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Chapter5Checking andBanking5.15.2Checking AccountsBanking Services and Fees20102016South-Western,CengageLearning 2016South-Western,CengageLearning
Lesson 5.1Checking AccountsLearning ObjectivesLO 1-1 Describe the purpose of a checkingaccount and the forms associated with it.LO 1-2 Explain how to use a checkingaccount.LO 1-3 Discuss the types of checkingaccounts.Chapter 5 LearningLearning SLIDE 2
Checking Account Basics A checking account allows you to writechecks to make payments. A check is a written order to a bank to paythe amount stated to the person or businessnamed on it. A checking account is also called a demanddeposit, because the money may bewithdrawn at any time—that is, “on demand.”Chapter 5 LearningLearning SLIDE 3
(continued)Checking Account Basics Checks follow a process through the bankingsystem. The payee cashes your check. The payee’s bank returns the check to your bank. Your bank withdraws the money from your accountand sends it to the other bank. Your bank then stamps the back of your check,indicating that it has cleared. A canceled check is a check that has cleared youraccount.Chapter 5 LearningLearning SLIDE 4
(continued)Checking Account Basics Many banks no longer send paperchecks to other banks for processing. They transmit an image of the check, calleda substitute check. A substitute check can be used in the sameway as an original check.Chapter 5 LearningLearning SLIDE 5
(continued)Checking Account Basics You must maintain enough money in youraccount to cover all the checks you write. A check written for more money than youraccount contains is called an overdraft. A bank usually stamps the check with the words“not sufficient funds” (NSF) and returns the check tothe payee’s bank. When this occurs, the check has bounced. Your bank will charge you a fee for each NSF checkprocessed.Chapter 5 LearningLearning SLIDE 6
(continued)Checking Account Basics Floating a check is writing a check andhoping to deposit money to cover itbefore the check clears. Floating a check is risky because today’selectronic systems allow checks toprocess very quickly. Floating a check is illegal in most states.Chapter 5 LearningLearning SLIDE 7
Checking Account Advantages Convenience Safety Built-in record-keeping system Access to bank servicesChapter 5 LearningLearning SLIDE 8
Opening a Checking Account A signature form provides an officialsignature that the bank can compare tothe signature you write on your checks. Most banks require a certain amount asan initial deposit to open a checkingaccount.Chapter 5 LearningLearning SLIDE 9
Parts of a CheckCheckNumberName andAddress of MakerDatePayeeABA NumberNumeric AmountWrittenAmountMemoSignatureAccount and Routing NumbersChapter 5 LearningLearning SLIDE 10
Using Your Checking Account Writing checks Paying bills online Making deposits Using a checkbook register A checkbook register is a booklet used torecord checking account transactions.Chapter 5 LearningLearning SLIDE 11
Reconciling Your Account The process of matching your checkbookregister with the bank statement is knownas bank reconciliation.Chapter 5 LearningLearning SLIDE 12
Reconciling Your Account1. Write ending balance from bankstatement.2. Add credits or deposits not onstatement.3. Total lines 1 and 2.4. List checks, withdrawals, anddebits made but not shown onstatement.5. Total outstanding checks/debittransactions.6. Subtract line 5 from line 3.(Result should match checkbookbalance.)Chapter 5 LearningLearning SLIDE 13
Endorsing Checks A check generally cannot be cashed until it isendorsed. To endorse a check, the payee named on thecheck signs the top part of the back of thecheck in ink. There are three major types of endorsements. Blank endorsement Special endorsement Restrictive endorsementChapter 5 LearningLearning SLIDE 14
Blank Endorsement A blank endorsement is the signature ofthe payee written exactly as his or hername appears on the front of the check.Chapter 5 LearningLearning SLIDE 15
Special Endorsement A special endorsement, or anendorsement in full, is an endorsementthat transfers the right to cash the checkto someone else.Chapter 5 LearningLearning SLIDE 16
Restrictive Endorsement A restrictive endorsement restricts orlimits the use of a check.Chapter 5 LearningLearning SLIDE 17
Types of Checking Accounts Joint accounts Special accounts Standard accounts Money-Market accounts Share accountsChapter 5 LearningLearning SLIDE 18
Lesson 5.2Banking Services and FeesLearning ObjectivesLO 2-1 Describe banking services availableat most financial institutions.LO 2-2 List and explain fees charged bybanks for their services.Chapter 5 LearningLearning SLIDE 19
Banking Services A full-service bank is one that offers every possiblekind of service, from savings and checking accounts tocredit cards, safe deposit boxes, loans, and ATMs. Other services commonly offered are online banking,telephone banking, certified checks, cashier’s checks,money orders, and debit cards. Most banks offer FDIC (Federal Deposit InsuranceCorporation) insurance, which protects the deposits ofcustomers against loss up to 250,000 per account.Chapter 5 LearningLearning SLIDE 20
Guaranteed-payment Checks A certified check is a personal checkthat the bank guarantees or certifies tobe good. A cashier’s check, also called a bankdraft, is a check written by a bank on itsown funds. Traveler’s checks are check forms inspecific denominations that are usedinstead of cash while traveling.Chapter 5 LearningLearning SLIDE 21
