Services Most banks offer a number of different services. The service that most of you will likely use is a checking account . A Checking Account is a banking service where you deposit $$ into a secured account and checks can be written to withdraw $$ as needed. This account is also known as a demand deposit because you can demand portions of your deposited $$ at will. A full-service bank also offers services like credit cards, debit cards, safe-deposit boxes, loans, automatic teller machines (ATM), certified checks, cashiers checks and money orders.
Advantages 1. Convenience: 2. Safety: You can use checks to pay bills. Sending cash through the mail is very risky. With checks only the person the check is made out to can cash it. If you had to hold onto all your money that you made you would run the risk of it being stolen, lost in a fire, or just the carelessness of spending it. Your money is insured in most banks by the FDIC. (Federal Deposit Insurance Corporation)
Advantages cont. 3. Proof of Payment: 4. Proof of Finances: Whenever you write a check or take $$ out of your account you use a check registry to keep track of all transactions. By doing this you can keep track of what you spend your $$ on and make adjustments in your spending as needed. If you use a check to pay for anything it is legal proof of payment. This is known as a cancelled check . A cancelled check are checks that have been cashed by an individual or business and cleared by your bank. With this cancelled check you have proof of purchase if the item ever malfunctions or if you ever have a dispute over the purchase.
Types of Checking Accts. Every bank offers their own type of accounts. So when you begin thinking about getting a checking account shop around. There are generally 4 types of checking accounts: Free Checking , Special Accounts , Standard Accounts , and Interest Bearing . Free Checking This is usually one of the most widely used accounts. There are no service charges, as long as you maintain a certain minimum balance. Usually around $100-$200. No check writing fees The only charge is for reordering checks.
Types of Checking Accts. cont. Special Accounts: Offered to customers who don’t write a lot of checks. No minimum balance is required. Small service charge for the account each month. Small fee for each check written. Usually good for students (College students) because of the no minimum balance required. Students don’t usually have a large amount of money in the first place. They just use this account to pay bills.
Types of Checking Accts. cont. Standard Accounts: Usually has a set monthly fee with no per check fee. If you maintain an average balance the monthly fees are usually dropped. Most banks offer a package of services, such as free travelers checks, an ATM (Automated Teller Machine), free safe-deposit box and/or low interest rates on credit cards. Negative: There are generally some hidden fees with the packages. EX ATM usage fee, or just the fact you will see the credit card as free $$.
Types of Checking Accts. cont. Interest Bearing Account: With this account you are paid interest on all $$ that is in the account daily. You must maintain a minimum balance (depending on your credit level) If you fall below this minimum large penalties can occur. The interest on this account will vary depending on economic conditions (Inflation, Deflation) This account is usually best for someone that can maintain the higher minimum balance. As long as you maintain the minimum balance there aren’t usually any service charges. Don’t see this as a big $$ making account. If you are thinking of using this account as a way of saving for the future DON’T it is best to put large amounts of money elsewhere like a CD or bonds. Stocks if you know what you are doing.
Special Types of Checking Account When opening a checking account you must make some decisions on the type of account. The types of accounts include individual, and joint and within joint you have “and” “or” accounts. If you are the only one on the account then your decision is pretty simple, you will choose an individual account. If you are opening a checking account with your spouse or family member then you would choose a joint account. A joint account is opened by 2 or more person who may write checks on that account at anytime. This account is also known as a survivorship account . It is known by this name because if a member of this account dies the other (survivor) becomes sole owner of the funds in the account. Even if all the $$ wasn’t deposited by them.
Special types of checking acct cont. With a joint account you have what are called “and” “or” accounts. With a “and” account all owners of the account must sign the check before it is used. With a “or” account any authorized holder can write checks on the account. Opening a Checking Account Signature Cards When opening a checking account make sure that you have money that can be put into it. You don’t get free money just because you are opening a checking account. The next step is to fill out a signature card. A signature card should contain the following: Your signature (preferably in cursive) Social Security # Address Fathers Name Mothers Name (Include maiden name) Occupation Birthday Type of Acct.
