Chapter 9 – Checking Accounts & Banking

Checking AccountCheck: written order to a bank to pay a specific

amount to a person/business (payee)

Canceled check: a check that has a bank’s stamp on it, showing it has cleared the bank

Overdraft: a check written for more money than what is in your account

Floating a Check: writing a check when you know you don’t have enough money in your account, hoping a deposit will clear before the check does

Advantages of a Checking Account

• Convenient for paying bills• Safe than cash for major purchases, bills, and

mail orders• Built-in record keeping system• Other services:– Instant loans– Online banking– 24-Hour access (ATMs)

Checking Account = known as DEMAND DEPOSIT

Opening an Account

• Make initial deposit• Can be a joint account• Fill out a Signature Authorization Form– Compare signature on card to checks– Security identification question (ex. mother’s

maiden name)

Paying Online

• Can list bills to be paid automatically• Allow for lag time• Some banks charge fees for this

• Assigned a PIN (Personal Identification Number)

Tips When Writing Checks• Use pen

• Write legibly

• Do not put extra space between words/numbers

• Keep signatures consistent

• Avoid mistakes – if a mistake happens: “VOID”

• Make sure you have enough money!!

The Path of a CheckJoe writes Suzie a $25 check.

The check has now cleared and is a canceled check.

Joe’s bank gets the check, takes $25 from Joe’s account, and sends it to Suzie’s bank to reimburse the payment.

Suzie’s bank takes money from it’s bank, gives her the $25 cash.

Suzie takes the check to her bank to cash it.

Suzie’s bank then sends the check to Joe’s bank to be reimbursed.

A

HG

ED

C

B

I J

F

A: Check Number

B: Maker (Drawer)’s Name and Address (preprinted)

C: Date

F: Written Amount

I: Routing Number (Banks Identification Number)

J: Account Number (YOUR bank account number)

001

December 1, 12

Wal-Mart

Twenty-Five and 23/100

25. 23/100

Groceries you r signature

D: Payee E: Numeric Amount

H: SignatureG: Memo

Check #1001 to Wal-Mart on December 1, 2012 for groceries for $25.23

Checkbook Register• Booklet used to record all checking account

transactions• Keeps a running total of your account balance

• Types of Transactions:– Checks– Debit Card purchases– Deposits– Withdrawals (ATM)

1. Beginning Balance (OR balanced carried over)2. Check Number (transaction code)3. Date4. Transaction Description5. Amount of Payment OR Deposit6. New running Total

Beginning Balance: $430.56Aug. 9 – wrote a check #1001 to Kroger for $24.95

Sample TransactionsAug. 11 – bought random items at Wal-Mart for $25.97 using your Debit CardAug. 16 – wrote a check # 1002 to IBHS for $15.00Aug. 19 – deposited your paycheck of $120.00Aug . 22 – got gas at Casey’s with your Debit Card for $31.80Aug. 29 – withdrew $40 from the ATMAug. 29 – wrote check #1003 but made an error while writing the check so not

using the checkAug. 31 – Deposited a check from your parents for $250.00

430 56405 61 24 95Kroger - groceries1001 8-9

364 64 15 00IBHS1002 8-16484 64120 00PaycheckD 8-19452 84 31 80Casey’s - gasDC 8-22

379 64Wal-Mart - randomDC 8-11 25 97

WithdrawATM 8-29 40 00 412 84VOID1003 8-29 - - - - 412 84PaycheckD 8-31 662 84250 00

Depositing a 50 bill (cash), a check for $150 from your parents, and a check for $25 from IBHS on Dec. 1, 2012. You want to withdrawal $25 cash.

STEPS: 1.Enter the Date2.Enter any Cash you are depositing3.Enter any Checks you are depositing4.Total all Deposits5.Less cash received? (withdrawing any money?)6.Net Deposit (Amount to actually be deposited)7.Sign ONLY IF you are withdrawing money

December 1, 12

50 00150 00

25 00

225 0025 00

200 00

parentsIBHS

your signature

Endorsing Checks• Signing the back of a check so it may be cashed

or deposited

• THREE TYPES• Blank Endorsement: the signature of payee is

written exactly as it is on the front of the check

Simon Smith

• Special Endorsement: transferring the right to cash the check to someone else

• Restrictive Endorsement: restricting or limiting the check to be deposited only into the account specified

Pay to the Orderof Sue JonesSimon Smith

For Deposit only CEFCU Acct. # 12345

Simon Smith

Reconciling Your Bank Account• Matching your checkbook register with the bank

statement (or online statement)

• Outstanding debit transactions / checks: any debit transaction or check that is recorded in the register but has not yet cleared the bank

• Outstanding deposits: any deposit that is recorded in the register but has not yet cleared the bank

• Register balance = last line on reconciliation sheet

477.79

250.00

727.79

64.95

662.84

#1001 24 95WD 40 00

O

O

O--

8/17

8/19

8/27

2012

Types of Checking Accounts• An account opened by two or more people

“Joint Account”• An account where anyone on the account has the

right to the amount deposited if the other individual dies

“Survivorship Account”• These accounts have low (or no) average daily

balance requirements and no service fees

“Share Account”

• These accounts have a set monthly service fee if an average minimum balance is not met but no per check fee

“Standard Account”• These accounts have flat rate service fees and fees

for each check written“Special Account”

• These accounts offer interest on the amount in the account as long as the amount does not fall below a minimum average

“Interest-Bearing Account”– Average-Daily-Balance Method: a fee is charged if the

monthly average is below a certain $ amount