Money Orders Banks sell money orders to people who do notwish to use cash or do not have a checkingaccount. A money order is like a check, except that itcan never bounce. There is a charge for purchasing a moneyorder. You also can purchase money orders throughthe post office and local merchants.Chapter 5 LearningLearning SLIDE 22
Debit Cards A debit card is a plastic card thatdeducts money from a checking accountalmost immediately to pay for purchases. The debit card is presented at the time ofpurchase. The amount of the purchase is quicklydeducted from the customer’s checkingaccount and paid to the merchant.Chapter 5 LearningLearning SLIDE 23
Bank Credit Cards You can apply to a full-service bank for a bankcredit card, such as a Visa or MasterCard. If you meet the requirements and are issued acard, you can use it instead of cash at anybusiness that accepts credit cards. Banks offering national credit cards usuallycharge both an annual fee for use of the cardand interest on the unpaid account balance.Chapter 5 LearningLearning SLIDE 24
Overdraft Protection Overdraft protection allows you to coverchecks or withdrawals up to a specifiedamount, usually between 100 and 1,000, depending on the typical balancein your account. With overdraft protection, your checkswill be covered even if you haveinsufficient funds in your checkingaccount.Chapter 5 LearningLearning SLIDE 25
Automated Teller Machines An automated teller machine is also called anATM. To use ATMs, you must Have a card that is electronically coded Know your personal identification number (PIN) Getting cash is a common ATM transaction. Using a debit card, you can withdraw cash fromyour checking or savings account. Using a Visa or MasterCard, you can receive a cashadvance electronically.Chapter 5 LearningLearning SLIDE 26
Online and Telephone Banking Online and telephone banking services let youaccess your accounts from a computer ortelephone any time, day or night. Services include: Transferring money from one account to another Paying bills by authorizing the bank to disbursemoney Getting account balances Seeing which checks have cleared and whichdeposits have been enteredChapter 5 LearningLearning SLIDE 27
(continued)Online and Telephone Banking Most banks also allow and encourageelectronic transfers of money. An electronic funds transfer (EFT) uses acomputer-based system that enables you tomove money from one account to anotherwithout writing a check or exchanging cash.Chapter 5 LearningLearning SLIDE 28
Stop Payment Orders A stop-payment order is a request thatthe bank not honor a specific check. The usual reason for stopping payment isthat the check has been lost or stolen. Most banks charge a fee for stoppingpayment on a check.Chapter 5 LearningLearning SLIDE 29
Safe Deposit Boxes Financial institutions offer customers asafe deposit box to store valuable itemsor documents. They charge a yearly fee based on thesize of the box. Keeping important documents and otheritems in a safe deposit box ensures thatthey won’t be stolen, lost, or destroyed.Chapter 5 LearningLearning SLIDE 30
(continued)Safe Deposit Boxes Examples of items commonly kept in asafe deposit box include Birth, marriage, and death certificates Deeds and mortgage papers Stocks and bonds Jewelry Coin collectionsChapter 5 LearningLearning SLIDE 31
Loans and Trusts Financial institutions make loans to finance thepurchase of cars, homes, home improvements,vacations, and other items. Banks can also provide advice for estateplanning and trusts. Banks can act as trustees of estates for minorsand others. A trustee is a person or an institution that managesproperty for the benefit of someone else under aspecial agreement.Chapter 5 LearningLearning SLIDE 32
Notary Public A notary public verifies a person’s identity,witnesses the person’s signature on a legaldocument, and then “notarizes” the signatureas valid. Financial institutions typically have a person ontheir staff who is a notary public. This person provides notary services for accountholders, usually without charge. For noncustomers, there is typically a small fee.Chapter 5 LearningLearning SLIDE 33
Financial Services Purchasing or selling savings bonds Investment brokerage servicesChapter 5 LearningLearning SLIDE 34
Bank Fees Banks charge fees to their customers tohelp cover their operating costs. The best way to avoid fees is to choosethe right kind of account. Shop around and find an account that isright for you. Be aware of the rules of your account, sothat you don’t violate them and have to payhigh fees.Chapter 5 LearningLearning SLIDE 35
Examples of Bank Fees Loan feesTrustee feesCheck cashing feesPer-check feesMonthly service feesOverdraft feesNSF check chargesATM transaction fees Safe deposit box feesTeller service feesMinimum balance feesFees for guaranteedpayment checks Notary service fees Online bill payment fees Fees to return canceledchecksChapter 5 LearningLearning SLIDE 36
Chapter 5 Checking Account Basics Checks follow a process through the banking system. The payee cashes your check. The payee's bank returns the check to your bank. Your bank withdraws the money from your account and sends it to the other bank. Your bank then stamps the back of your check, indicating that it has cleared.
