHECKS and DEPOSITS and fees.

19. The Checking Account Checking Account Vocabulary Outstanding Check - A check that has been written but Has not been processed (paid) by the bank Cancelled Check – A check that the bank has processed and paid. Overdraft – A check that cannot be processed and paid by the bank because of insufficient funds. (AKA: Bouncing a check)

20. Deposits in transit • Deposits that have not reached the bank or been recorded by the bank before the statement is prepared • Service charges • E.g., check printing and processing, account fees • NSF Checks • Not sufficient funds • Somebody wrote us a rubber check

21. The Checking Account • When you receive your bank statement, IMMEDIATELY • do the following: • Verify all of the transactions on your bank statement • against what you have recorded in your check register. • if you have forgotten any, record them in your check • register. • Re-calculate your balances in your check register to • make certain that you have calculated correctly.

22. The Checking Account • THEN, IMMEDIATELY do the following: • Perform the reconciliation process: • Step 1: List your current STATEMENT balance. • Step 2: Add outstanding deposits • Step 3: Subtract outstanding checks or debit card transactions. • and any fees that the bank has charged. • The total should equal your checkbook balance. If it • doesn’t, something is wrong and you need to re-check • your calculations and make certain that EVERYTHING has been • recorded.

23. The Checking Account When both the statement balance and the check register balance agree, your checking account has been. . . Reconciled! …a must in maintaining checkbook responsibility!

24. You may have forgotten to record a transaction. Bank may have charged you a service charge. Bank doesn’t know about a deposit. Interest earned may have been added. You may have recorded the amount of a check incorrectly. Some of your checks may not have cleared. Why your checking account and bank balance might be different.