Unit 2
Banking Procedures
Copyright 2007 Thomson South-Western
Chapter 2 Checking Accounts
Key Terms
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Check
Deposit/credit
Debit
Balance/reconcile
Statement balance
Debit card
PIN
EFT (electronic
funds transfer)
• Online and smart
phone banking
• Automated Teller
Machines
• Overdrawn
• Overdraft Penalty
• Identity theft
• Overdraft
protections
• Minimum account
balance
• Interest bearing
Slide 2
account
Introduction to Checking Accounts
• A check is a handwritten or computer
generated order specifying the amount
of money to be paid and the name of
the person or company who should
receive the funds
5-1 Checking Accounts
Slide 3
Introduction Checking Accounts
• 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
Slide 4
Federal Deposit Insurance Corporation
• Also known as the FDIC
• The FDIC insures each account in a
federally chartered bank up to $250,000.
• Savings accounts, Checking accounts,
Money Market accounts, and CD’s are all
covered
5-1 Checking Accounts
Slide 5
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 fee
for each check written
5-1 Checking Accounts
Slide 6
Signature Card
Slide 7
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
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 written record of where money is
spent
• Safety – using checks is safer than
carrying cash
• https://www.youtube.com/watch?v=b8kh2
Qx5LV0
Checking Account Activity
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Compare and contrast 2 checking accounts
Name of bank/website?
Students checking?
Is there a minimum balance? Is there a
required balance or fee if below.
Is a debit card included?
Are checks free?
What is the address of the closest branch to
your house?
Slide 10
Would you use this bank? Why?
Comparing Checking
Accounts
location
branch offices; hours of operation;
availability of ATMs
fees
monthly fees; per check fees; printing of
checks; balance inquiry fees; ATM fees
other charges
overdraft charge; stop-payment fees;
certified check fees
Slide 11
Comparing Checking
Accounts continued
Interest - rate earned; minimum deposit to
earn interest; compounding method; fee
charged for falling below necessary balance
Restrictions -minimum balance; deposit
insurance; holding period for deposited
checks
special features- direct deposit; automatic
payments; overdraft protection; online
banking; discounts or free checking for
students, seniors, or employees of certain
Slide 12
companies
Choosing a checking account
1. Read the fine print
2. Keep a minimum account balance- the amount of
money you must keep in the account to avoid
service charges, qualify for special service or earn
interest on the checking account
3. Interest bearing account- an account that earns
interest
4. Hidden fees/high minimum balances
5. Perks you can get like free checks and easy-to-use
mobile phone apps, email statements and overdraft
protections
6. Special starter accounts for students
Slide 13
Writing Checks
• Use ink to write the data on checks
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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 and make sure to record it
in the check register.
5-1 Checking Accounts
Slide 14
What is a Check?

Used at the time of purchase as the form of payment
• Piece of paper pre-printed with the account
holder’s:
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Name
Address
Financial institution
Identification numbers
H
Writing a check
20
teens – lesson 6 - slide 6-Fb
Writing a check
1. Date Enter the date on which you are writing the check.
2. Payee- Enter the name of the person or the company you are going to give the check
to.
3. Amount of check in numerals Enter the amount of the check, in numbers. Don’t
leave any space between the pre-printed dollar symbol ($) and the numbers indicating
the amount of the check; there should be no room for someone to add in extra
numbers.
4. Amount of check in words Enter the amount of the check in words. Start writing at the
far left side of the line. Follow the dollar amount by the word “and,” then write the
amount of cents over the number 100. Draw a line from the end of the 100 to the end
of the line.
teens – lesson 6 - slide 6-Fb
Writing a check (continued)
5. Name Your personal information is printed here. Never list your Social
Security number on your printed check.
6. Signature Sign your check exactly the way you signed your name on the
signature card you filled out when you opened your account.
7. Memo Use this space to note why you wrote the check. If you are paying a
bill, this is a good place to put information requested by the company.
8. Identification numbers These numbers are used to identify the bank, your
account number, and the check number. They are printed in a special
magnetic ink that machines can read.
teens – lesson 6 - slide 6-Fb
Sample Check
What is the legal tender amount on a check?
http://www.themint.org/teens/spending.html
5-1 Checking Accounts
Slide 20
Endorsements
• Endorse checks to be deposited
5-1 Checking Accounts
Slide 21
Endorsing a check
blank endorsement
Anyone can cash
check
restrictive endorsement
More secure than blank endorsement
special (or full) endorsement
Transfer check to another party
teens – lesson 6 - slide 6-E
Making Deposits
• Complete a deposit slip, including
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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 your deposit in the check register
5-1 Checking Accounts
Slide 23
Front of Deposit Slip
Slide 24
Completing a Deposit Slip
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Checks
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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
Back of Deposit Slip
Slide 26
Make a Deposit
1.
Write the date of the
deposit in this field.
2. If you are depositing
currency (paper bills),
write the total amount
here.
3. If you are depositing
coins, write the total
amount here.
4. If you are depositing a
check, write the check
number individually and
last name of check writer
(bank transit number
here, which is the top
portion
of the two-part number
printed in the upper
corner of the check).
5. Write the amount of the
check here.
Slide 27
Make a Deposit
6. If you are depositing
more checks than can be
listed on the front, continue
to list them on the back,
and write the total amount
of the checks on back here.
