Chapter 7
Banking Services
Banks Help You Move Your Money
7.1 How Banks Work
Bell Ringer-1
• Why do we have banks?
–What do banks do?
–Who uses and benefits from
banks?
–Why not just keep your money
in your mattress/shoe box?
Banks Purpose
Earn Profit
• Banks are a private business
• They earn money by selling financial
services
• Income comes from interest they charge
when they lend money
• Money they lend mostly comes from
deposits made by consumers and
businesses
How It Works…
• Banks pay depositors interest on
accounts they have…
– The interest rates that depositors
receive are lower than what banks will
charge borrowers
– The difference between the rates is the
banks profit
How It Works…
• Example:
– You deposit $100 into your bank account
• - Bank pays you 2% interest on your account ($2)
– The bank lends $100 to a business and charges
them 6% interest ($6)
– The bank will earn $4
Other Sources of Income
•
•
•
•
•
Credit card fees
Checking account fees
Financial planning fees
Overdraft fees
ATM fees
Inflation
• Sustained increase in the average level
of prices
– Example:
• You save for a year for a TV that cost
$800… when you go to buy that same TV a
year later you notice it is now $850.
• The price of the TV may have increased due
to the general state of inflation in the
economy.
Security
• Banks provide security
– If money is stolen or a bank is robbed, a
bank has insurance to cover the loss
– If you keep your money in a shoe box in
your closet and someone either... steals your
money, you lose it, or mishap occurs, your
money is gone.
Federal Deposit Insurance Corporation
(FDIC)
• An organization created by the federal
government that insures deposits in most banks
up to a maximum of $250,000
• If a bank fails and is not able to pay its
depositors, the FDIC will pay instead
• There is no chance of losing money that you
deposit up to the maximum in an FDIC
insured bank
• Your Bank Has Failed
• Bank Run
Money and Financial Transactions
• Bartering
– Trading goods and services without using money
– Example… Your parents will let you use their car on Saturday
if you babysit your sister on Friday night…
• Currency
– Paper money and coins used for financial transactions
• Check
– An order to a bank to pay a specified sum to the person or
business named on the check–
Money and Financial Transactions
• Payee
– Person the check is made out to… “Pay to the order
of…”
Advantages of using a check
• Safety
– If check gets lost or stolen, no one else can legally cash it
– If someone does cash it illegally, you are not responsible, the
money will not come out of your account… the bank or
business that cashed the check will take the loss
• Convenience
– Making large purchases
– Safer to send through mail than cash
• Records your transactions
– Bank statement- a written record of all your transactions
Parts of a Check
Chapter 7.2 Use Your
Checking Account
Bell Ringer-2
• What does is mean when a bank
is member FDIC?
• Up to what amount are your
deposits insured?
Checking Account
• A bank account that allows depositors to write checks
to make payments
• Banks offer different features and aspects of various
types of checking accounts, but they all work the same
way!
• Joint account- when 2 or more people have access to
the same bank account
– Mother and Son
– Husband and Wife
Opening a check account
• Complete application
• Sign a signature card
• Provide valid
identification
• Make an initial deposit
Deposit Slips
• Used to deposit cash and checks into your bank
account
• First thing you need to do after opening your account
• Deposit slips are often found at the back of your
checkbook, if you run out, you can always get more at
the bank when you go to deposit your money
Opening a Checking Account
• Safest and easiest ways to manage your
money
• Allows you to write checks for bills and pay
them by mail
• Allows you to avoid carrying a large amounts
of cash
• Statement is given to you each month to
summarize your spending
Writing A Check
• 1. Date- Write in the date
• 2. Pay to the order of- who is the check going to? (person or
company)
• 3. Amount- numerical amount written in small box
• 4. Amount- written out in words
• 5. Memo- what is the check for?
• 6. From- Your signature
Check Register
• Booklet used to record your transactions including
deposits!
Check Register
• Record Fees
– For writing a certain amount of checks
• Record interest
– Credit you receive
• Calculate New Balance
– Account Balance- total amount in the account at a specific
date
– Make sure to always record new balance when you write
checks or use your debit card!
• Record Check Number
– This helps you know what each check was written for
– Also helps you know if you have forgotten to record a check
Check Writing/Check Register
• Go to Page 3 in your packet.
• Read the 3 transactions listed
– Write the checks for the bills listed
– Record the transactions in your check
register!
Account Balance
• The total amount in your bank
account at a specific date
Overdrawing
• Writing a check for more than you have in your
account.
• This will result in “Insufficient Funds”
– You may be charged $35 or more (depending on your bank)
each day your account is negative!
Check Register
•Go to page 5 in your
packet.
•Practice filling in
your check register!
Endorsement
• Signing the back of a check
– When you sign the back of a check, you are
acknowledging you received the money or
transferred your right to someone else.
