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What is a Checking Account?

Common financial service used by many consumers
Funds are easily accessed

Check
ATM (automated teller machine)
Debit card
Telephone
Internet

Services and fees vary depending upon the financial institution

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Why Do People Use Checking Accounts?

Reduces the need to carry large amounts of cash
Convenience – useful for paying bills
Spending Plan Tool

Keeps a record of where money is spent

Safety – using checks is safer than carrying cash

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What is a Check?

Piece of paper pre-printed with the account holder’s:

Name
Address
Financial institution
Identification numbers

Used at the time of purchase as the form of payment

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Bouncing a Check

Check written for an amount over the current balance held in the account

‘Bounces’ due to insufficient funds, or not enough money in the account to cover the check written

A fee will be charged to the account holder
Harm future opportunities for credit

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Other Checking Components

Checking Account Register

Place to immediately record all monetary transactions for a checking account

Written checks, ATM withdrawals, debit card purchases, deposits and additional bank fees

Checkbook

Contains the checks and the register to track monetary transactions

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ATM

Automated teller machine, or a cash machine
Can be used to withdraw cash and make deposits
Additional fees may be assessed if the ATM used is not provided by the financial institution sponsoring the card

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Debit Card

Plastic card that looks like a credit card
Electronically connected to a bank account
Money is automatically taken from the bank account when purchases are made
Requires a PIN (personal identification number)

Confirms the user is authorized to access the account

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To Use A Debit Card

Swipe it through the store machine or put into an ATM
Enter the PIN
Complete transaction

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Pros and Cons - Debit Cards

Convenient
Small
Can be used like a credit card
Allows a person to carry less cash
Does not allow overspending

Can lose track of balance if transactions are not written down
Opens checking account up to credit fraud
Others can gain access to the account if the card is lost and PIN is known

Pros Cons

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Endorsing a Check

Endorsement

Signature on the back of a check to approve it to be deposited or cashed
A check must be endorsed to be deposited

Three types

Blank
Restrictive
Special

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Blank Endorsement

Receiver of the check signs his/her name
Anyone can cash or deposit the check after has been signed

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Restrictive Endorsement

More secure than blank endorsement
Receiver writes “for deposit only” and account number above his/her signature

Allows the check to only be deposited

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Special Endorsement

Receiver signs and writes “pay to the order of (fill in person’s name)”
Allows the check to be transferred to a second party

Also known as a two-party check

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Worksheet Answers

Blank

Restrictive

Special

Student’s Signature

Endorse Here

For Deposit Only—Acct. # 987654321

Student’s Signature

Endorse Here

Pay to the Order of Jonathon Smith

Student’s Signature

Endorse Here

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Making a Deposit

Deposit slip

Contains the account holder’s account number and allows money (cash or check) to be deposited into the correct account
Located in the back of the checkbook

Complete a deposit slip to make a deposit
Deposited amount must be recorded in the checking account register to keep the balance current
Deposits can be made at an ATM or with a bank teller

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Completing a Deposit Slip

Date

The date the deposit is being made

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Completing a Deposit Slip

Signature Line

Sign this line to receive cash back

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Completing a Deposit Slip

Cash

The total amount of cash being deposited

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Completing a Deposit Slip

Checks

List each check individually

Identify each check on the deposit slip by abbreviating the name of the check writer

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Completing a Deposit Slip

Checks

If more checks are being deposited than number of spaces on the front, use the back
List each check
Add the total, enter it on the front

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Completing a Deposit Slip

Total from Other Side

The total amount from all checks listed on the back

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Completing a Deposit Slip

Subtotal

The total amount of cash and checks

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Completing a Deposit Slip

Less Cash Received

The amount of cash back being received
This amount is not deposited into account

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Completing a Deposit Slip

Net Deposit

The amount being deposited into the account
To calculate the amount, subtract the cash received from the subtotal

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Worksheet Answer

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Writing a Check

To pay for items using a checking account

A check is given as a form of payment
Must be completed and given to the person or business

Pre-printed items on a check

Name and address of account holder
Name and address of financial institution
Check number
Identification numbers (account, routing)

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Writing a Check

Personal Information

Account holder’s name and address
May include a phone number, not required
DO NOT list a social security number for safety reasons