Opening a Checking Account cont. When filling the card in you need to make sure that you mark what special type of account it is. Is it individual or joint ? If it is joint make sure that all people that are involved with the account sign this card. With every new checking account banks will give you your 1st couple of boxes of checks free. You can pick the color, font and graphics on the checks. You will also be given the option of starting the checks at what ever number you want. It is a wise decision to start numbering your checks in the 1000’s. Most businesses will ask for more identification when they see a check # in the 100’s. They may turn you down and ask for cash in fear the check you are going to write will be no good.
Parties of a Check 1. Payee: 2. Drawer: 3. Drawee: The party to whom the check is payable. The party who requests that payment be made. The party who pays the money to the payee. This is always a bank or financial institution, its name should appear on the check Look @ Hand out #1
Parts of a Check No matter where you get your check the basic format of the check with be constant A. Your Check Number B. The American Bankers Association (ABA) number: This number appears in a fraction form in the upper right corner of each check. The top half of the fraction identifies the location and district of the bank from which the check is drawn. The bottom half helps in routing the check to the specific area and bank on which it is drawn. C. Drawers Name: This area includes information about the drawer(s) name, address, and telephone #. Most businesses are reluctant to accept checks that don’t have this pre-printed information. Look @ Handout #1
Parts of a Check cont. D. Date Make sure you use the date you are writing the check. Do not post-date checks . Post dated checks are writing on a one day and dated for a day in the future. Post-dated checks can’t be cashed by the bank until the date on the check. Some banks will charge a fee for post-dated check E. Payee The party to whom the check is payable. F. Numeric Amt This is the amount of dollars and cents being paid by this check. This is written in figures. This amount should be neatly and clearly written and placed as close as possible to the dollar sign. When writing the cents portion of the amount write it as a large #, don’t make it a fraction. Most checks are read by a computer and the fraction makes it difficult to read.
Parts of a Check cont. G. Written Amount: This is the amount of dollars and cents being paid by this check. This is written in words. Make sure that when you begin writing this information that you start at the far left of the line, leaving no space. Begin writing out the amount leaving no space or a little amount of space between words. The word “and” replaces the decimal in the written portion of the check. Write the cents portion of the payment as a fraction and finish off the line with a scribbled line to the words “dollars”. H. Drawer(s) signature: This is the signature of the person who is requesting that a payment be made.
Parts of a Check cont. I. Account # This is the group of numbers that contain the checking account #, the check #, and the banks identification #. 16487214 is the checking account # 101 is the check # 10310172 is the banks identification # J. Memo This line is provided so that the drawer can write in a note about the check or its purpose. It is a good idea to use this spot to put in account #’s. You will use this line in my class. K. Drawee: This is the name of the bank or financial institution where the checking account is located. This should always appear on a check. Just like the drawers name, businesses are reluctant to accept checks without this pre-printed.
Seven Steps in Writing Checks 1. Fill out your Check Registry (We will talk more about later) 2. Write the date on which the check is written. This should be the same as the one entered in your check registry. 3. Write the Payee’s name on the line following “Pay to the Order of.” 4. Write the amount of the check in figures after the printed $ on the right side of the check. Write this amount as close to the $ as possible so that additional numbers can’t be added to increase the amount of the check. The cents part of the amount should be written as close to the decimal also to ensure extra numbers are not added. Ex. $48.50, $114.90
Steps cont. 5. Below the Payee’s name write the amount of the check in words, inserting the appropriate position amount. Start this as close to the edge of the check as possible to make sure no one inserts information. After the cents part is written out draw a line to the right edge of the check to ensure nothing is added. 6. Write the purpose of the check on the line labeled “for” or “ memo” on the bottom of the check. 7. Sign the check with the same signature that you wrote on your signature card.
Tips for Good Check Writing 1. Write checks only on the checks provided by your bank. You can get blank checks that can be used, but these can cause you problems in that some banks and businesses do not allow them because they don’t have a drawee’s name on it. 2. Tear up all checks that are not used or have errors on them. Don’t try to erase or scribble over the mistake. Just mark “ VOID” on the check and tear it up and write “VOID” in the check registry for that check number. 3. Write your checks to a particular person. Don’t make it out to “cash” or “bearer”. This type of check can be cashed by anyone. 4. Fill in the amount. By leaving it blank you are leaving yourself open to others deciding for you what the check should be made for.