– DO NOT sign back until you get to the bank,
otherwise someone else can deposit it!
3 Types Of Endorsements
• Blank
– Just your signature and
Account number
• Restrictive
– “For Deposit Only” include your name and your account
number.
– This ensures it only gets deposited into your account!
Endorsement in Full
• Used to transfer a check to another person.
• No one except the person whose name is stated on the
endorsement can cash the check.
• “Pay To The Order Of...”
#123456789
• This type of check is called a Third Party Check.
– Signing your check over to someone else
Endorse A Check
• Go to page 6 in your packet
• Read the scenarios on the
following slides and endorse
each check accordingly.
Check Endorsing Scenarios
1. You receive a check for $63 that you wish to give to
Ethan. Endorse the check using a third party
endorsement.
2. You receive a check for $933. Use a blank
endorsement to deposit the check in your account
#740696.
3. You receive a check for $395. Use a restrictive
endorsement so it may only be deposited directly into
your account.
Check Endorsing Scenarios
4. You receive a check for $922 that you wish to give to
Anna. Endorse the check using a third party
endorsement.
5. You receive a check for $33. Use a blank
endorsement to deposit the check into your account.
6. You received a check for $50. Use a restrictive
endorsement so it may only be deposited directly into
your account.
Check-Clearing Process
• When you deposit money, you cannot
withdrawal the money unless you have
enough in your account already to cover
what you are taking out.
– Example:
• You have a current balance of $50
• You deposit a check for $100
• You cannot take more than $50 out until the
check you just deposited has cleared.
Checking Account Fees
• IF a bank charges a fee for a
checking account, there are 2 basic
fees that can be charged...
– Monthly Service Fee (flat fee)
– Service Charge Fee
Types of Checking Accounts and
Fees...
Account Feature
Free Checking
Green Checking
Premier Checking
Ultimate Checking
Min. Balance to
waive service charge
None
None
$1,500 in account or
$5,000 in bank
$10,000 in account
Service Charge
Interest
None
None
None
Compounded daily,
paid monthly
$8 per month
Compounded daily,
paid monthly
$10 per month
Tiered at $25,000
Free Checks
Other Features
None
-Free ATM
Withdrawals
-Free Bill Pay
-Free Online Banking
-Free Check Image
Return
-Annual Fee waived
on approved VISA
None
-Electronic Statement
-Free ATM
Withdrawal
-Free Online Banking
-Free Bill Pay
-Annual Fee waived
on approved VISA
Standard Style
FREE CHECKING
FEATURES PLUS:
-Service charge
waived for 55 and
older
-50% off small safe
deposit box
Any Style
FREE CHECKING
FEATURES PLUS:
-.25% rate bump on
CDS
-Free Cashier’s checks
-Free stop payments
-Free small safe
deposit box
Chapter 7.3 Balance
Your Checkbook
Your Bank Statement
• Received at the end of the month showing all
transactions for the month
• You should compare your checkbook register
to your bank statement to make sure no
mistakes have been made.
• This is called reconciliation or balancing your
account.
Reconciliation
• Checking bank statement with checkbook register to
assure no mistakes have been made.
PAYMENT OUTSTANDING
No.
• Check Summary
–
–
–
–
–
–
01/03 Deposit
01/08 Check 101
01/15 Check 103
01/15 Check 104
01/19 Check 105
01/28 Check 107
102
106
$717.20+
$35.24$40.00$41.80$120.24$314.12
108
TOTAL
24.00
33.93
450.00
507.93
ENDING BALANCE ON STATEMENT
ADD DEPOSITS NOT SHOWN
SUB-TOTAL
SUBTRACT PAYMENTS
OUTSTANDING
BALANCE
$ 160
692
853
507
80
37
17
93
345
24
Reconciliation
• Look at your statement and start with the
first transaction and compare it with
your check register.
• Continue this one transaction at a time.
• After you have checked off everything
listed in your statement, look for any
entries in your check register that you
did not check off.
Routing Diagram
Canceled Check
• A check that has been paid
• A check that has made its way
through the banking system
What is included in a Statement?
• Account Balance
• Any checks you have written
• Any withdrawals you have made
(ATM or debit card)
• Any deposits you have made
• Any fees that you have received
Can’t reconcile?
• The design of reconciliation forms varies
from bank to bank
• Often times a reconciliation form will be
attached to the back of your statement
• You should speak with a bank
representative or manager if you have an
issue with your bank account.
Bank Reconciliation- Page 5
• Use the bank statement and check register to
reconcile your bank account.
• 1. Use the checkmark column on your checkbook
register to check off transactions that are on your
bank statement.
• 2. On your reconciliation form, record checks that
are on your checkbook register, but are NOT on
your bank statement.
