Checks & Payment Methods
Ch. 17-3 PoB 2011
Opening a Checking Account
 The First Deposit
 Starts with providing personal data and a sample of your signature
 Signature Card – document usually requires your legal name, address,
phone, Social Security number, driver’s license number and e-mail
address
Types of Endorsements
 Endorsement – is written evidence that you received payment
or that you transferred your right of receiving payments to
someone else
 Must be made in the 1 ½ inch space on the back left side of the
check
Types of Endorsements
 Blank Endorsement – consists of only the endorser’s name
 Full Endorsement (special endorsement) – allow you to
transfer a check to another person
 You write the words: “Pay to the order of…” followed by the name
of the person or business; then followed by your signature
 Restrictive Endorsement – limits the use of the check to the
purpose given in the endorsement
 “For Deposit Only”
Types of Endorsements
Elements of a Check
 Drawer – is the owner of the account who signs the check
 Payee – is the person to whom the check is written
 Drawee – is the bank that pays the check
Check Register
 Checkbook provides one of three formats for recording
account activities
 Check Stub – is a form attached to the check by a perforated line
 Check Register – is a separate book that allows you to maintain a
record of the checks written
 Duplicate Copy – may be automatically created when you write
the check
 Fill out the register before filling out the check so that all
information is recorded accurately
Writing a Check
1. Write checks in order by number
2. Write the date
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
dollar sign
5. Write the dollar amount in words on the line below the
payee’s name
6. Write the purpose of the payment on the notes line
7. Sign checks with the same signature as on your signature card
Parts of a Check
Proper Check Writing
1.
2.
3.
4.
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6.
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8.
Write checks only on the forms provided by your bank
Write checks in ink
Only write checks if money is available
Use the current date
Avoid making checks payable to “Cash” or to “Bearer”
Always fill in the amount
Void checks on which you make errors
Record every payment from your checking account, whether
the payment is by check, debit card, or automatic payments
Stopping Payment
 Stop Payment Order – a written notice that tells the bank not
to pay a certain check
 Banks may charge a high fee
 Use this process for only good reasons
 Use if a check has been lost or stolen
The Reconciliation Process
 As a depositor, you will need to review the record of
your account that the bank keeps
 At regular intervals, usually monthly, the bank will
send you a report on the status of your account
known as a bank statement
Bank Statement Information
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The balance at the beginning of the month
The deposits made during the month
The checks paid by the bank during the month
Any automated teller transactions made during the month
Any electronic fund transfers (EFT) or special payments the
bank has made
 Service charges for the month
 Any interest earned on the account
 The balance at the end of the month
Determine Checks Paid
 When you bank statement arrives, compare the checks you
wrote to those that have been paid by your bank
 Canceled Checks – checks that have been paid; may not be
returned by your bank
 Substitute Check – is a digital reproduction of the original paper
check
Monthly Account Statement
Find Differences
 Bank Reconciliation – the document created to show
how the two balances (statement and checkbook)
were brought into agreement
 Reconciling the Bank Balance – bringing the balances
into agreement
Most Common Differences
 Some of the checks you wrote may not have cleared (been
paid)
 Outstanding Checks – checks not deducted from the bank
statement balance
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Forgotten transactions, not recorded
Service charges
Mailed a deposit that has yet to be received
Interest earned
Recorded check amounts incorrectly
Sample Bank Reconciliation Form
Calculate Adjusted Balance
 To determine the true balance in your account, take the
following steps:
1.
Subtract the total of the outstanding checks from the bank
statement balance
2. Add any deposits in transit to the balance statement balance
3. Subtract service charges, fees and automatic payments from
your checkbook balance
4. Add any interest earned to your check register balance
Other Types of Payments
 Certified Check – is a personal check for which a bank has
guaranteed payment
 Cashier’s Check – is a check that a bank draws on its own
funds and has a fee
 Traveler’s Check – are special forms designed for making
payments away from home
Other Types of Payments
 Money Order – is a form of payment that orders the issuing
agency to pay the amount printed on the form to another
party
 Bank Money Order – is sold by a bank stating that money is to be
paid to a specific person or business
 Postal Money Order – purchased from the US Post Office can be
sent safely through the mail
 Express Money Order – is issued by various organizations
 Telegraphic Money Order - involves buying a message to direct a
telegraph office to pay a sum of money to a certain person or
business
Review
1. What are the three types of endorsements?
2. What is the purpose of a check register?
3. What are causes of difference between the bank
statement balance and a person’s check register?
4. How does a certified check differ from a cashier’s
check?