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Writing a Check

Check Number

Numbers used to identify checks
Printed chronologically

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Writing a Check

Date

The date the check is written

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Writing a Check

Pay to the Order of

The name of the person or business to whom the check is being written

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Writing a Check

Amount of the Check in Numerals

The amount of the check written numerically in the box
Write the cents smaller and underline
Write the numbers directly next the dollar sign to prevent someone else from adding numbers to change the amount

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Writing a Check

Amount of the Check in Words

The amount of the check written in words on the second line
Start at the far left of the line, write the amount in words, followed by ‘and’, and the amount of cents over 100; draw a line from the end of the words to the word ‘dollars’

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Writing a Check

Memo

Space used to identify the reason for writing a check; optional
Good place to write information requested by a company when paying a bill, generally the account number

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Writing a Check

Signature

The account holder’s signature agreeing to the transaction

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Writing a Check

Identification Numbers

First - routing numbers to identify the account’s financial institution
Second - account number
Third - check number

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Worksheet Answers

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Worksheet Answers

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Check 21

Check Clearing for the 21^st Century Act (Check 21)

When a check is written, the money is automatically withdrawn from a bank account
Makes “bouncing checks” difficult

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Debit Card

Account Number—Links all purchases made with the card to a designated bank account
Expiration Date— The debit card is valid and may be used until this date
Cardholder’s Name— The cardholder’s full name is written out and displayed.
Magnetic Strip— When the debit card is swiped, the magnetic strip automatically withdraws funds from the cardholder’s account.

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Debit Card

Authorized Signature— Sign in the signature box on the back of the debit card to authorize payments

Should also write, “See ID” in the signature box
Ensures the person using the card is authorized to do so

Verification Number—This three digit code is located on the back of the card in the signature area

Help ensure the card is in the cardholder’s possession when making purchases
Prevents unauthorized use

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Checking Account Register

Place to record all monetary transactions for a checking account

Deposits, checks, ATM use, debit card purchases, additional bank fees

Used to keep a running balance of the account
Remember

Record every transaction!

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Check Register

Date

The date the check was written or transaction was made

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Check Register

Number

The number of the written check; if a debit card or ATM was used, write DC or ATM

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Check Register

Description of Transaction

The person/business the check was written to or where the debit card was used
Gray line can be used to write the memo

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Check Register

Payment/Debit(-)

Amount of the transaction
Deducted from the balance

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Check Register

Deposit/Credit(+)

Amount of the transaction
Added to the balance

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Check Register

√ T

A box used to track whether the check has cleared on the monthly bank statement when reconciling at the end of each month

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Check Register

Fee (if any)

Any extra fees charged to the account
Listed on the bank statement

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Check Register

Balance

The running total of the checking account
Calculated by adding or subtracting each transaction
Keep this updated

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Monthly Bank Statement

Lists each monetary transaction and the current account balance for a specified time period
Includes:

Dates
Identification for each transaction (number or type, date, amount)
Transaction amounts for withdrawals and/or deposits
Interest earned (if applicable)
Fees or charges (if applicable)

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Monthly Bank Statement

Lists each transaction and current account balance

Deposits
Checks
Debit Card transactions
ATM transactions
Additional fees

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Reconciling a Checking Account

Reconcile

Balance the checkbook register each month to the balance shown on the statement

Do this every month to ensure the correct balance in the checkbook

Knowing the correct balance can help to avoid bouncing checks

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Steps for Reconciling

View the monthly bank statement and check register

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√

Place a check mark in the √ T column for all transactions that have been cleared and are shown on the bank statement

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Determine the current account balance from the bank statement

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Add any outstanding deposits – transactions that have not cleared the bank

Calculate the Subtotal

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Subtract any outstanding withdrawals and calculate

Compare the total with the checkbook register. If the totals are different, double check the math and make sure all service fees and bank charges are recorded in the check register.

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Checking Account Safety

If a checkbook, ATM, and/or debit card becomes lost or stolen

Immediately report it to the financial institution
File a report with the police

Reported lost/stolen checkbook:

Financial institutions generally do not hold the account holder liable for any fraudulent charges

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Safety continued

Reported lost/stolen ATM/debit card:

Within 2 business days

Cardholder is only liable for $50.00

Longer than 2 business days

Could be liable for up to $500.00

Varies depending upon the financial institution

May not charge the account holder anything if the correct steps were taken to report the lost/stolen card

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Questions?

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