• 3. Record any deposits you have made that are not
on your bank statement.
• 4. Determine the correct balance!
Bell Ringer–3
• Name 3 types of fees you can
incur when having a
checking account
Chapter 7.4 Electronic
Banking
Electronic Funds Transfer
(EFT)
• To move money from one account to another by
computer. (Including smartphone or tablet)
• You DO NOT need checks or currency in order to do
this.
• EFTS are quicker and less expensive for banks to
complete than paper transactions.
Automated Teller Machine
(ATM)
• A computer terminal that you can use to make deposits,
withdraw cash, transfer money between accounts,
check your account balance, and pay some kinds of
bills.
• An ATM can come complete most transactions that a
human teller can.
• Most popular way to transfer money.
Personal Identification Number
(PIN)
• A secret number that identifies you to the
ATM as the owner of the account.
• When you insert your card and enter
your PIN on the ATM key pad, the
machine identifies you as the card owner
and authorizes you to make transactions.
Direct Deposit
• Having your payroll check directly
deposited into your checking/saving
account.
• You will receive a pay-stub which does
not have value and cannot be deposited.
Debit Card
•
•
•
•
Plastic card that resembles a credit card.
Also know as a “Check Card.”
Used in place of writing a check.
When using a debit card, the funds
automatically get withdrawn from your bank
account.
Automatic Withdrawal
• An arrangement you can make with your
bank to pay certain bills automatically
from your bank account.
• Often done online
• Convenient way for you to make sure
bills are paid on time each month.
– Eliminates late fees
Online Banking
• Features
– Keeps checkbook register
– Pay bills - Automated
– Transfer funds
• Convenient
– Any device can be used, just need
internet
• Security
– Password protected
– Use of different computers/devices
Mobile Banking
• https://www.bankofamerica.com/onlinebanking/mobile.go
Chapter 7.5
Certified Check
• Personal check that has been
stamped and signed by a
bank officer to guarantee
your account has the funds
to cover the check.
Cashiers Check
• A way to guarantee payment
• A banks own check signed by the bank’s cashier
• You pay the teller the amount you want the check
written for and the bank uses their own check.
• There is usually a $25 fee to use this type of check.
• In what situations may you need to get a
cashiers check?
Money Order
• A check that draws on the money of the bank or other
financial business that doesn’t accept personal checks.
• Similar to a cashiers check only there are 2 major
differences:
– 1. Many different companies sell money orders, not just
banks... post office, a check-cashing business, Western Union,
American Express, etc...
– 2. Your name, not the bank’s name, appears on the money
order.
Traveler’s Check
• Checks you pay for in advance, and if they are lost of
stolen, the company you got them from will replace
them for free.
• Can be bought in many places:
– Banks, American Express offices, travel agencies, offices at
the American Automobile Association
• Generally sold in amounts such as $20, $50, or $100
• Fee is usually 1% of the amount it is worth
• How to cash them- sign bottom signature line in front
of the person you want to pay. Usually an ID will be
required.
Why Travelers check...
• Why travelers Check?
– If you travel its not always a good idea to bring a lot of cash
with you.. In case you lose your suitcase, misplace your
money, etc...
– Most local businesses wont accept a personal check,
especially if your bank is from away from where you currently
are visiting.
– Traveler’s checks are a good option in this situation!
Wire Transfer
• An electronic communication that moves money from
an account in one bank to an account in a different
bank.
• They happen instantly
• On a smaller scale... This is what happens when you
withdrawal money from an ATM.
• Why a wire transfer?
– Suppose a company orders thousands of monitors from a
company and agrees to pay 28 million for them. This huge
sum would earn substantial interest in a bank account each
day. Companies don’t want to lose this interest so instead of
writing a check and waiting a few days for it to go through,
they will do a wire transfer to pay immediately.
Safe Deposit Box
• Boxes with individual locks that you can rent from a
bank.
• Located in a vault, where their contents are safe from
fire, theft, and loss.
• Renting a small safe deposit box can range from $30$50 per year.
• A larger safe deposit box can cost more
• If you need to access your safe deposit box you need to
sign in, show your ID, and give your box key to a bank
employee.
Endorsing Assessment
• 1. You have just entered the bank, and you are
depositing your check from Grandma Sally. On the
back of this check, write a blank endorsement to put
this check in your account. Your account number is:
#700456.
• 2. You have received a check from Grandpa Frank,
and you want to mail it to your bank. On the back of
this check, write a restrictive endorsement so that you
can mail this check to the bank and have it deposited to
your account. Your account number is: #700456.
Endorsing Assessment
• 3. You receive a check for $50 that you wish to give to
Rachel Adams. Endorse the check in full to Rachel
Adams. Rachel Adams’ account number is #100123.