Chapter 9 Checkig Accouts ad Bakig Services 9.1 Checkig Accouts 9.2 Bakig Services ad Fees Cosider THIS Rochelle works part time after school ad oe weeked a moth. She receives a paycheck oce a week from her employer. I ca t cash my paychecks, Rochelle told her boyfried, uless my mom goes with me to her bak. They told me that I eed my ow accout. They recommeded a checkig accout alog with a savigs accout. That way I ca trasfer the moey I do t eed each moth ito savigs, where I ca ear higher iterest. The bak teller told Rochelle that her mother or other adult has to be a joit accout holder with her util she reaches age 18. The she ca have her ow private accout. But for ow, a joit accout with her mother will allow Rochelle to deposit her checks ito her checkig accout ad maage her ow moey. Chapter 9 Checkig Accouts ad Bakig Services 185 Copyright 2010 Cegage Learig, Ic. All Rights Reserved. May ot be copied, scaed, or duplicated, i whole or i part.
9.1 Checkig Accouts GOALS Describe the purpose of a checkig accout ad the forms associated with it. Explai how to use a checkig accout. Discuss the types of checkig accouts. TERMS check, p. 186 demad deposit, p. 186 caceled check, p. 186 overdraft, p. 187 floatig a check, p. 187 checkbook register, p. 191 bak recociliatio, p. 192 blak edorsemet, p. 194 special edorsemet, p. 194 restrictive edorsemet, p. 195 CHECKING ACCOUNT BASICS Fiacial istitutios such as baks ad credit uios offer a umber of services. The first service you will likely wat is a checkig accout. A checkig accout allows you to write checks to make paymets. A check is a writte order to a bak to pay the amout stated to the perso or busiess amed o it. A checkig accout is also called a demad deposit, because the moey may be withdraw at ay time that is, o demad. Oly you, the depositor, also kow as the maker, ca write checks o the accout. Checks follow a process through the bakig system. The payee cashes your check. The bak that cashed the check returs it to your bak. Your bak withdraws the moey from your accout ad seds it to the other bak. Your bak the stamps the back of your check, idicatig that it has cleared, which meas it has bee processed by the bak. A caceled check is a check that has cleared your accout. It ca be used as proof of paymet if a dispute arises. May baks o loger sed paper checks to other baks for processig. To make processig faster ad more efficiet, they exchage check iformatio electroically by trasmittig a image of the check, called a substitute check. A substitute check ca be used i the same way as a origial check. A checkig accout offers several advatages. It provides a coveiet way to pay your bills. Writig a check is ofte safer tha usig cash, especially whe makig major purchases, payig bills, or buyig through the mail. It has a built-i record keepig system that you ca use to track expeses ad create budgets. It gives you access to other bak services, such as loas, olie bakig, ad 24-hour access to your moey through automated teller machies (ATMs). As a accout holder, you should write checks carefully ad keep accurate records. You should check the accuracy of the bak statemet you receive 186 Uit 2 Moey Maagemet Copyright 2010 Cegage Learig, Ic. All Rights Reserved. May ot be copied, scaed, or duplicated, i whole or i part.
each moth. I the past, caceled checks were retured with the statemet. Today, most baks either sed copies of caceled checks or simply describe your caceled checks o the statemet. Merchats ca also use electroic check coversio to covert a check ito a debit trasactio istead of processig the check. With this process, the check may either be destroyed or retured to you immediately after the trasactio is processed. It is your resposibility to keep track of all of these etries i your checkig accout. You must also maitai eough moey i your accout to cover all the checks you write. A check writte for more moey tha your accout cotais is called a overdraft. A bak that does ot hoor a check usually stamps the check with the words ot sufficiet fuds (NSF) ad returs the check to the payee s bak. Whe this occurs, the check has bouced. Your bak will charge you a fee of $25 or more for each NSF check processed. May people write checks, hopig to deposit moey to cover them before they clear. This is called floatig a check. Floatig a check is very risky because today s electroic systems allow checks to process very quickly. Floatig a check is illegal i most states. Itetioally writig bad checks ca result i pealties ad hurt your credit record. OPENING A CHECKING ACCOUNT To ope a checkig accout, you must fill out ad sig a sigature authorizatio form, such as the oe show i Figure 9.1. The sigature form provides a official sigature that the bak ca compare to the sigature you write o your checks. Most baks also require that you have a iitial deposit of $50 or more. I Figure 9.1, Ardys Johso completed ad siged the form. Sigature forms look differet at various baks, but they cotai the same basic iformatio. Ardys also listed her mother s maide ame for use i idetificatio. FIGURE 9.1 Sigature Authorizatio Form First Idepedet Mutual Savigs Bak Checkig Sigature Verificatio Customer Name Ardys Johso Date 4/28/-- Accout No. 08 40 856 Idividual X Joit Address 4250 West 18 th Aveue Home Phoe 555-8925 City/State/ZIP Chicago, IL 60601-2180 Work Phoe 555-0100 Social Security No. 999-00-8696 Birthdate 11/20/80 Occupatio Accoutat How log? 2 years Employer Cho ad Jackso, Ic. Phoe 555-8925 Cotact i case of emergecy: Harold Johso Phoe 555-2322 Relatioship father Mother s Maide Name or other code word Williams SIGNATURE: Ardys Johso (Use secod page for joit accout holders.) Date 4/28/-- Chapter 9 Checkig Accouts ad Bakig Services 187 Copyright 2010 Cegage Learig, Ic. All Rights Reserved. May ot be copied, scaed, or duplicated, i whole or i part.
