CHECKING ACCOUNTS

UNIT 1, LESSON 1

WHAT IS A CHECKING ACCOUNT?

•TOOL USED TO TRANSFER FUNDS DEPOSITED INTO THE ACCOUNT TO MAKE A CASH PURCHASE

•AVAILABLE AT BANKS AND CREDIT UNIONS

HOW DO THEY WORK?• MONEY IS DEPOSITED INTO THE ACCOUNT BY:

• TAKING PAYCHECK TO THE BANK

• DIRECT DEPOSIT

• TRANSFER FROM ANOTHER ACCOUNT

• MONEY IS TAKEN FROM THE ACCOUNT BY:

• WRITING A CHECK

• USING A DEBIT CARD

• ELECTRONIC BANKING

BENEFITS OF HAVING A CHECKING ACCOUNT• CAN HELP MANAGE MONEY

• CASH ISN’T SITTING AROUND WAITING TO BE SPENT

• WRITTEN RECORD OF EXPENSES USING A CHECK REGISTER

• MAKES BILL PAYING MORE CONVENIENT

• REDUCES THE NEED TO CARRY LARGE AMOUNTS OF CASH

• CHECKS ARE CONSIDERED CASH IN MANY PLACES

TYPES OF CHECKING ACCOUNTS• BASIC CHECKING ACCOUNTS

• MOST WIDELY USED

• MANY DO NOT PAY INTEREST

• INTEREST-BEARING CHECKING ACCOUNTS

• PAY THE CUSTOMER INTEREST USUALLY ON A MONTHLY BASIS FOR USING THEIR MONEY

• MINIMUM BALANCE IS USUALLY REQUIRED

• FEES ARE CHARGED IF BALANCE IS BELOW THE MINIMUM REQUIRED BALANCE

• FREE CHECKING ACCOUNTS• NO MINIMUM BALANCE

• NO MAINTENANCE FEES

• JOINT CHECKING ACCOUNTS• OWNED BY MORE THAN ONE

PERSON

• ALL OWNERS HAVE EQUAL ACCESS TO MONEY

OPENING A CHECKING ACCOUNT• APPLICATION

• PICTURE ID

• NAME, ADDRESS, PHONE NUMBER, SSN

• SIGNATURE CARD ONCE APPROVED

• CONTAINS ACCOUNT INFORMATION

• CONTAINS CUSTOMER SIGNATURE FOR TRANSACTION VERIFICATION

• AGREEMENT OF TERMS AND CONDITIONS OF THE ACCOUNT

• ALSO INCLUDES THE SIGNATURE OF OTHERS AUTHORIZED TO USE ACCOUNT

• INITIAL DEPOSIT

CHECK REGISTERS• PLACE TO IMMEDIATELY RECORD ALL MONETARY TRANSACTIONS FOR YOUR

CHECKING ACCOUNT

• USED TO RECORD:

• WRITTEN CHECKS

• ATM WITHDRAWALS

• DEBIT PURCHASES

• ELECTRONIC PAYMENTS

• DEPOSITS

• FEES

EXAMPLE OF A CHECK REGISTER

LET’S START A CHECK REGISTER• BEGINNING BALANCE IS $1,000.00—A GIFT FROM YOUR PARENTS FOR MAKING IT

TO YOUR SENIOR YEAR!

• BE CAREFUL… THEY AREN’T GOING TO GIVE YOU ANOTHER GIFT LIKE THIS FOR A LONG TIME!

ANATOMY OF A CHECK• PREPRINTED PIECE OF PAPER WITH THE ACCOUNT HOLDER(S):

• NAME

• ADDRESS

• PHONE NUMBER

• DRIVER’S LICENSE NUMBER

• NO SOCIAL SECURITY NUMBER!! WHY?

