ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
WHAT’S AHEAD
7.1 How Banks Work
7.2 Use Your Checking Account
7.3 Balance Your Checkbook
7.4 Electronic Banking
7.5 Other Banking Services
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
LESSON 7.1
How Banks Work
GOALS
►Explain how banks operate and benefit consumers.
►Describe the different types of money that are used in
the U.S. economy.
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
KEY TERMS
 inflation
 Federal Deposit Insurance Corporation (FDIC)
 bartering
 currency
 check
 payee
 statement
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
Inflation – a sustained increase in the average level of
prices
Federal Deposit Insurance Corporation (FDIC) –
organization created by the federal government that
insures deposits in most banks up to $250,000.
Bartering – trading goods and services without using
money.
Currency – paper money and coins used for financial
transactions.
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
Key Terms
Check – an order to a bank to pay a specified
sum to the person or business named.
Payee – the person or business named on a
check.
Statement – copy of the bank’s record of
transactions made in an account.
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
The Role of Banks
►Banks are in business to earn a profit
►Banks provide security
►Protect your money’s purchasing power
►Banks are regulated
►Most deposits are insured
►Banks make borrowing easier
►Money and financial transactions
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
Types of Money
►Currency
►Check
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
Advantages of Using Checks
►Safety
►Convenience
►Records of your transactions
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
How do banks benefit consumers and help the
economy work better as they strive to earn a
profit?
What are the two types of money that are used in
the U.S. economy?
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
How do banks benefit consumers and help the
economy work better as they strive to earn a
profit?
• Banks earn income by charging borrowers higher rates of
interest than they pay depositors.
• They protect depositors’ money by using vaults,
surveillance systems, guards, and deposit insurance.
• Without banks, many people and businesses could find it
difficult to borrow funds.
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
What are the two types of money that are used in
the U.S. economy?
• Currency: paper money and coins used for financial
transactions
• Checks: an order to a bank to pay a specified sum to the
party named on the check (the payee)
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
LESSON 7.2
Use Your Checking Account
GOALS
►Demonstrate how to write, endorse, record, and deposit
checks.
►Identify types of checking accounts and checking
account fees.
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
KEY TERMS
 checking account
 check register
 account balance
 overdrawing
 endorsement
 third party check
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
checking account – bank account that allows depositors
to write checks to make payments.
check register – booklet used for recording checking
transactions.
account balance – total amount in the account on a
specific date.
Overdrawing – writing a check for more money than you
have in your account.
Endorsement – signature on the back of a check.
third party check – check signed over to someone other
than the payee.
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
Your Checking Account
►Open a checking account
►Write a check
►Record checks in your check register
►Record each transaction
►Record fees
►Record interest
►Calculate your new balance
►Record check numbers
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
Cash or Transfer Checks
►Cash a check
►Transfer a check
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
Deposits
►Deposit form
►For deposit only
►Record your deposit
►The check-clearing process
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
Checking Account
Types and Costs
►Checking account types
►Interest-bearing checking accounts
►Noninterest-bearing checking accounts
►Checking account fees
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
Describe the steps you need to take to write,
endorse, and deposit a check.
What costs should you expect to pay to use your
checking account?
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
Describe the steps you need to take to write,
endorse, and deposit a check.
• A written check includes the date, name of the payee,
amount in numbers and written out, and your signature.
• When endorsing a check, you sign your name in the
appropriate space on the back as it was written on the
front.
• Depositing a check requires that you endorse it and
complete a deposit form.
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
What costs should you expect to pay to use your
checking account?
Checking accounts may require the payment of a monthly
maintenance fee and a per-check fee.
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
LESSON 7.3
Balance Your Checkbook
GOALS
►Identify information that is provided on a checking
account statement.
►Explain how to reconcile your checkbook.
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
KEY TERM
 cancelled check – an image of a check that
has been paid.
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
Your Bank Statement
►Monthly statement
►Transactions
►Bank fees
►Balancing or reconciling your account
►Confirm transactions
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
The Account Reconciliation Form
Statement Column
Checkbook Column
 Balance from statement
 Balance from checkbook
 List deposits not on
 List deposits not in




statement
Total statement balance
and deposits
List checks not on
statement
Total checks
Statement balance
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




checkbook
Total checkbook balance
and deposits
List fees not in checkbook
Enter interest payment
Total feels and interest
Checkbook balance
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
Account Reconciliation
►Fill out the account reconciliation form
►Make adjustments
►What if the bank made an error?
►File your records
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
What types of information will be provided on
your checking account statement?
Why is it important for you to reconcile each of
your checking account statements?
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
What types of information will be provided on
your checking account statement?
• A record of all checks presented to the bank for payment
• Deposits made
• Electronic transfers
• Fees
• Interest earned
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
Why is it important for you to reconcile each of
your checking account statements?
• Statements should be quickly reconciled to find and
correct any mistakes.
• If they are not reconciled, depositors may write checks
that will bounce and be charged substantial fees.
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
LESSON 7.4
Electronic Banking
GOALS
►Describe transactions you can make at an ATM.
►Identify various uses of electronic funds transfers.
►Discuss your rights and responsibilities in electronic
transactions.
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
KEY TERMS
 electronic funds transfer (EFT)
 automated teller machine (ATM)
 personal identification number (PIN)
 direct deposit
 debit card
 automatic withdrawal
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
Automated Teller
Machines (ATMs)
►Your ATM card and PIN
►ATM transactions
►ATM deposits
►ATM withdrawals
►ATM costs
►Use ATMs responsibly
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
Uses of Electronic Funds Transfers
►Direct deposit
►Debit cards
►Automatic bill payments
►Online banking
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
Consumer Protection
and Responsibilities
►Electronic Fund Transfer Act (EFTA)
►Bank responsibilities
►Consumer responsibilities
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
What types of financial transactions may be
completed at an ATM?
In addition to ATM transactions, what types of
electronic funds transfers are available to
consumers?
How does the EFTA protect you?
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
What types of financial transactions may be
completed at an ATM?
• Deposit funds
• Make withdrawals
• Transfer funds
• Pay bills
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
In addition to ATM transactions, what types of
electronic funds transfers are available to
consumers?
• The use of debit cards
• Automatic bill payments
• Direct deposits of paychecks and tax refunds
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
How does the EFTA protect you?
The Electronic Fund Transfer Act (EFTA) requires banks
to inform customers of fees and to supply receipts for
electronic transactions.
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
LESSON 7.5
Other Banking Services
GOALS
►Identify alternatives to personal checks and explain
their uses.
►Describe the use of wire transfers and safe deposit
boxes.
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
KEY TERMS
 certified check
 cashier’s check
 money order
 traveler’s check
 wire transfer
 safe deposit box
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
Different Checks for
Different Purposes
►Certified checks
►Cashier’s checks
►Money orders
►Traveler’s checks
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
Other Services
►Wire transfers
►Safe deposit boxes
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
Why can’t personal checks be used to make
payments in every situation?
In what situation might you use a wire transfer?
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
Why can’t personal checks be used to make
payments in every situation?
Accepting a personal check involves some risk to payees
because they do not know whether money is on deposit
to cover the check. By using other forms of checks,
payees are assured that a payment is good.
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 7
In what situation might you use a wire transfer?
When funds need to be moved over a distance quickly
(e.g., large sums in commercial transactions,
emergencies where checks aren’t accepted, etc.)
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© 2010 South-Western, Cengage Learning