Someoe forgig Ardys s sigature is ot likely to kow her mother s maide ame whe questioed by a teller. PARTS OF A CHECK A check cosists of the followig parts. Look at the lettered elemets of the check i Figure 9.2 as you read the followig explaatios.. A Check Number. Checks are umbered for easy idetificatio. I Figure 9.2,. Check 581 has bee preumbered by the bak. B ABA Number. The America Bakers Associatio (ABA) umber appears i fractio form i the upper right corer of each check. The top half of the fractio idetifies the locatio ad district of the bak from which the check is draw. The bottom half helps i routig the check to the specific. area ad bak o which it is draw. C Name ad Address of Maker. The maker, or drawer, is the perso authorized to write checks o the accout. Ardys Johso is the maker of the check i Figure 9.2. You should have your ame, address, ad phoe. umber prited o your checks. D Date. I this blak, fill i the date you write the check. Do ot postdate.(write a future date o) checks. E Payee. The payee is the perso or compay to whom the check is made. payable. Food Mart is the payee i Figure 9.2. F Numeric Amout. Write the amout eatly ad clearly as close as possible. to the dollar sig, with the dollars ad cets clearly distiguished. G Writte Amout. The writte amout shows the amout of dollars ad cets beig paid, writte i words. The word dollars is preprited at the ed of. the lie. Write the word ad to separate dollar amouts from cets. H Sigature. Sig your check o the sigature lie, the same way you wrote. it o your sigature card. I Accout ad Routig Numbers. The accout umber appears i bak codig at the bottom of each check. I Figure 9.2, 08 40 856 is Ardys s checkig accout umber. The umber 071000741 is the bak s routig. umber for the electroic sortig ad routig of checks. J Memo. The memo lie at the bottom left of each check provides a place to write the purpose of the check. Fillig i this lie is optioal. FIGURE 9.2 Parts of a Check PAY TO THE ORDER OF MEMO I E G J C ARDYS JOHNSON Phoe: 555-0100 4250 West 18th Aveue Chicago, IL 60601-2180 Food Mart Thirty-six ad 12 /100 For Classroom Use Oly SKY CENTRAL BANK Chicago, Illiois H groceries D July 1 20 F $ - Ardys Johso A 36.12 B 581 2-74 710 DOLLARS 188 Uit 2 Moey Maagemet Copyright 2010 Cegage Learig, Ic. All Rights Reserved. May ot be copied, scaed, or duplicated, i whole or i part.
Baks sell checks to customers. They ofte provide checks of basic desig free to accout holders who maitai miimum balaces. You ca also choose to buy checks with special desigs or colors, either from your bak or from a check-pritig compay. USING YOUR CHECKING ACCOUNT Checkig accouts ca help you maage your persoal fiaces but oly if you use them correctly. Careless or improper use of a checkig accout ca result i fiacial loss. Here are some tips o usig a checkig accout. WRITING CHECKS Whe writig checks, be sure to do the followig: Always use a pe, preferably oe with dark ik that does ot skip or blot. Write legibly. Keep umbers ad letters clear ad distict, without extra space before, betwee, or after them. Sig your ame as it appears preprited o the check ad o the sigature card. Avoid mistakes. If you make a mistake, write VOID across the face of the check to cacel it ad the write a ew check. Be certai you have deposited adequate fuds i your accout to cover each check you write. PAYING BILLS ONLINE Istead of writig checks to pay bills, you ca pay bills olie. It is safer tha sedig checks through the mail ad faster because moey leaves your accout right away. It s also coveiet ad saves bothpostageadthecostofchecks. To pay bills olie, you have two choices. First, you ca register at the web site of the busiess to which you will be makig paymets. You will give them your routig umber ad checkig accout umber. Each moth you ca authorize a paymet, or you ca allow the busiess to take automatic paymets from your accout. Secod, you ca pay bills from your ow bak. To do this, you must first register at your bak s web site. I that process, you establish your persoal idetificatio umber (PIN) or password to gai etry ito your accout. Scree prompts will lead you to the bak s olie bill paymet page, such as the oe show i Figure 9.3. Digital Visio/Getty Images Why do people pay their bills olie? Chapter 9 Checkig Accouts ad Bakig Services 189 Copyright 2010 Cegage Learig, Ic. All Rights Reserved. May ot be copied, scaed, or duplicated, i whole or i part.
FIGURE 9.3 Olie Bill Paymet Page WCB West Chicago Bak Bill Pay Lik to Make Paymets page Dow arrow List of Payees Click to trasmit Home Make Paymets Paymet Activity Payee Setup My Profile Make Paymets To schedule a paymet, eter your paymet iformatio ad click OK. Ardys Johso 4250 West 18th Aveue Chicago, IL 60601-2180 OK Payee: { *Paymet Date is the date the payee is scheduled to receive the paymet. Help Paymet Date*: Messages? Log Out Help 07/26/20 (mm/dd/yyyy) Select a Payee Amout: $ 30.00 Metro Gas & Electric Fulto Telephoe Co. TRC Cable Service Paymet Accout: 227-7A Click whe you fiish payig bills Date the bill will actually be paid Eter paymet amout Click to select this payee Symbol for a secure Web page After you set up your list of payees, you ca pay bills each moth by simply selectig the payee from the list ad eterig the paymet amout. The bak will remove the moey from your checkig accout ad sed it to the payee s accout. Be sure to record these paymets i your checkbook register. Some baks charge a mothly fee for olie bill paymet privileges. Some limit the umber of bills you ca pay olie each moth. Cosider the fees ad restrictios for olie bakig whe you choose a bak. MAKING DEPOSITS You should complete a deposit slip each time you wat to deposit moey i your accout. Figure 9.4 illustrates a deposit slip. To prepare a deposit slip, follow these guidelies: 1. Isert the date of the trasactio. 2. I the Cash sectio, write i the amout of currecy (paper moey) ad cois you are depositig. 3. If you are depositig checks, write the amout of each check, together with the check s ABA umber (top part of fractio), i the Checks sectio of the slip. 4. Total the currecy, coi, ad check amouts. Write this figure o the Subtotal lie. 190 Uit 2 Moey Maagemet Copyright 2010 Cegage Learig, Ic. All Rights Reserved. May ot be copied, scaed, or duplicated, i whole or i part.
