Copyright 2007 Thomson South-Western Chapter 5 Banking Procedures

Copyright 2007 Thomson South-Western

Chapter 5

Banking Procedures

Slide 2

Introduction to Checking Accounts

• A check is a written order to pay a stated amount to a person or business

• Checking account– Is a demand deposit in a bank or other financial

institution– Provides a safe place to keep money– Provides easy access to the money

• The FDIC insures accounts for up to $100,000 per depositor per bank

5-1 Checking Accounts

Slide 3

Opening an Account

• To open an account, you will need to– Provide personal data and identification

– Complete a signature card

– Deposit money

• Some banks charge monthly fees or a feefor each check written


Slide 4

Keeping a Checkbook Register

• Checks and a checkbook register are received when you open an account

• A checkbook register – Can be used to track checking account

transactions

– Can provide a record of payments made for bills or purchases

– Shows how much money is in the account


Slide 5

Sample Checkbook Register


Slide 6

Writing Checks

• Use ink to write the data on checks– The current date

– The name of the payee

– The amount in numbers and words

– Your signature

– A note on the Memo line

• If you make a mistake– Write VOID on the check and in the register

– Begin a new check


Slide 7

Sample Check


Slide 8

Using Debit and ATM Cards

• Debit card – Allows the account holder to withdraw cash

at an ATM– Can be used to make purchases– The withdrawal is made electronically

• ATM card– Allows the account holder to withdraw cash

or make deposits at an ATM


Slide 9

Protecting Account Data

• Crimes can be committed using account and personal data – Check fraud and forgery

– Identity theft

• To help prevent crime– Keep cards and account

information in a safe place

– Protect your PIN or password when using cards


Slide 10

Making Deposits

• Endorse checks to be deposited


Slide 11

Making Deposits

• Complete a deposit slip, including – Current date

– Amount of cash (bills and coins)

– Check numbers and amounts

– Total amount of cash and checks

– Cash amount received, if any, and your signature

– Net deposit amount

• Record the deposit in the check register


Slide 12

Reconciling a Bank Statement

• Bank statements– Come in paper or electronic form

– Show the checks, other withdrawals, and deposits made to an account

• Purpose of a bank reconciliation – To review the bank statement

– To update the checkbook register

– To bring the statement and register balances into agreement


Slide 13

Focus on...

Check Cashing Services • Are businesses that charge a fee to cash a

check

• Charge fees that vary by state and by the type of check being cashed

• May also make payday loans


Slide 14

The Purpose of Savings

• Saving means accumulating money to use for future needs

• A savings account– Is a demand deposit in a bank or other

financial institution

– Is a safe way to set aside money

– Typically pays interest

– May have some restrictions on how quickly or

easily the money can be withdrawn

5-2 Savings Accounts

Slide 15

Computing Interest

• Money deposited in a savings account typically earns a set rate of interest– Simple interest


SIMPLE INTEREST

Interest (I) = Principal (P) x Rate (R) x Time (T)

Interest = $1,000 x 6% annual rate x 6 months

$30 = $1,000 x 0.06 x 0.5

Slide 16

Computing Interest

– Compound interest


$119.57$1.77$1.74$1.72$1.690.015$112.653

$112.65$1.66$1.64$1.62$1.590.015$106.142

$106.14$1.57$1.55$1.52$1.500.015$100.001

Ending Balance4321Rate

Beginning BalanceYear

Quarterly Interest

QUARTERLY COMPOUNDINGAnnual Interest Rate 6%

Slide 17

Savings Options

• Certificates of deposit

• Money market accounts

• Individual retirement arrangements (IRAs)

• U.S. savingsbonds


The TreasuryDirect Web site provides information on savings bonds.

Source: TreasuryDirect, http://www.treasurydirect.gov (accessed April 27, 2006).

Slide 18

Meeting Financial Goals

• When choosing a savings option, consider– The amount to save

– The length of time you will save

– The interest you can earn

• Use the Rule of 72 to estimate how long it will take the money to double at a certain interest rate


Slide 19

Bank Services

• Safe deposit box

• Overdraft protection

• Cashier’s checks and money orders

• Stop payment

• Bank cards

• Bank loans


Banks offer home mortgages and other types of loans.

Slide 20

Success Skills

Negotiating • Means working to reach an agreement

that benefits you– Understand your position (what you want)– Understand the other party’s position– Create a proposed solution– Be willing to compromise when appropriate


Slide 21

Ethics

Writing Bad Checks • A bad check is one you write but do not

have money in the account to pay

• Monitor your account carefully to avoid writing a bad check by mistake

• Show ethical behavior by not writing a bad check intentionally


Slide 22

Technology Corner

Internet Banking • Involves banking using phone or Internet access

to bank accounts

• Offers various services– Electronic payment of bills

– Transfer of money between accounts

– Checking that deposits are posted

– Seeing which checks have been processed

– Seeing interest or fees that have been posted


Slide 23

Federal Reserve System

• Is the central bank of the United States • Seeks to provide the nation with safe, flexible,

and stable monetary and financial systems

5-3 The Federal Reserve System

Source: The Federal Reserve Board, http://www.federalreserve.gov/consumers.htm (accessed October 20, 2006).

Slide 24

Monetary Policy

• Key interest rates are controlled by the Fed – Discount rate– Federal funds rate– Prime rate

• The Fed sells and buys U.S. government securities in open-market transactions– Government bills (Treasury bills)– Treasury notes– Treasury bonds


Slide 25

Monetary Policy

• The Fed plays a major role in operating the country’s payment systems – Reserve banks act as a clearinghouse for checks – Checks may be deducted from your account in a

single business day

• The Fed regulates the banking industry– All interstate banks must be Fed members– Intrastate banks are also subject to Fed rules


Slide 26

Building Communications Skills

Reading Comprehension • Is the ability to understand what is read• Can be improved with practice

– Read slowly and think about the material– Note the paragraph structure and topic sentences– Underline key points– Read the material a second time, focusing on

vocabulary and details


Documents

Copyright 2007 Thomson South-Western Chapter 5 Banking Procedures