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Benefits of a checking account
Convenience
Safety to make payments with less risk than using cash.
Proof of payment
A record of finances for managing your money.
The Checking Account
Checking Account – A banking service where money isdeposited 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!
The Checking Account
Opening Your Checking Account
1. Complete application2. Complete Signature Card, which is used to
verify your signature.3. Make Deposit!
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.
The Checking Account
Three types of endorsements:
1. Blank endorsement: Simple signature on back. Signcheck as it is written on check.
2. Restrictive endorsement: Restricts further transfers.A typical endorsement will read “For Deposit Only.”
The Checking Account
Three types of endorsements:
3. Special Endorsement. Transfer ownership to anotherperson. A typical special endorsement will read:“Pay to the order of:”
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
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
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
The Checking Account
Eight proper check writing habits
1. Write checks on the proper form2. Use permanent ink3. Only write checks if money is available4. Use the current date5. Avoid making checks payable to “Cash”6. Always fill in the amount7. Void checks on which you make errors.8. Record every payment from your checking account.
The Checking Account
Recording checking account activity
Checkbook Register – A record keeping system used to
keep track of checks that you have written, debit cardtransactions, 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.
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!
The Checking Account
Debit Card Transactions
Debit cards allow you to make payments for itemsat 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 deductedimmediately. (Credit cards allow for “extra time” to pay andincur finance charges (interest).
The Checking Account
Bringing into agreement your bank statement balance and your check register balance!
The Checking Account
The Bank Reconciliation ProcessBringing into agreement your check register balance withthe bank statement balance.
The Path of a Check
The Checking Account
The Bank Reconciliation ProcessBringing into agreement your check register balance with the bank statement balance.
Many bank customers wrongly assume that the accountbalance shown on the bank statement is the actual amount of money available. This is NOT true!
You must reconcile your checkbook register with thebank statement to “prove your balance” and make surethat they are in agreement.
The Checking Account
The Bank Reconciliation Process
Bank Statements are received from the bank monthlyand show all of the transactions that have occurred duringthe month.
The bank’s balance and your checkbook register balance will usually NOT agree because of OUTSTANDINGCHECKS and DEPOSITS and fees.
The Checking Account
Checking Account Vocabulary
Outstanding Check - A check that has been written butHas not been processed (paid) by the bank
Cancelled Check – A check that the bank has processedand paid.
Overdraft – A check that cannot be processed and paidby the bank because of insufficient funds.(AKA: Bouncing a check)
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
The Checking Account
When you receive your bank statement, IMMEDIATELY do the following:
1. Verify all of the transactions on your bank statementagainst what you have recorded in your check register. if you have forgotten any, record them in your check register.
2. Re-calculate your balances in your check register to make certain that you have calculated correctly.
The Checking Account
THEN, IMMEDIATELY do the following:
3. Perform the reconciliation process:Step 1: List your current STATEMENT balance.Step 2: Add outstanding depositsStep 3: Subtract outstanding checks or debit card
transactions.and any fees that the bank has charged.
The total should equal your checkbook balance. If itdoesn’t, something is wrong and you need to re-checkyour calculations and make certain that EVERYTHING
has beenrecorded.
The Checking Account
When both the statement balance and the checkregister balance agree, your checking account has
been. . .
…a must in maintainingcheckbook responsibility!
Why your checking account and bank balance might be different.
1. You may have forgotten to record a transaction.2. Bank may have charged you a service charge.3. Bank doesn’t know about a deposit.4. Interest earned may have been added.5. You may have recorded the amount of a check
incorrectly.6. Some of your checks may not have cleared.