FIGURE 9.4 Deposit Slip DATE FOR DEPOSIT TO THE ACCOUNT OF ARDYS JOHNSON Phoe: 555-0100 4250 West 18th Aveue Chicago, IL 60601-2180 July 15 20 SIGN HERE FOR LESS CASH IN TELLER S PRESENCE - CHECKS CASH 2-51 SUBTOTAL LESS CASH RECEIVED NET DEPOSIT 20 50 200 00 DOLLARS CENTS 220 50 220 50 2-74 710 BE SURE EACH ITEM IS PROPERLY ENDORSED SKY CENTRAL BANK Chicago, Illiois CHECKS AND OTHER ITEMS ARE RECEIVED FOR DEPOSIT SUBJECT TO THE TERMS AND CONDITIONS OF THIS INSTITUTION'S COLLECTION AGREEMENT. 5. If you wish to receive some cash at the time of your deposit, fill i the desired amout o the Less Cash Received lie. 6. If cash is received, subtract it from the subtotal. Write the fial amout of the deposit o the Net Deposit lie. 7. If you will receive cash, write your sigature o the lie above the words Sig here for less cash i teller s presece (this wordig will vary). 8. The teller will give you either a copy of this deposit slip or a receipt. Keep the copy or receipt as proof of your deposit. Checkig accout deposits ca also be made at your bak s ATM machie or i a ight deposit. Be sure the deposit slip is filled out accurately. USING A CHECKBOOK REGISTER A checkbook register is a booklet used to record checkig accout trasactios. Figure 9.5 shows a page from the checkbook register of Ardys Johso. Ardys lists all checks, olie paymets, fees, iterest, ad deposits for her accout. Follow alog i Figure 9.5 as you read the followig guidelies for recordig trasactios i a checkbook register. 1. Record the curret amout i your accout at the top of the Balace colum. (Whe you go to the ext page i your register, copy your accout balace from the bottom of the previous page to the top of the ew page). 2. As soo as you write a check, make a olie paymet, or make a deposit, record the trasactio i your checkbook register. 3. Write the preprited check umber i the first colum. If the trasactio is ot a check, make up a code to represet the kid of trasactio it is, such as DEP for deposit, WD for withdrawal, ON for olie trasactio, SC for service charge, ad INT for iterest. 4. Write the moth, day, ad year of the trasactio i the Date colum. 5. Eter the ame of the payee o the first lie of the Descriptio sectio. O the secod lie, write the purpose of the check or ay descriptio of the trasactio you fid useful. 6. If the trasactio will reduce your balace, write the amout i the Paymet/Debit colum. If the trasactio will add to your balace, record the amout i the Deposit/Credit colum. Chapter 9 Checkig Accouts ad Bakig Services 191 Copyright 2010 Cegage Learig, Ic. All Rights Reserved. May ot be copied, scaed, or duplicated, i whole or i part.
FIGURE 9.5 Checkbook Register CHECK NO. OR TRANSACTION CODE DATE DESCRIPTION OF TRANSACTION PAYMENT/ DEBIT( ) 581 7/1/-- Food Mart $ 36 DEP WD 582 ON SC 7/15/-- 7/16/-- Groceries Deposit Paycheck ATM Withdrawal 7/20/-- Bellvue Apts. Ret 7/22/-- Metro Gas & Electric Olie Paymet 7/31/-- Mothly Accout Fee July 20 600 32 FEE ( ) 1 2.20 00 00 50.20 5.00 DEPOSIT/ CREDIT (+) $ 220 50 $ BALANCE 800 00 36 32 763 68 220 50 984 1 8 20 00 964 1 8 600 20 363 98 32 50 33 1 48 5 00 326 48 192 Uit 2 Moey Maagemet 7. Some baks charge a fee for each check writte. I this case, record the fee i the Fee colum ext to the check. 8. Add the amout of the check to the check fee, ad record the result i the Balace colum. For a deposit, simply repeat the amout i the Balace colum. 9. If the amout is a debit trasactio, subtract it from the previous balace. If the amout is a deposit or other credit trasactio, add it to the previous balace. Write the ew balace o the ext lie of the Balace colum. 10. The colum headed by a check mark is provided so that you ca check off each trasactio whe it appears o your mothly bak statemet. The check mark shows that the trasactio was cleared by the bak ad is o loger outstadig (uprocessed). Always keep your checkbook register hady so you ca write dow the ecessary iformatio each time you make a trasactio. If you do t record it promptly, you could forget a trasactio ad accidetally overdraw your accout. RECONCILING YOUR CHECKING ACCOUNT Fiacial istitutios that offer checkig accouts provide each customer with a mothly statemet. This statemet lists checks received ad processed by the bak, plus all other withdrawals, deposits, service charges, ad iterest. Your caceled checks, or copies of them, may also be icluded with your statemet. The process of matchig your checkbook register with the bak statemet is kow as bak recociliatio. The back of the bak statemet is usually prited with a form to aid you i recocilig your accout. Figure 9.6 represets both sides of a typical bak statemet. The left side of Figure 9.6 is a statemet showig the bak s record of activity o Ardys Johso s checkig accout. The statemet lists all checks that have cleared as well as all withdrawals, olie bill paymets, ad fees that the bak subtracted from the accout. It also shows all deposits added to the balace that moth. After subtractig all debit trasactios ad addig all deposits, the bak arrives at the edig, or curret, balace for the accout. Copyright 2010 Cegage Learig, Ic. All Rights Reserved. May ot be copied, scaed, or duplicated, i whole or i part.