Tips Cont. 5. Write a check only if you have enough money in your acct. If you write a check for $100 and only have $50 in your acct. then you have overdrawn your account. When this happens banks will charge you a finance charge of $10-$30 per overdrawn check. In most cases they will send the check back to the business it came from and they will also charge you a fee for the bad check. This hurts your “Credit”. Ex. “Bouncing a Check” 6. Record every check written. This will enable you to keep accurate records of what you spend your money on. 7. Write all checks in ink. This prevents someone from changing things on your checks.
Making a Deposit When you make a deposit in your checking account, you will fill out a deposit slip. These are normally found in back of your checkbook behind the last check. The slip shows your name as the depositor, your acct. number, the date, items deposited, and the total of the deposit.
Three Endorsements When you receive a check from someone else you will have to endorse it, sign your name to it, before you cash or deposit it. This certifies that you received the $$ from the check. Blank Endorsement: An endorsement that consists of only the endorsers name. You sign your name the same way you would sign a check. If your name is misspelled on the check then endorse it the way the name is spelled on the check and then endorse it the correct way underneath. This is not a safe endorsement for the mail. Don’t sign the back of the check until you are at the bank. By signing it it is ready to be cashed by anyone. Look @ Handout #2
Three endorsements cont. Special Endorsement:(Endorsement in Full) Restrictive Endorsement: Issued to transfer a check to another person. No one except the person whose name is stated on the line of endorsement can cash the check. “ Pay to the order of” This is the safest endorsement. A restrictive endorsement stating “For Deposit Only” means that the check must be deposited into your account only. This is the safest type of endorsement for the mail. Make sure that you include your account #.
Parts of a deposit slip When depositing $$ into you account you will use a deposit slip. A. Date This is the day when you are making the deposit. B. Drawer signature: This is where you put your signature whenever you are going to be taking money out of the deposit. If you put a number in line H, you must remember to sign here. C. Cash Amount: If you are depositing any cash you mark that total here. D. The ABA #: This is the top half of the ABA # on the check being deposited. E. Check amount(s): This is the amount the check is made out for. If you are depositing more than 1 check just go to the next line and start over. Handout #2
Parts of a deposit slip cont. F. Total from other side: If you are depositing a large number of checks you will have to start listing them on the back of the deposit slip. When you are done you will total those numbers up and place them in this spot. G. Subtotal: C + E + F H. Less Cash Received: If you plan on keeping some of the $$ from this deposit mark that amount here. If you have a number here you need to remember to sign the slip on line B. I. Net Deposit: G - H
Check Registry Before writing any check you should fill out your check registry first. This helps to keep track of the money that you have left in your account and you have an up-to-date listing of each check written. In most cases the Check Registry is separate from the checkbook itself. In some cases you can have your checks made with a check stub attached to the checks. Either way the information on each should be the same. Also fill in the registry when you make a deposit or withdrawal using an ATM card.
Parts of a Checkbook Registry A checkbook registry is a record of deposits to and withdrawals from a checking account. A. Item No: Write in the check number used, or one of the following codes: ATM= Automated Machine Withdrawal SC= Service Charge DC= Debit Card PAP= Pre-Authorized Payment PBP= Pay By Phone IP= Internet Payment This column should always have something in it. B. Date: Write in the exact date of the transaction. You may have two ATM transactions for $20. The date will be the only difference between the transactions. Look @ Handout #4 DEP=Deposit STP=Stop Payment RC=Returned Check RCC=Returned Check Charge
Parts of a Checkbook Registry cont. C. To or Top Line: Enter the name of the payee here. If it is a code from Section A mark in the long name here. D. For or Bottom Line: Write in the purpose of the transaction. E. Amount of Payment: Write in the amount of the transaction. Make sure you write it clearly. F. Check Amount: Put in a check mark here when the item appears on the Reconciliation forms. (More later) G. Amount of Deposit: Write in the amount of the deposit. Make sure you write clearly. H. Balance Forward: Copy the amount that appears in position E & G. Mark with a (-/+) depending on if you are subtracting or adding.