• ROUTING NUMBER

• BANK ACCOUNT NUMBER

• CHECK NUMBER

• SIGNATURE LINE

• MEMO LINE

EXAMPLE OF A CHECK

PRACTICE WRITING A CHECKCHECK #100

• WRITTEN TODAY

• WRITTEN TO WAL-MART

• BOUGHT SCHOOL SUPPLIES

• FOR $28.59

CHECK #101

• WRITTEN TODAY

• WRITTEN TO FORD MOTOR CREDIT

• PAID AUGUST’S CAR PAYMENT

• FOR $197.50

CHECK #102• WRITTEN TODAY

• WRITTEN TO KFC

• 3 PC. CHICKEN DINNER, SODA, & DESSERT

• $10.72

BOUNCING A CHECK…• CHECK WRITTEN FOR AN AMOUNT OVER THE CURRENT BALANCE IN AN ACCOUNT

• INSUFFICIENT FUNDS (IF) OR NONSUFFICIENT FUNDS (NSF)

• CHARGED A SUBSTANTIAL FEE BY BOTH THE BANK AND THE PAYEE WHERE YOU WROTE THE CHECK)

• FOR EXAMPLE, BOUNCING A CHECK TO A BUSINESS MAY COST YOU $25 CHARGED BY THE BUSINESS AND $25 CHARGED BY YOUR BANK.

• WHAT IF THE CHECK WAS ONLY FOR $5??

• FEES ARE CHARGED FOR EACH CHECK THAT TRIES TO BE CLEARED!• IF YOU BOUNCE THREE CHECKS AND THE BANK CHARGES $25… YOU HAVE BEEN CHARGED $75

BY THE BANK!

• CAN HARM YOUR CREDIT REPORT WHICH IS USED TO DETERMINE YOUR “CREDIT WORTHINESS” FOR ADDITIONAL CREDIT (A CAR, A HOME, A LOAN)

WHAT IS AN ATM?• AUTOMATED TELLER MACHINE

• ALLOWS CUSTOMERS TO PERFORM BANKING TRANSACTIONS AS IF THEY WERE MADE INSIDE THE BANK WITH A TELLER

• DEPOSITS

• WITHDRAWALS

• ACCOUNT TRANSFERS

• CHECK ACCOUNT BALANCES

• TRANSACTIONS ARE AUTOMATICALLY POSTED TO THE ACCOUNT

• IMMEDIATELY RECORD ALL ATM TRANSACTIONS INTO THE CHECK REGISTER

• VERY CONVENIENT• DRIVE-THRU

• AFTER NORMAL BANKING HOURS

MORE ABOUT ATMS• AVAILABLE WORLDWIDE

• AVAILABLE IN:

• BANKS

• SUPERMARKETS

• DEPARTMENT STORES

• CONVENIENCE STORES

• DRIVE-THROUGH KIOSKS

• OWNED BY DIFFERENT BANKING INSTITUTIONS

• USUALLY CHARGE A FEE (BETWEEN $0.50 AND $3.00) IF THE ATM IS NOT OWNED BY YOUR BANK

• MUST HAVE A PIN TO ACCESS ACCOUNTS

RECORD ATM WITHDRAWAL•IN YOUR CHECK REGISTER, RECORD AN ATM

WITHDRAWAL

•TODAY’S DATE

•LOCATION OF WITHDRAWAL (CITIZENS BANK)

•FOR 50.00

•ATM FEE $2.50

DEBIT CARDS• USED LIKE A CREDIT CARD

• MONEY IS AUTOMATICALLY WITHDRAWN AT THE TIME OF PURCHASE

• PREVENTS OVERDRAFTS—TRANSACTION WILL NOT BE AUTHORIZED IF THERE ARE INSUFFICIENT FUNDS

• RECORD TRANSACTIONS INTO THE CHECK REGISTER

• MOST DEBIT CARDS HAVE THE VISA/MASTERCARD LOGO AND CAN BE USED WHERE THOSE ARE ACCEPTED

PROS & CONS OF A DEBIT CARDPROS

• CONVENIENT

• SMALL

• CAN BE USED LIKE A CREDIT CARD

• ALLOWS A PERSON TO CARRY LESS CASH

• DOES NOT ALLOW OVERSPENDING

CONS

• CAN LOSE TRACK OF BALANCE IF TRANSACTIONS ARE NOT RECORDED

• OPENS CHECKING ACCOUNTS UP TO CREDIT CARD FRAUD

• IF LOST, ANYONE CAN USE IT

• SOMEONE ELSE CAN GAIN ACCESS TO YOUR ACCOUNT IF THEY FIND YOUR CARD AND THE PIN IS LEARNED

RECORD DEBIT CARD PURCHASES•YOU RAN TO DOLLAR GENERAL TO BUY SOME SHAMPOO

AND CONDITIONER.