FIGURE 9.6 Bak Recociliatio Bak Statemet Ardys Johso 4250 West 18 th Aveue Chicago, IL 60601-2180 Statemet Date: July 31, 20 Opeig Balace: $800.00 Edig Balace: $926.68 Checks Check No. Date Paid Amout 581 7/4/ 36.12 Debits ad Withdrawals Date Amout Descriptio 7/16/ 20.00 ATM withdrawal 7/22/ 32.50 Olie bill paymet 7/31/.20 Check fee ($0.20 per check) 7/31/ 5.00 Mothly accout fee Deposits Date Amout 7/15/ 220.50 Deposit Descriptio Accout Recociliatio 1. Edig balace show o the bak statemet: 2. Total of all credits ad deposits made but ot show o statemet: 3. Total lies 1 ad 2: 4. List all checks, withdrawals, ad debits made but ot show o statemet: Check No. or Trasactio Code 5. Total of outstadig debit trasactios: 926.68 0 926.68 Amout 582 600 00 SC 20 600.20 6. Subtract lie 5 from lie 3: (Result should match checkbook balace.) 326.48 The balace your checkbook register shows will ot always match the edig balace show o the bak statemet. A check does ot appear o the statemet util the payee has cashed it ad the check completes its route through the bakig system. Sice you recorded the check ad subtracted the amout from your balace whe you wrote it, your balace will be lower tha the bak s util the check clears ad the bak removes the paymet from your accout. As you ca see by comparig Ardys s checkbook register (Figure 9.5) to her bak statemet (Figure 9.6), the edig balaces do ot match. Whe this occurs, you ca check for errors by recocilig your accout. Follow alog o the right side of Figure 9.6 as Ardys recociles her accout. 1. Write the edig balace show o the bak statemet. 2. From your checkbook register, total ay deposits you made that do ot appear o the bak statemet. 3. Add the outstadig deposits to the edig bak balace. 4. List all debit trasactios from your checkbook register that do ot appear o the statemet. Debit trasactios are ay trasactios that reduce your balace, icludig checks, olie bill paymets, withdrawals, ad fees. Ardys listed check #582 ad its check fee, sice these did ot appear o her statemet. 5. Total all outstadig debit trasactios. 6. Subtract the total debits from the previous total. The result should match the balace show i your checkbook register. If the balaces do ot match, check your additio ad subtractio i the recociliatio process. Next, make certai that you have deducted service Chapter 9 Checkig Accouts ad Bakig Services 193 Copyright 2010 Cegage Learig, Ic. All Rights Reserved. May ot be copied, scaed, or duplicated, i whole or i part.
charges from ad added ay iterest eared to your check register balace. For example, Ardys recorded the $5 mothly accout fee i her check register. Check all additio ad subtractio for the period covered by the statemet. Fially, if you still caot recocile your accout, ask a bak represetative for help i discoverig where the error lies. Be sure to take your checkbook, caceled checks, ad bak statemet with you. Do the recociliatio immediately upo receipt of the bak statemet. This will allow you to report ay problems to the bak as soo as possible. Occasioally the bak does make a error, which it will correct whe you report the mistake. You ca also view your curret balace ad all trasactios with olie bakig. ENDORSING CHECKS A check geerally caot be cashed util it is edorsed. Whe two or more people are amed as payees, all must edorse the check if the ames are separated by ad. If the ames are separated by or, oly oe perso must edorse it. To edorse a check, the payee amed o the check sigs the top part of the back of the check i ik. There are three major types of edorsemets. Blak Edorsemet A blak edorsemet is the sigature of the payee writte exactly as his or her ame appears o the frot of the check. Doald MacLae If Doald s ame had bee writte icorrectly o the face of the check, he would correct the mistake by edorsig the check with the misspelled versio first ad the with the correct versio of his ame, as show here. Doald McLai Doald MacLae 194 Uit 2 Moey Maagemet Special Edorsemet A special edorsemet, or a edorsemet i full, is a edorsemet that trasfers the right to cash the check to someoe else. It cosists of the words Pay to the order of [ew payee s ame] ad the sigature of the origial payee. I the followig illustratio, for example, Doald MacLae uses a check writte to him to pay a debt owed to Diae Joes. By usig a special edorsemet, Doald avoids havig to cash the check before repayig Diae. Copyright 2010 Cegage Learig, Ic. All Rights Reserved. May ot be copied, scaed, or duplicated, i whole or i part.
Pay to the order of Diae Joes Doald MacLae Restrictive Edorsemet A restrictive edorsemet restricts or limits the use of a check. For example, a check edorsed with the words For Deposit Oly above the payee s sigature ca be deposited oly to the accout specified. The restrictive edorsemet is safer tha the blak edorsemet for use i mailig deposits, i ight deposit systems, or i other circumstaces that may result i loss of a check. If a check with a restrictive edorsemet is lost, the fider caot cash it. For Deposit Oly Uited Califoria Bak Acct. #8-2011-4 Doald MacLae TYPES OF CHECKING ACCOUNTS Fiacial istitutios offer may types of checkig accouts. You should carefully study your optios, because a wise choice ca save you moey. Most baks still offer free checkig (o service fees) accouts. These accouts do ot pay iterest ad may come with certai coditios. For example, you may be required to maitai a certai balace or limit your use of teller services. Free checkig is also available to seior citizes, oprofit groups, ad to others durig special bak promotios. JOINT ACCOUNTS Accouts ca be either joit or idividual. A joit accout is opeed by two or more people. Such a accout is also called a survivorship accout because ay perso who sigs o the accout has the right to the etire amout deposited. If oe perso usig the accout dies, the other (the survivor) the becomes the sole ower of the fuds i the accout. Photodisc/Getty Images Why might a perso ope a joit accout? Chapter 9 Checkig Accouts ad Bakig Services 195 Copyright 2010 Cegage Learig, Ic. All Rights Reserved. May ot be copied, scaed, or duplicated, i whole or i part.
SPECIAL ACCOUNTS Most baks offer a special checkig accout to customers who have a small amout of activity i their accouts each moth. Service fees are charged at a flat rate per moth with a additioal fee for each check writte (for example, $8 per moth plus 15 cets for each check cashed). I some istaces, baks may charge service fees oly whe the umber of checks writte or deposits made i a moth exceeds a set limit (such as more tha te checks or three deposits i a give moth). If you write oly a few checks each moth, this type of accout might be right for you. Aother type of special accout assesses a small or o mothly fee, but charges for each teller service. If you make a deposit or withdrawal at a teller statio, you will be assessed a fee for the persoal service. This type of accout is good for people who have their paychecks electroically deposited by their employers ad who use ATMs for most of their withdrawals ad other trasactios. STANDARD ACCOUNTS A stadard accout usually has a small or o mothly service fee ad o percheck fee. To avoid a mothly service fee, you are usually required to maitai a average miimum balace i the accout. May baks offer a package of services for this type of accout, such as free traveler s checks, a ATM card, or a free safe deposit box. Some baks offer reduced iterest rates o credit card balaces to customers who also have checkig, savigs, ad other accouts at their bak. INTEREST-BEARING ACCOUNTS Most fiacial istitutios offer checkig accouts that ear iterest. With these accouts, your accout balace usually must ot fall below a miimum average set by the bak durig ay moth. The miimum may be $500 or more. Iterest rates rise ad fall with ecoomic coditios. Whe overall iterest rates drop, you may receive less tha 1 percet. Whe overall Omaha State Bak operates several braches o the west side of Omaha, Nebraska. The bak offers its customers a wide array of checkig accout choices. Access www.cegage.com/school/pfiace/mypf ad click o the lik for Chapter 9. Browse the site ad review the optios for the various plas. (Hit: Uder Deposits, click the Checkig lik.) The aswer: Which accout requires the smallest miimum balace? What is the mothly maiteace fee for the Prime Time Checkig accout, ad whe does it apply? Does the Ultimate Choice pla allow ulimited check writig? If you wated to ope a checkig accout at Omaha State Bak, which accout would you choose? Why? www.cegage.com/school/pfiace/mypf iterest rates rise, you might expect 5 percet or more. A moey market accout is a iterest-bearig checkig accout that pays a higher rate of iterest, but it usually has more restrictios. SHARE ACCOUNTS Most credit uios offer share accouts. These are checkig accouts with low (or o) average daily balace requiremets ad, geerally, o service fees. If you are eligible for credit uio membership, this type of accout may be the least expesive ad most coveiet optio. 196 Uit 2 Moey Maagemet Copyright 2010 Cegage Learig, Ic. All Rights Reserved. May ot be copied, scaed, or duplicated, i whole or i part.
