Checking Accounts

What is a Checking Account?

1. A checking account is a sum of money that you deposit in a bank or other financial institution, to hold for you and from which you write checks.

2. A check is a written order to a bank (DRAWER) to pay the specific amount of money to a particular person.

Advantages of Checks: Convenient

1. Can be used to send money through the mail, i.e.

to pay bills.

2. Checks are safer than cash.

3. A cancelled check is a legal record of payment.

4. It is a record of how you spent your money.

Checking Account Terms

1. Cancelled Check – Check that is stamped and perforated to show it has been paid.

2. Insufficient Funds - Not enough money in

account to pay check; the bank’s polite way of

saying a check has bounced. (fee)

3. Stop Payment – An order by depositor to the bank

to prevent payment of a check. (fee)

4. Float – Period of time it takes a check to be processed.

5. Certified Check – A check issued by the bank that insures the check amount will be paid because it has been set aside. (fee)

6. Cashiers Check – A check written on financial

institution’s own account and signed by one of its

officers.

7. Endorsing – Signing the back of a check.

8. Reconciling – Process of bringing your check record and bank statement into agreement.

Check Writing

You need to write the following items on the face of the check:

a. Payee – Name of person/business who receives the money after the words “PAY TO THE ORDER OF”

b. Date

c. Check number

d. Amount – Written twice – numbers and words

e. Signature of the person writing the check (DRAWEE)

f. Memo – For recording the purpose of check

Check Endorsements

1. Blank – Your signature on back of check;

payable to anyone.

2. Restrictive – “For deposit only” and your

signature on the back of the check;

limits use of check.

3. Special or full – “Pay to the order of ________”

and your signature on the back;

limits payments to a particular

payee.

Types of Checking Accounts

1. Special Checking Account

a. No minimum amount needed to open

b. Monthly fees*

c. Transactions fees*

2. Regular Checking Account

a. Maintained minimum balance required

(usually $500)

b. No transaction fees*

c. May be a penalty if your account falls below

minimum balance

3. NOW Account

a. Means Negotiable Order of Withdrawal

b. Interest bearing account

c. Requires minimum balance (usually $1000)

* For all accounts: Banks may charge for other services, such as printing checks.

Other Payment Types

Money Order – A check for a specified sum of money

issued by a financial institution, a

post office, an express or telegraph

company, or a grocery store.

Telegraphic Money Order – A transfer of money

through Western Union;

useful in emergency,

but very expensive.

Traveler’s Checks – Checks which come in set

denominations of $10, $20, $50,

and $100 and are insured in case

of loss; checks signed twice;

service charge of 1%.

Banking Electronically

Electronic Fund Transfer or (EFT) is the moving of

money from one account

to another by computer.

1. Automated Teller Machine – (ATM) computer

stations that can be used for certain banking

purposes.

2. Automated Bill Payment – Prearranged

electronic payments of certain bills.

3. Debit and Check Card – Used to make

purchases without writing a check and

amounts are automatically deducted from

your checking account.

4. Banking from Home – Making bill payments

through the use of a home computer.

Review:

1. Balance a checkbook register when you write

each check.

2. A bank’s record of your checking account which

you receive monthly is called a statement.

Balance a checking account statement when

you receive the statement.