Checking Accounts &
Banking Services
Purpose
• Checking account: an account that
allows depositors to write checks to
make payments
• Check: written order to a bank to pay
the stated amount to a person or
business (payee) named on it
Purpose
• Also called a demand deposit
– Money can be withdrawn at any time– “on
demand”
• Only the depositor can write checks on
the account
• Financial institutions often charge a
fee or require a minimum balance
Purpose
• Process
– Payee cashes check
– Bank that cashes it returns it to your bank
– To reimburse the payment, your bank
withdraws the money from your account and
sends it to the other bank
– Your bank stamps the back of your check
indicating that it has cleared
• Successfully completed its trip through the system
Purpose
• Canceled check: check that bears the
bank’s stamp, indicating it has cleared
• Because of the stamp, you can use
your canceled checks as proof of
purchase or payment
Purpose
• Advantages
– Provides convenient way to pay bills
– Writing a check is safer than using cash
– A checking account has a built-in record
keeping system that you can use to track
expenses and create budgets
– You have access to other bank services
• Online banking
• ATM
Purpose
• Responsibilities
– You must write checks carefully and
keep an accurate record of checks
written and deposits made
– You must verify the accuracy of the
bank statement you receive each month
– You must maintain sufficient funds in
your account to cover all the checks
you write
Purpose
• Responsibilities
– http://www.youtube.com/watch?v=b8
kh2Qx5LV0
Purpose
• Some banks do not return
cancelled checks
– truncation
Purpose
• Overdraft: a check written for
more money than your account
contains
• Bank stamps the check NSF– non-sufficient funds
• “Bounced”
• Bank will charge you a fee
– Usually around $25
Opening an Account
• Fill out and sign an authorization
form
• This provides an official signature
to verify against forgery
• Most banks require a minimum
deposit amount
Purpose
• You are floating a check when you
realize your account contains
insufficient funds, but you write a
check anyway, hoping that a deposit
will clear before the check is cashed.
• Risky now
Purpose
• Check Kiting:
– Writing a check off of an account
with NSF and then depositing a
check into that account from another
account that also has NSF
– ILLEGAL!
Parts of a Check
• Check Number
– Checks are number for easy
identification
– Checks are usually pre-numbered
Parts of a Check
• ABA number
– American Bankers Assoc. number
– Appears in a fraction
• Top half indentifies the location and district
of the bank the check is drawn from
• Bottom half helps in routing the check to the
specific area and bank on which it is drawn
Parts of a Check
• ABA number
Parts of a Check
• Name and Address
– The maker is the person authorized
to write check on the account
– You should have this printed on your
checks
– You can add phone number, DLN, or
SSN
• However, because of identity theft it is
recommended that you don’t put your
DLN or SSN
Parts of a Check
• Name and Address
Parts of a Check
• Date
– When you write the check
– Do not postdate checks
• Future date a check
– Banks will not cash a check before
the date written on it
• May not honor a check after 6 months
Parts of a Check
• Date
Parts of a Check
• Payee
– Whom the check is made payable
Parts of a Check
• Numeric Amount
– Amount of dollars and cents being
paid, written in numbers
Parts of a Check
• Written Amount
– Shows the amount of dollars and
cents being paid, written in words
– Write the word “and” to separate
dollar amounts from cents
• Replaces the decimal point
– Leave no space between the words
– Draw a line from the end of the word
to the word “Dollars”
Parts of a Check
• Written Amount
– 12/100 means 12 cents, which is 12
one-hundredths of a dollar
Parts of a Check
• Signature
– If the bank suspects fraud the teller
can compare the check to your
signature authorization form
Parts of a Check
• Account Numbers
– Appears in bank coding at the
bottom of the check
Parts of a Check
• Routing Number
– Bank’s identification code for
electronic sorting and routing of
checks
Parts of a Check
• Memo
– Provides a place to write the purpose
of the check
– Not mandatory
Using Your Account
• Writing Checks
1. Always use a pen; one with dark ink
2. Write legibly
3. Sign your name exactly how it appears
preprinted on the check and signature
card
4. Avoid mistakes
•
Void the check and write a new one
5. Be certain you have deposited
adequate funds to cover each check
you write
John Smith pays a bill to Duke Energy for
$154.96 on November 1, 2011.