Plaig a Career i... Accoutig Accoutats are aalytical ad traied to keep good, accurate records. They work i compaies, for idividual cliets, ad for govermet uits. Their jobs focus o iformatio preparig, aalyzig, ad verifyig it. Through audits ad verificatio procedures, accoutats esure that accuracy stadards are met. May people deped o the itegrity of the iformatio reported by busiesses. Accoutats esure that a orgaizatio reports its results of operatios ad curret fiacial coditio i a full ad trasparet maer. Employmet Outlook l l Strog growth i overall employmet through 2016 is expected. CPAs will experiece the highest demad; growth at 18 percet is faster tha average for all occupatios. Job Titles l l l l l Certified public accoutat (CPA) Govermet accoutat Iteral auditor Maagemet accoutat Foresic accoutat Needed Skills l l Bachelor s degree i accoutig or related field, with CPA desigatio ad four years experiece is preferred. Excellet commuicatio skills; attetio to detail ad accuracy. l Excellet techology skills, icludig proficiecy i accoutig, tax, ad spreadsheet software. What's it like to work i... Accoutig Bill works may 12-hour days as a juior accoutat. He plas to become a juior parter withi 5 years ad a full parter withi 15 years. That meas log days learig the itricacies of fiacial audits, iformatio cosultig, ad tax laws. Bill took ad passed the CPA exam right after college graduatio. Whe he completed two years of work experiece with a CPA, he was grated the CPA desigatio, which ow hags proudly o the wall at the accoutig firm. Bill ejoys meetig with his firm s cliets ad discussig their eeds, both i terms of reportig ad assessig their busiess operatios effectively, ad i terms of plaig the security of their assets ad busiess iformatio. He kows that it is critical for busiesses to protect their iformatio system as well as use it effectively to make good ecoomic decisios. What About You? Would you cosider a career i accoutig? Are you aalytical ad detail-orieted? Do you like workig with people? How do ethics affect those workig i this field? Chapter 9 Checkig Accouts ad Bakig Services 197 Copyright 2010 Cegage Learig, Ic. All Rights Reserved. May ot be copied, scaed, or duplicated, i whole or i part.
9.1 Assessmet KEY TERMS REVIEW Match the terms with the defiitios. Some terms may ot be used. 1. A type of bak accout from which fuds may be withdraw at ay time 2. A booklet used to record checkig accout trasactios 3. A edorsemet that trasfers the right to cash a check to someoe else 4. Writig a check ad hopig to cover it with a deposit before it clears 5. A check that has cleared your accout 6. A writte order to a bak to pay the amout stated to the perso or busiess amed o it 7. A check writte for more moey tha your accout cotais 8. A edorsemet that limits the use of a check a. bak recociliatio b. blak edorsemet c. caceled check d. check e. checkbook register f. demad deposit g. floatig a check h. overdraft i. restrictive edorsemet j. special edorsemet 9. The process of matchig your checkbook register with the bak statemet CHECK YOUR UNDERSTANDING 10. What is a overdraft? Why is it importat to avoid it? How ca keepig a checkbook register up to date help? 11. Name five types of checkig accouts available at may baks. 198 Uit 2 Moey Maagemet APPLY YOUR KNOWLEDGE 12. Usig a blak piece of paper, prepare three edorsemets blak, special, ad restrictive. Label each oe ad explai whe it would be used. THINK CRITICALLY 13. Explai why it is importat to protect your ow accout umber by shreddig uused deposit slips ad voided checks. 14. A checkig accout offers you coveiece for bill payig. May people choose to use cash oly. Which viewpoit do you agree with? Why? 15. Bak recociliatio allows you to catch errors i your accout your ow ad the bak s. May people do ot take time to recocile their accouts. Is this okay? Why or why ot? Copyright 2010 Cegage Learig, Ic. All Rights Reserved. May ot be copied, scaed, or duplicated, i whole or i part.