7. Write the total amount
you are depositing here.
8. If you are making a
deposit inside a bank with a
teller and you want to
receive cash back from your
deposit, write the amount
you want in this field.
9. Write the total amount
(less cash back) of your
deposit in this field.
Slide 28
Keeping a Checkbook Register
• Checks and a checkbook register are
received when you open an account
• A checkbook register
– Used to track checking account transactions
– Provides a record of payments made for bills
or purchases (even online payments)
– Shows how much money is in the account
– Always fill out the register before you write a
check
5-1 Checking Accounts
Slide 29
Sample Checkbook Register
Check
Withdrawal
5-1 Checking Accounts
Online
Payment
Bank Charges
Deposit
Slide 30
Keeping a running balance
(a) Keeping a Running Balance: Check Transaction
(b) Keeping a Running Balance: ATM Cards
teens – lesson 6 - slide 6-Ga
Keeping a running balance
(continued)
(c) Keeping a Running Balance: Check Cards
teens – lesson 6 - slide 6-Gb
Check Register
http://www.themint.org/teens/balance-your-checking-account.html
Checking Account Balances
Important to keep track of debits or credits
Debit withdrawal from your account
What else could decrease your account?
________________________________
Deposit/credit – money you put into your account
__________________________________
Conclusion: Gets larger when a deposit or credit
is made and smaller when withdrawals/checks
are written against the account
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)
Monthly Bank Statement
• Lists each transaction and current
account balance
– Deposits
– Checks
– Debit Card transactions
– ATM transactions
– Additional fees
Reading a bank statement
teens – lesson 6 - slide 6-H
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
5-1 Checking Accounts
Slide 39
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
– Account balance = Start of the month account balance
+ total amount of deposits made
- total amount of checks written
Steps for Reconciling
• View the monthly bank statement
and check register
Place a check mark in the √ T column for all transactions that have been
cleared and are shown on the bank statement
√
√
√
√
√
√
√
Reconciling a checking
account
step 1: Obtain the current balance from your bank statement.
step 2: Add any deposits that you have recorded in your check
register but that are not on this statement.
step 3: Subtract any outstanding checks (checks you have written
but that have not yet cleared the banking system).
step 4: Compare the result with the current balance in your check
register.
Note:
The balance in your check register should be adjusted to include:
(a) deductions for service fees or other charges; (b) additions for
direct deposits and interest earned
Step 1:
Determine the current statement balance from the bank statement
Step 2:
Add any outstanding deposits – transactions that have not cleared
the bank
Calculate the Subtotal
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
5-2 Savings Accounts
Slide 46
Step 3:
Subtract any outstanding checks/withdrawals and calculate
Step 4 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.
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
Overdraft and Overdraft
Protection
• Failure to record such transactions,
particularly debits, could result in your
account balance to be overdrawn –
having a negative balance
• Overdraft penalty-a fee to cover the
cost of process your bad check
• Overdraft protection-an arrangement
with the bank to cover checks so they
will not bounce
Check 21
• Check Clearing for the 21st Century
Act (Check 21)
– When a check is written, the money is
automatically withdrawn from a bank
account
– Makes “bouncing checks” difficult
– Ex. Macy’s and other department
stores
ATM
• Automated teller machine, or a cash
machine
• Can be used to withdraw cash and
make deposits at an ATM only
• Additional fees may be assessed if the
ATM used is not provided by the
financial institution sponsoring the card
• You need to have a PIN (personal
identification number)
Debit Card
• Swipe it through the store machine or
put into an ATM
• Allows you to withdraw cash or make
a purchase at a store
• Enter the PIN (personal identification
number)
• Money is automatically taken from the
bank account when purchases are
made electronically
• Complete transaction
Pro’s and Con’s - Debit Cards
Pro’s
Cons’
• Convenient
• Can lose track of balance
• Small
if transactions are not
written down
• Can be used
like a credit card • Opens checking account
• Allows a person
up to credit fraud
to carry less
• Others can gain access to
cash
the account if the card is
• Does not allow
lost and PIN is known
overspending
Electronic, Online & Smartphone Banking
 Electronic Funds Transfer-EFT- the movement of
funds using computers systems, telephones or
electronic terminals or smart phones
 Online and smart phone banking allows account
holders to access their account information view
transaction history and perform banking transactions
via the internet or their mobile phone
 Touch-Tone banking-electronic services banks offer
consumers like checking account balances, pay bills
and transfer money using a touchtone phone.
Bank Services
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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.
5-2 Savings Accounts
Slide 56
Online 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
5-2 Savings Accounts
Slide 57
Identity Theft
 Is stealing someone’s personal identifying information and using it to make
purchases or to get other benefits
 Millions of Americans have their identity stolen every year
 You have to protect yourself and your personal information such as: address,
phone number…
 How? Old statement in the trash, online scams, computer viruses, stealing your
documents
 What to do? Be on guard!
 Monitor your financial statements regularly.
 Shred your old documents.
 Maintain computer security
 Keep you private info private – don’t just provide it to anyone
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
5-1 Checking Accounts
Slide 59
Conclusion
Why is it important to maintain your
checking account?
• It helps you to make better financial
decisions and take responsibility for
those decisions
Slide 60