Checks & Payment Methods

1. Checks & Payment Methods Ch. 17-3 PoB 2011

2. Opening a Checking Account • 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

3. Types of Endorsements • 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

4. 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”

5. Types of Endorsements

6. Elements of a Check • 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

7. Check Register • 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

8. Writing a Check Write checks in order by number Write the date Write the payee’s name on the line following: Pay to the Order of Write the amount of the check in figures after the printed dollar sign Write the dollar amount in words on the line below the payee’s name Write the purpose of the payment on the notes line Sign checks with the same signature as on your signature card

9. Parts of a Check

10. Proper Check Writing Write checks only on the forms provided by your bank Write checks in ink Only write checks if money is available Use the current date Avoid making checks payable to “Cash” or to “Bearer” Always fill in the amount Void checks on which you make errors Record every payment from your checking account, whether the payment is by check, debit card, or automatic payments

11. Stopping Payment • 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

12. The Reconciliation Process 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

13. Bank Statement Information 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

14. Determine Checks Paid • 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

15. Monthly Account Statement

16. Find Differences • 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

17. Most Common 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

18. Sample Bank Reconciliation Form

19. Calculate Adjusted Balance • To determine the true balance in your account, take the following steps: • Subtract the total of the outstanding checks from the bank statement balance • Add any deposits in transit to the balance statement balance • Subtract service charges, fees and automatic payments from your checkbook balance • Add any interest earned to your check register balance

20. Other Types of Payments 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

21. 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

22. Review What are the three types of endorsements? What is the purpose of a check register? What are causes of difference between the bank statement balance and a person’s check register? How does a certified check differ from a cashier’s check?