9.2 Bakig Services ad Fees GOALS Describe bakig services available at most fiacial istitutios. List ad explai fees charged by fiacial istitutios for their services. TERMS certified check, p. 199 cashier s check, p. 199 traveler s checks, p. 200 debit card, p. 200 overdraft protectio, p. 201 electroic fuds trasfer (EFT), p. 201 stop-paymet order, p. 201 safe deposit box, p. 202 BANKING SERVICES A full-service bak is oe that offers every possible kid of service, from savigs ad checkig accouts to credit cards, safe deposit boxes, loas, ad ATMs. Other services commoly offered are olie bakig, telephoe bakig, certified checks, cashier s checks, moey orders, ad debit cards. Most baks offer FDIC (Federal Deposit Isurace Corporatio) isurace, which protects the deposits of customers agaist loss up to $250,000 per accout. GUARANTEED-PAYMENT CHECKS A certified check is a persoal check that the bak guaratees or certifies to be good. Sometimes a payee might wat you to get your persoal check certified to reduce the risk of acceptig your check for paymet. For example, if you buy a used car from someoe, the ower might wat a certified check before allowig you to take the car. To get a check certified, write your check i the ormal maer. The take it to your bak. A bak officer will immediately deduct the amout from your checkig accout, stamp the word certified o the check, ad iitial it. I effect, the bak holds i reserve the check amout from your accout for specific paymet of that check. Most fiacial istitutios charge the accout holder for this service. Typically, the fee rages from $2.50 to $5.00 per check. A cashier s check, also called a bak draft, is a check writte by a bak o its ow fuds. You ca pay for a cashier s check through a withdrawal from your savigs or checkig accout, or i cash. After receivig your paymet, the teller makes out the cashier s check to your payee, ad a officer of the bak sigs it. Cashier s checks are geerally used whe the payee requires a guarateed paymet but cash is ot desirable. A cashier s check also ca be used for trasactios i which you wish to remai aoymous. The bak is listed as the maker of the check, ad your idetity eed ot be revealed. As with certified checks, may baks charge a fee for issuig cashier s checks. Chapter 9 Checkig Accouts ad Bakig Services 199 Copyright 2010 Cegage Learig, Ic. All Rights Reserved. May ot be copied, scaed, or duplicated, i whole or i part.
GLOBAL View Wome s World Bakig (WWB) is a oprofit orgaizatio based i New York that is committed to expadig the ecoomic assets, participatio, ad power of low-icome wome as etrepreeurs ad ecoomic agets. WWB supports a etwork of fiacial orgaizatios that provide wome with easier access to fiace, kowledge, ad markets. WWB has more tha 23 millio ed users (wome borrowig moey) who are low-icome borrowers. The etwork of orgaizatios fiaces small busiess loas ad health isurace to help icrease family icomes, improve utritio ad health, raise educatio stadards, ad reduce poverty aroud the globe. THINK CRITICALLY How ca WWB help reduce poverty by makig small busiess loas? May fiacial istitutios also provide traveler s checks for their customers. Traveler s checks are check forms i specific deomiatios that are used istead of cash while travelig. May busiesses that will ot accept a out-ofstate persoal check will accept a traveler s check for paymet. Whe traveler s checks are purchased, moey is take from your bak accout to cover them. You sig each traveler s check i oe place immediately upo purchase. Whe cashed, you preset idetificatio ad sig i aother place. Traveler s checks are safer tha carryig cash, sice they are payable oly upo compariso of the purchaser s edorsemet agaist the origial sigature o the check. MONEY ORDERS Baks sell moey orders to people who do ot wish to use cash or do ot have a checkig accout. A moey order is like a check, except that it ca ever bouce. There is a charge for purchasig a moey order. It ca cost from 50 cets to $5 or more, depedig o the amout of the moey order. You also ca purchase moey orders through the post office ad local merchats. DEBIT CARDS A debit card is a plastic card that deducts moey from a checkig accout almost immediately to pay for purchases. The debit card is preseted at the time of purchase. Whe a debit card is used, the amout of the purchase is quickly deducted from the customer s checkig accout ad paid to the merchat. The debit card trasactio is similar to writig a check to pay for purchases. The issuig bak may charge a aual fee for the card or a fee for each trasactio. A debit card is ot the same as a credit card. No credit is exteded. Istead, paymet occurs istatly because fuds are quickly withdraw from your checkig accout. Debit cards ca also be used for cash withdrawals at ATMs. Be sure to record these trasactios i your check register. BANK CREDIT CARDS You ca apply to a full-service bak for a bak credit card, such as a Visa or MasterCard. If you meet the requiremets ad are issued a card, you ca use it istead of cash at ay busiess that accepts credit cards. Baks offerig 200 Uit 2 Moey Maagemet Copyright 2010 Cegage Learig, Ic. All Rights Reserved. May ot be copied, scaed, or duplicated, i whole or i part.
atioal credit cards usually charge both a aual fee for use of the card ad iterest o the upaid accout balace. The topics of credit ad credit cards will be discussed i detail i Uit 4. OVERDRAFT PROTECTION Overdraft protectio allows you to cover checks or withdrawals up to a specified amout, usually betwee $100 ad $1,000, depedig o the typical balace i your accout. With overdraft protectio, your checks will be covered eve if you have isufficiet fuds i your checkig accout. Protectio may be offered i the form of a istat loa with high iterest rates. Other baks may charge a flat fee. With some overdraft-protectio agreemets, the amout of the overdraft may be pulled from your savigs accout or charged to your bak credit card. Baks may charge trasfer fees for this type of protectio. AUTOMATED TELLER MACHINES May baks provide ATMs for their customers. At a ATM, you ca make cash withdrawals (usig your debit card) from your checkig or savigs accout. Usig a Visa or MasterCard, you ca receive a cash advace electroically. To use 24-hour ATMs, you must have a card that is electroically coded. You also must kow your persoal idetificatio umber (PIN), which usually is some combiatio of umbers ad letters. For safety, do ot carry your PIN i writte form. Commit it to memory. ONLINE AND TELEPHONE BANKING Most fiacial istitutios offer olie ad telephoe bakig services to their customers. These services give you the ability to access your accouts from a computer or telephoe, trasfer moey from oe accout to aother, ad pay bills by authorizig the bak to disburse moey. You ca fid out your curret balace, what checks have cleared, ad which deposits have bee etered. Olie ad telephoe bakig eable you to access your accout aytime, day or ight. Most baks also allow ad ecourage electroic trasfers of moey. A electroic fuds trasfer (EFT) uses a computer-based system that eables you to move moey from oe accout to aother without writig a check or exchagig cash. This ca be doe by telephoe, by computer, or i perso. Moey is available immediately (there is o delay as with waitig for a check to clear). Electroic trasfers ca also be made betwee bakig istitutios, ad fuds are available immediately. STOP-PAYMENT ORDERS A stop-paymet order is a request that the bak ot hoor a specific check. The usual reaso for stoppig paymet is that the check has bee lost or stole. By issuig a stop-paymet order, the check Photodisc/Getty Images Why do people use automated teller machies? Chapter 9 Checkig Accouts ad Bakig Services 201 Copyright 2010 Cegage Learig, Ic. All Rights Reserved. May ot be copied, scaed, or duplicated, i whole or i part.