Check Reconciling Once a month you will receive a bank statement from your bank. This statement will vary with each bank but most will have the following. 1. Balance @ beginning of statement month 2. Deposits made during statement month. 3. The checks paid during the statement month. 4. Any ATM amounts paid during the statement month 5. Any special payments. 6. Service Charges 7. Balance @ end of statement month Look @ Handout #3 & #4
Check Reconciliation Cont. Some banks will send you the cancelled checks you have written. Make sure that you keep these cancelled checks in a safe place. These are proof of payment for you. Some banks do not return the cancelled checks, instead they will keep a photographic record of each cancelled check. If you need a copy of a check for proof of payment all you need to do is give the check number to the bank and they will send you a copy.
Reconciling Your Statement When you receive your bank statement the ending balance rarely matches your balance in the check registry. This happens because of many reasons. 1. You may have some checks that your wrote that were not returned to the bank during the statement month. These are known as Outstanding Checks . 2. You may have forgot to record a transaction. When you use your debit card, you usually don’t have your check registry with you.
Reasons statement is different cont. 3. The bank charges you a service charge for use. 4. You have included deposits in your registry that did not make the statement. 5. If you have an interest checking account you will have to add this to your account. 6. Incorrectly recording an amount in your check registry. 7. Did not add or subtract correctly.
Steps in Reconciling Statement 1. Place all your cancelled checks in order from beginning to end. 2. Mark the checks that are listed as returned on your statement. Place a check mark next to each check in the check registry. If there is an asterisk next to a check number this means the preceding check didn’t make it on this statement. 3. Mark the deposits that are listed as deposited in your acct. Again place a check mark next to each. There is usually a Reconciling Form on the back of your statement that you can use to compare your registry with the new statement. We will talk more about this later.
Steps continued 4. Fill in any Outstanding Checks from your check registry. This should only include those checks that are Outstanding up to the last check listed on your statement. Add these up. 5. Fill in the ending Balance on the form, this should appear somewhere at the top of the statement. 6. Fill in the Outstanding Deposits (If any) Add this to your ending balance. 7. Subtract your Outstanding checks from this.
Steps Cont. 8. Subtract any Service Charge from your balance in your check registry. (Make sure your mark this in your check Registry.) 9. The amount in your check registry @ the last check mark minus any service charge should equal the Reconciliation form balance.
Banking Services Besides offering different types of checking accounts and savings accounts. Banks also offer other types of services. Certified Checks: One of your personal checks that the bank guarantees or certifies to be good. The amount of this check is automatically deducted from the drawers account. This ensures that there will be money for the payee. The words “Certified” are stamped on the check and initials are usually added near the stamp. This is usually the initials of one of the bankers. This type of check is used when a Drawer wants to make a large purchase. EX: Car
Banking Services cont. Cashier’s Checks Is a check written by a bank on its own funds. This check is usually a plain check that is issued by the bank with its address and account information. The bank withdrawals a specified amount of $$ from your account and then gives you their check for that amount. This check is primarily used when people want to make a purchase or donation anonymously. This can also be used when you want to make a large purchase.
Banking Services cont. Money Orders: This is generally used by people who don’t have a checking acct. You pay a small fee to have a check made for a specific amount. Used for purchases through the mail. Can also be purchased @ the post-office. Debit Cards: A card that when used automatically deducts that transaction from your checking account. Looks like a credit card, except the transaction is deducted automatically. Keep your receipts from this type of service, that is all you will have for proof of payment.
Banking Services cont. Safe-Deposit Box: A secured box where valuables can be kept. Only authorized people have access to this box. When buying a safe-deposit box it is like getting a checking acct. You must fill out a signature card. Every time you access the box you must sign a form that is used to compare your signatures. Rental fees range from $20 for a small box to $70 for a larger one. Stop Payment Order: Is a request by a drawer to have a payment stopped on a specific check. Reasons: Check has been stolen or lost. Purchased an item and was not satisfied with the product or the product malfunctioned and you took it back.
Banking Services cont. Automated Teller Machine: A machine where a drawer can make withdrawals, deposits and transfers. This machine uses a process called EFT (Electronic Funds Transfer) to process your transactions. With this ability you can use your debit card at any machine around the United States. If the machine is not affiliated with your banking institution you may be charged a fee for the use.