•YOUR TOTAL BILL WAS $14.97

•RECORD THIS IN YOUR CHECK REGISTER

ENDORSEMENTS• SIGNATURE ON BACK OF CHECK BY

THE RECIPIENT

• CHECKS MUST BE ENDORSED TO BE DEPOSITED

TYPES OF ENDORSEMENTS:

• BLANK• SIGN NAME

• ANYONE CAN CASH OR DEPOSIT ONCE IT IS SIGNED

• RESTRICTIVE• MORE SECURE

• “FOR DEPOSIT ONLY”

• SPECIAL• ALLOWS CHECK TO BE DEPOSITED TO

ANOTHER PERSON

• “THIRD PARTY” CHECKS

MAKING A DEPOSIT

PRACTICE WRITING DEPOSIT SLIPS• IT’S PAYDAY! (YAY!)

• ON AUGUST 10TH, YOU WILL DEPOSIT:• $45.00 CASH YOU EARNED WHEN YOU MOWED YOUR GRANDMA’S LAWN

• $10.00 CHECK YOUR FRIEND OWED YOU FOR BUYING GAS LAST FRIDAY• CHECK #413

• $78.29 PAYCHECK FROM MCDONALDS• CHECK #19456

• $22.14 CHECK YOU FOUND FROM LAST WEEK FROM YOUR AUNT BETTY TO BUY SCHOOL SUPPLIES

• YOU ALSO NEED TO KEEP $50.00 CASH FOR WILD ADVENTURES

YOUR TURN…COMPLETE THE FOLLOWING TRANSACTIONS:

•ON 8/10, YOU WROTE YOUR NEXT CHECK TO BRANCH’S VETERINARY CLINIC FOR $100.00… YOUR DOG NEEDED HIS YEARLY SHOTS AND CHECK UP.

•ON 8/12, YOU WENT TO HARVEYS FOR CHEAP CHICKEN MONDAY. YOUR TOTAL BILL WAS $13.24 AND YOU PAID USING YOUR DEBIT CARD

•ON 8/12, YOU WITHDREW $25.00 FROM THE ATM MACHINE. THE MACHINE WILL CHARGE YOU $3.00.

•ON 8/13, YOU WROTE A CHECK TO VSU TO APPLY FOR ADMISSION. THE APPLICATION FEE IS $25.00.

•ON 8/14, YOU EARNED $154.00 (CHECK #651) FOR BABYSITTING. MAKE THE DEPOSIT BUT KEEP $35 FOR THE FOOTBALL GAME.

•ON 8/16, YOU TREATED YOUR FRIENDS TO HUDDLE HOUSE. YOU PAID THE $27.93 BILL WITH YOUR DEBIT CARD.

HOW ABOUT SOME ALGEBRA??

•RICH AS T DOLLARS IN HIS CHECKING ACCOUNT. ON JUNE 3, HE DEPOSITED W, H, AND V DOLLARS AND CASHED A CHECK FOR K DOLLARS. WRITE AN ALGEBRAIC EXPRESSION THAT REPRESENTS THE AMOUNT OF MONEY IN HIS ACCOUNT AFTER THE TRANSACTIONS.

ONE MORE ALGEBRA PROBLEM JOBY HAD $421.56 IN HER CHECKING ACCOUNT WHEN SHE DEPOSITED G TWENTY DOLLAR BILLS AND K QUARTERS. WRITE AN EXPRESSION THAT REPRESENTS THE AMOUNT OF MONEY IN HER ACCOUNT AFTER THE DEPOSIT.

ON AUGUST 29TH, YOUR BALANCE WAS $795.23. OVER THE NEXT FEW DAYS, THE FOLLOWING CHECKS ARRIVED FOR PAYMENT AT THE BANK: AUGUST 30, $423.45; AUGUST 31, $224.97; SEPTEMBER 1, $45.47 AND $22.78; AND SEPTEMBER 2, $128.24 AND $52.68.

• HOW MUCH WILL YOU PAY IN INSUFFICIENT FUNDS FEES IF YOUR BANK CHARGES $30.00 PER CHECK THAT DOES NOT CLEAR?

• WHAT IS THE BALANCE IN YOUR ACCOUNT ON SEPTEMBER 3?

INSUFFICIENT FUNDS FEES