Jane Doe pays for gas at Huck’s. She
got $45.00 worth of gas on 10/31/11.
Tom buys pizza at Pizza Hut for $19.08.
Endorsing Checks
• A check cannot be cashed until it
has been endorsed.
• When two or more people are the
payee, all payees must endorse.
Endorsing Checks
• To endorse:
– The payee named on the front signs
the back of the check in ink.
– There is usually a space, but if there
is not, this should be no more than
1 ½ inches from the trailing edge
Endorsing Checks
• Three types of endorsements:
– Blank
– Special
– Restrictive
Endorsing Checks
• Blank Endorsement
– Signature of the payee written
exactly as his/her name appears on
the front
Jane Public
Endorsing Checks
• In a blank endorsement, if your
name is spelled incorrectly on the
front, you will write the incorrect
version and then the correct
version right below it
Mrs. Balt
Endorsing Checks
• Special Endorsement
Mrs. Bault
Endorsing Checks
• Restrictive Endorsement
– Restricts or limits the use of the
check
• Example “For Deposit Only”
• Safer than Blank Endorsement for
mailing deposits or night deposits
• If the check is lost, the finder cannot
cash it
Endorsing Checks
• Restrictive Endorsement
Mrs. Bault
Endorsing Checks
Endorsing Checks
• Special Endorsement, or
endorsement in full, is an
endorsement that transfers the
right to cash a check to someone
else.
• Consists of the words “Pay to the
order of (new payee’s name)” and
the signature of the original payee
Deposits
Deposit means to add money to an account.
Deposit slips can be found in the back of
your checkbook and at the bank.
Most banks will require your signature on a
deposit slip.
What does a deposit slip look like?
Making Deposits
• You should complete a form every
time you deposit money into your
account.
• You will have to sign a form to
withdraw money from your
account.
Making Deposits
• Preparing a Deposit Slip:
– Insert the date of the transaction
– In the cash section, write the total of
currency and coin you are depositing
– Write the amount of each check you
are depositing
Making Deposits
• Preparing a Deposit Slip (cont’d):
– Total the currency, coin, and check
amounts.
– Write this figure on the subtotal line
– If you want cash back fill in the
“Less Cash Received” line with the
amount
Making Deposits
• Preparing a Deposit Slip (cont’d):
– Subtract the cash received from the
subtotal
– Write the final amount on the net
deposit line
– If you get cash back you will need to
sign your deposit slip
– You will receive a receipt after your
transaction. Keep this for your records
Making Deposits
Making Deposits
Making Deposits
• John Smith wants
to deposit:
– A $100 bill
– A $25 check
(#101)
– A $25 check
(#390)
Making Deposits
• Jane wants to
deposit:
– A $58.76 check
(#523)
– A $456.07 check
(#1937)
– And get $100
cash back
On September 5, 2015, you
deposited $25 in cash and one
check for $98.72 into account
158975. You took no cash back.
On February 20, 2015, you
deposited three checks into
account 778590: one for $50,
one for $62. 45, and one for
$100. You wanted $75 back in
cash.
On May 3, 2015, you
deposited $5 in cash and
two checks, one for $46.33
and one for $87.20 into
account number 9003021.
You wanted to keep $25 in
cash.
On September 5, 2015, you
deposited $25 in cash, and 1
check for $98.72 into account
158975. You took no cash
back.
On February 20, 2015, you
deposited 3 checks, one for
$50, one for $62. 45, and
one for $100 into account
778590. You wanted $75 in
cash back.
On May 3, 2015, you
deposited $5 in cash, a
check for $46.33, and a
check for $87. 20 into
account number 9003021.
You wanted to keep $25.
Check Registry
A register is a record
of withdrawals and
deposits made into
an account.
Example
Assignment
Complete the
check register
assignment.