Checking Accounts 101

1. Checking Accounts 101 How much do you know about the most common form of bank account?

2. What’s the point? • It is a demand account – allowing you to withdraw money at any time • Convenient way to pay bills • Safer than using cash • Built-in record keeping system that can be used to track expenses and create budgets • Provides access to other banking services • Instant loans, online banking, 24-hour access through ATMs

3. Responsibilities of maintaining a checking account • Accurate record keeping is essential • Truncation – banks not returning cancelled checks • Do not bounce checks • Illegal and costly • Americans pay over $10 billion in overdraft fees per year • Be careful of playing the float • Betting that a deposit will clear the bank before a check is presented for payment • Computers have virtually closed the window

4. Who’s in Charge? • Banks regulators enforce banking laws • Banking laws are written on the state and federal level • Charters are licenses to operate a bank • Charters can be issued by the state or federal banking authorities • The type of bank charter determines which government agency has regulatory authority

5. Health and Safety Concerns • Legislation passed during the Great Depression in response to bank runs • The Federal Deposit Insurance Company insures all bank deposits up to $100,000.00 • Bank regulators regularly audit banks to ensure financial health • The Federal Reserve can act as the Lender of Last Resort to financial institutions in times of crisis.

6. The Federal Reserve System • The Central Bank of the United States • Comprised of 12 independent banks • Regulates bank holding companies and certain state chartered banks • Serves as repository for bank reserves • Regulates the economy by setting interest rates (discount rate) and controlling the money supply

7. Opening a checking account • Application • Fill out and sign a signature card • Provides the bank with your official signature • Initial deposit • Joint accounts are those accounts with two or more signatories who have access to the account • Security and code words

8. Parts of a check

9. How to write a check • Always use pen • Write legibly • Sign your name exactly as it appears preprinted on the check and on the signature card • Avoid mistakes • If you make a mistake void (cancel) the check and write a new one • To cancel a check, write the word VOID across the face of the check • Make sure you have enough money in the bank to cover the check

10. Other checking activities • Online banking • Register with your bank’s website, establish a PIN to gain account access • Set up a list of payees • Don’t forget to record each transaction • Deposits • Complete a deposit slip • Retain receipt as proof of the transaction

11. Keeping track of your account • Record checking transactions in a checkbook register • OR use a financial management program such as Microsoft Money or Quicken • Record each check written, deposit made and any electronic transactions • Compare your register balance with your monthly bank statement • Don’t forget to record bank fees

12. Endorsements • Required to cash a check • All payees must sign • Endorsements must be in ink • Endorse checks within 1 ½ inches from the trailing edge of the check • Usually marked on the back of the check

13. Types of Endorsements • Blank – the signature of the payee written exactly as his or her name appears on the front of the check • Correcting for any mistakes • Once endorsed, anyone can cash it • Special – transfers the right to cash the check to someone else • Pay to the order of.... • Restrictive – limits the use of the check

14. Types of Checking Accounts • Joint account • Survivorship • Special accounts • Limited use, fee for use • Standard accounts • Interest-bearing accounts • Share accounts • Credit unions

15. Other Banking Services • Savings accounts • Credit cards • Safe deposits boxes • Loans and trusts • Other financial services • Online and telephone banking • ATM/Debit cards • Debit cards are ATM cards with additional POS features

16. Other Banking Services (cont’d) • Guaranteed payment checks • Certified check: a personal check that the bank guarantees (certifies) to be good • Cashier’s check (or bank draft) is a check written by the bank on its own funds • Money orders • Stop payment orders – a request that the bank not cash a specific check

17. It’s not free (Bank fees) • How do banks earn money? • Interest on loans > interest on deposits • Charge fees to cover costs • Non customer fees • Maintenance fee • Per check fees • Minimum balance fees • ATM fees • NSF fees • Service fees for online bill payment, cancelled checks, use of a teller