writer ca safely write a ew check, kowig that the origial check caot be cashed if it is foud ad preseted to the bak. Most baks charge a fee (usually $20 or more) for stoppig paymet o a check. The stop-paymet order is usually good for oly six moths. After that, the check will o loger be hoored because checks over six-moths old are ot valid for cashig or depositig. SAFE DEPOSIT BOXES Fiacial istitutios offer customers a safe deposit box to store valuable items or documets. They charge a yearly fee based o the size of the box. Aual retal fees may rage from $50 $150 or more. The customer is give two keys for the box. The bak will also have a key. Both the customer s key ad bak s key must be used to ope the box. Documets commoly kept i a safe deposit box are birth certificates, marriage ad death certificates, deeds ad mortgages, ad stocks ad bods. Jewelry, coi collectios, ad other small valuables also are commoly stored there. Keepig importat documets ad other items i a safe deposit box esures that the items wo t be stole, lost, or destroyed. Documets that ca be easily replaced with a duplicate eed ot be stored there. Whe you ret a safe deposit box, you will fill out a sigature card. The each time you eter your safe deposit box, you must sig a form so that your sigature ca be compared to the oe o file. This procedure prevets ulawful etry to your box by a uauthorized perso. LOANS AND TRUSTS Fiacial istitutios also make loas to fiace the purchase of cars, homes, vacatios, home improvemets, ad other items. Baks ca also provide advice for estate plaig ad trusts. (You ll lear more about estates ad trusts i Chapter 15.) I additio, baks ca act as trustees of estates for miors ad others. A trustee is a perso or a istitutio that maages property for the beefit of someoe else uder a special agreemet. NOTARY PUBLIC A otary public verifies a perso s idetity, witesses the perso s sigature o a legal documet, ad the otarizes the sigature as valid. Fiacial istitutios typically have a perso o their staff who is a otary public. This perso provides otary services for accout holders, usually without charge. For ocustomers, however, there is typically a small fee. FINANCIAL SERVICES May baks offer fiacial services to their depositors, such as purchasig or sellig savigs bods ad ivestmet brokerage services. You may buy ad sell stocks ad bods through the brokerage service. The purchases ad sales are cleared through your checkig or savigs accouts with the bak. Brokerage services will be discussed i Chapter 12. May baks also purchase a block of bods (debt obligatios) that they allow their members ad depositors to purchase. Geerally there is o additioal fee to buy or sell these securities (the fee is icluded i the purchase price). However, a miimum purchase such as $1,000 is ofte required. 202 Uit 2 Moey Maagemet Copyright 2010 Cegage Learig, Ic. All Rights Reserved. May ot be copied, scaed, or duplicated, i whole or i part.
BANK FEES Baks charge fees to their customers to help cover their operatig costs. For example, whe a bak grats you a loa, it charges you a loa fee. Whe the bak acts as the trustee of a estate, it charges a fee for this service. Baks also charge ocustomers for services such as check cashig. If you wat to cash a check at a bak where you do ot have a accout, the bak may charge you a fee or refuse to cash the check. Nodepositors pay for other services that may be free to depositors, such as traveler s checks ad otary services. Uder the Truth-i-Savigs Act (1993), checkig advertised as free must carry o hidde charges or coditios. The bak or savigs istitutio caot charge regular maiteace or per-check fees or require balace miimums to avoid fees. However, it still may charge for a box of checks ad for ATM trasactios. Most baks charge these fees to their customers who have checkig accouts: Mothly service fees, averagig $5 to $15 Overdraft fees of $25 to $30 per evet NSF check charges of $25 to $30 per evet ATM fees of $1 to $5 per trasactio Safe deposit box fees of $50 to $150 per year Uless you have a regular checkig accout, you may also be charged fees for teller services, accout balaces that fall below the stated miimum, cashier s ad certified checks, traveler s checks, otary services, ad olie bill paymet services. I additio, some baks charge a fee to retur caceled checks. The best way to avoid fees is to choose the right kid of accout. For example, if you eed to write a large umber of checks each moth, sig up for a accout that does ot charge a per-check fee. Some accouts charge a fee for usig a teller. Oly sig up for such a accout if you have your paycheck directly deposited by your employer ad ca do almost all of your trasactios olie or by ATM. Shop aroud ad fid the accout that is right for you. Be aware of the rules of your accout, so that you do t violate them, resultig i high fees. If your accout requires a miimum balace, pla eough cushio so that your balace will ot drop below that amout. Oe way to avoid service charges is to have more tha oe accout ad to lik them together. For example, if you have a retiremet savigs accout, it ca be liked to your checkig accout. The combied balaces of your retiremet accout ad checkig accout ca give you the miimum balace you eed to avoid service fees o your checkig accout. Photodisc/Getty Images Why is it importat to kow the rules i your bak accout agreemet? Chapter 9 Checkig Accouts ad Bakig Services 203 Copyright 2010 Cegage Learig, Ic. All Rights Reserved. May ot be copied, scaed, or duplicated, i whole or i part.
ISSUES IN YOUR WORLD SHOPPING FOR THE RIGHT BANK A checkig accout is a persoal choice. Some people choose the bak closest to their home or work. Others choose the biggest bak or the oe with the most ATMs. While all of these are good reasos, there are may other cosideratios i choosig your bak. Sometimes the best choice is a credit uio where you ca have the same services ad possibly lower fees. Fidig the right bak ca take a lot of time. All baks ad services are ot the same; they vary a great deal. A good way to start is to make a list of the features that are importat to you. Rak them 1 to 10. For example, #1 may be a low iterest rate o a Visa card; #2 may be a low miimum deposit for a free or iterest-bearig accout; ad #3 may be low or o service fees. Arrage your features ito a table, either o paper or i a word processor or spreadsheet. At the top, list the baks that you are cosiderig. Your table might look like this: Bak 1 Bak 2 Bak 3 Free olie bill paymet Low/o miimum deposit Low/o service fee Olie bakig available Low-cost credit card available Coveietly located ATMs Fill i your table by isertig iformatio you fid out about the differet baks. The compare iformatio to determie which bak overall provides the best services at the lowest costs for you. THINK CRITICALLY 1. Which is your favorite bak or credit uio? Why? 2. What features do you thik are the most importat whe choosig a fiacial istitutio for your checkig accout? 3. What would cause you to switch from oe fiacial istitutio to aother? 204 Uit 2 Moey Maagemet Copyright 2010 Cegage Learig, Ic. All Rights Reserved. May ot be copied, scaed, or duplicated, i whole or i part.
9.2 Assessmet KEY TERMS REVIEW Match the terms with the defiitios. 1. Check forms i specific deomiatios that are used istead of cash while travelig 2. A request that the bak ot hoor a specific check 3. A plastic card that deducts moey from a checkig accout almost immediately to pay for purchases 4. A persoal check that the bak guaratees to be good 5. A computer-based system that moves moey from oe accout to aother without writig a check or usig cash 6. A check writte by a bak o its ow fuds a. cashier s check b. certified check c. debit card d. electroic fuds trasfer e. overdraft protectio f. safe deposit box g. stop-paymet order h. traveler s checks 7. A place at your bak available to store valuable items or documets 8. A bak service that covers checks eve if you have isufficiet fuds i your checkig accout CHECK YOUR UNDERSTANDING 9. List five bakig services that are foud at full-service baks. 10. List bak fees charged to customers ad to ocustomers for services provided. APPLY YOUR KNOWLEDGE 11. Checkig accouts may have may good features, such as overdraft protectio. List bakig services that appeal to you ad idicate whether each is of high, medium, or low value. Would you be willig to pay a mothly service fee to have the service? THINK CRITICALLY 12. Whe customers write too may bad checks, baks may close their accouts. It may be difficult for such a perso to get a accout at aother bak. Do you agree with the baks actios? Why or why ot? 13. May people feel that bak fees are too high. They believe that baks make moey off of accout deposits but pay depositors isufficiet iterest for use of their moey. Do you agree? Why or why ot? Chapter 9 Checkig Accouts ad Bakig Services 205 Copyright 2010 Cegage Learig, Ic. All Rights Reserved. May ot be copied, scaed, or duplicated, i whole or i part.
9 Chapter Assessmet SUMMARY 9.1 A checkig accout is a demad deposit that provides a safe, coveiet way to pay bills. To ope a checkig accout, fill out a sigature authorizatio form ad make a deposit. To write a check, fill i the curret date, ame of the payee, ad the amout i figures ad words. The sig the form. As soo as you make a checkig trasactio, record it i your checkbook register. A caceled check is oe that has bee cleared, or processed by your bak ad deducted from your accout. If you float a check, you are riskig the possibility of a overdraft o your accout, sice today s electroic systems process checks so quickly. Recocile your bak statemet with your register each moth ad correct ay errors. To cash a check, you must edorse it with a blak, special, or restrictive edorsemet. 9.2 Certified checks ad cashier s checks are guarateed by the bak to be paid. Traveler s checks provide a readily acceptable ad safe form of paymet for people who are travelig. You ca pay for purchases or make ATM trasactios usig a debit card, which allows immediate deductios from your checkig accout. With overdraft protectio, your checks will be covered eve if you have isufficiet fuds i your checkig accout. Olie ad telephoe bakig eable you to make electroic trasfers ad access your accout 24 hours a day. A stop-paymet order is a request that the bak ot hoor a specific check. Fiacial istitutios offer safe deposit boxes for customers to store valuable items or documets. To avoid high bak fees, choose the type of accout that best fits your eeds ad follow the accout rules. 206 Uit 2 Moey Maagemet Copyright 2010 Cegage Learig, Ic. All Rights Reserved. May ot be copied, scaed, or duplicated, i whole or i part.
APPLY WHAT YOU KNOW 1. Usig Figure 9.2 as a example ad followig the guidelies o pages 188 189, write these checks: Check No. 12 to Melvi Quigly for $34.44, writte today. Check No. 322 to Save-Now Stores for $15.01, writte today. The purpose of your check is to buy school supplies. Check No. 484 to M.A. Rosario for $91.10, writte today. Note: Blak checks are available i the Studet Activity Guide. 2. Usig Figure 9.4 as a example ad followig the guidelies o pages 190 191, prepare these deposit slips: Today s date; currecy $40.00; cois $1.44; ABA No. 18-81 for $51.00; o cash received back with the deposit trasactio. Today s date; ABA No. 40-22 for $300.00 ad ABA No. 24-12 for $32.00; $20.00 cash received back with the deposit trasactio. Note: Blak deposit slips are available i the Studet Activity Guide. 3. Usig Figure 9.6 as a example, determie your edig recociled checkbook balace whe all of the followig six coditios exist: Your edig checkbook balace is $311.40 before the mothly accout fee (service charge) is deducted. You made a math error, resultig i $30.00 less showig i your accout tha should be. The mothly accout fee is $6.00. The edig bak balace is $402.00. Outstadig deposits total $100.00. Outstadig checks total $166.60. MAKE ACADEMIC CONNECTIONS 4. Commuicatio Write a oe-page paper discussig bak services ad fees ad how the bakig idustry depeds o chargig fees to its customers to make a profit. Also discuss other ways that baks make moey ad ways depositors may avoid fees. 5. History Today s bakig system has a log history. Use the Iteret to research the roots of U.S. bakig. Write a report explaiig why baks were created. Describe the first baks ad discuss ay laws that helped lay the foudatio for today s baks. 6. Iteratioal Studies Coduct olie research to explore bakig systems i foreig coutries. How are they similar to ad differet from the U.S. bakig system? Do they deped as much o electroic trasfers ad ATMs? Do customers pay bills o the Iteret? Is there as much Iteret fraud, such as idetify theft, i foreig coutries as there is i the Uited States? 7. Techology Visit a bak web site that offers olie bill paymet. Write a summary of how the process works. How do you set up your list of payees? Share your summary with the class. Chapter 9 Checkig Accouts ad Bakig Services 207 Copyright 2010 Cegage Learig, Ic. All Rights Reserved. May ot be copied, scaed, or duplicated, i whole or i part.