Checking Accounts - Strongsville City Schools



Checking Accounts

Module 5A, pp. 3-21

I. Checking Accounts

• Demand Deposit Account (DDA)

• When you demand the bank to transfer money from your bank account to “Kmart” for a purchase

• Use when spending money frequently (at least once/week)

A. BENEFITS:

• Don’t have to carry large amounts of cash on you

• Can be traceable

• Can receive interest from the bank

• Can have easy access to spending the money in the account without having to carry it with you all the time

• Canceled checks serve as a proof of payment

• Safe to put in the mail (vs. cash)

• Float period – the length of time it takes for an amount to get deducted from your bank account from the time you wrote the check; allows money to stay in account for 7-10 days (if not used as a debit card transaction)

• Insured by the FDIC (up to $250,000 per account)

• Can pick out funky check designs! (

B. DOWNFALLS:

• Money is not immediately deducted from your account, so bank balances may be inaccurate (because of “float”)

• Not readily accepted out of state or internationally

• Monthly service charges usually apply (none if a minimum balance is maintained)

• Must purchase the checks (box of 100 checks,4 books of 25 checks)

II. OPENING A CHECKING ACCOUNT:

• $50 minimum (usually) + free prizes! (

• Identification needed (Social Security Card, photo I.D.)

• Security Questions – Watch out when giving mother’s maiden name!

• Sign a “signature card” to prove what your signature looks like – must always sign each check in this “exact” way! :o)

• Use your middle initial if have a common name

• Can open up with a spouse (“joint account”)

• Must be a min. of 18 yrs. of age unless w/a parent

III. USING A CHECKING ACCOUNT:

• Temporary Checks – must complete all your personal information on each check used (p. 10)

• Personalized Checks – may take weeks to receive

• Personalized Deposit Tickets – come in the check pack, after 25 checks (4 books in a box)

• Checkbook Register – must use this log to keep track of all transactions (deposits + withdrawals) on the account

o ALL TRANSACTIONS ARE RECORDED in the register, NOT just checks!

o Use “codes” to identify each type of transaction (see below)

o Need to “balance” or reconcile your checking account once a month, when you receive your bank statement

o Always keep a running balance to be sure there is enough money in the account to cover any checks that you write!

o Can use a single-line method or a double-line method!

A. Deposits – $$ added into a bank account

e.g. Interest, cash, checks, electronically transferred paychecks

B. Withdrawals – $$ deducted/subtracted from a bank account

e.g. Service Charges (fees), checks, debit card transactions, automatic payments

IV. USING DEBIT CARD or WRITING A CHECK

A. Complete check register first

B. On check, write date – month & day only (8-12 or 8/12)

C. Fill in COMPANY name or PAYEE

D. Fill in amount of debit or withdrawal

E. Using a calculator, calculate a new balance

V. CASHING A CHECK:

• When a check has been written to YOU & you are receiving/depositing the money

• Must endorse (sign) the back of the check!!

• If your name has been misspelled, check can still be cashed! Listen how . . .

• Must have a bank account with the bank in order to cash a check . . . sometimes, you must have a balance in the account for at least the amount of the check (if you want cash back)

If you want CASH from your checking account & don’t have your ATM Card, write a check made out to “Cash” while standing at the teller window.

VI. MAKING DEPOSITS:

• Complete the pre-printed deposit slip located at the back of your checkbook OR complete a blank one located in the bank’s lobby

• ABA (American Banking Association) Number – a fraction or hyphenated number on the front of the check on the upper right corner. It identifies the bank branch. Write this on the deposit ticket

• If depositing the entire amount of the check(s), do NOT sign the deposit slip on the front

• If asking for a portion of money back from the total amount of the check(s) deposited, then SIGN the deposit slip on the front

• Never SIGN THE BACK of a deposit slip

• Endorse (signing the back of) the check while standing in front of the teller (never at home)

• If making a deposit via the ATM there could be a delay in getting it posted to your account

• NEVER deposit cash into an ATM

VII. WHEN YOU DEBIT or WRITE A CHECK:

1. Complete the register prior to completing the check

2. Complete the register from LEFT to RIGHT:

• Check number OR the code

• Date 10-2 or 10/2 (no year needed)

• Who you are paying (company name) -- PAYEE

• Amount of the transaction (check or deposit) – 2 columns: one for withdrawals; one for deposits

• Calculate a new account balance – 3rd column

3. It is a legal document used to transfer money from one bank account to another

VIII. TRANSACTION CODES (use in the check register):

• Check Number -

• DEP = Deposit +

• DEBIT or DC = Debit card transaction -

• INT = Interest +

• FEE or SC = Fee or Service Charge -

• EFT = electronic funds transfer + or -

• AUTO or AP = Monthly, Automatic payment for a bill -

• ON = Online payment for a bill -

• TT = Telephone transaction + or -

• WD = Withdrawal -

• ATM = Automated Teller Machine transaction (either withdrawal or deposit) + or -

ATM Card

• A card that is attached to the “funds” of your checking [or savings] account

• Can be used worldwide to access your money to get CASH/currency

• Must enter a PIN (Personal Identification Number) into an ATM machine to access your accounts

DEBIT Card

• A card that is attached to the “funds” of your account

• Amounts get deducted immediately from your account when used.

• Can be used at stores when making purchases

• If it has a MasterCard or Visa symbol on it, can be used as a “credit” card

Debit Card vs. Credit Card? Always say CREDIT

TRADITIONAL CREDIT CARD: using someone else’s (bank) money for 30 days then paying it all back when they bill you for it—NOT attached to your DDA account!!

PAYEE – the person RECEIVING the money/check; they cash or deposit the check to get the money

PAYER (Drawer) – the person completing the check (spending the money); the employer or boss of the account

DRAWEE – the bank where the account is held; the employee of the payer

IX. GOOD HABITS WHEN WRITING A CHECK:

• Always use non-erasable blue or black ink

• Write legibly – use cursive or print

• Don’t leave extra space before or after your writing – fraudulent activity can occur! Always start at the FAR LEFT! If there’s empty space, fill in with a line

• Use the current date + the YEAR!

• Avoid making a check payable to CASH unless you are standing in a bank

• Utilize the “Memo” area to explain why the check was written (the purpose)

• If you make a small mistake on a check, draw ONE line through the incorrect portion, correct the mistake, & INITIAL it

• If digits don’t match the amount written in words, bank will cash check based on the WORDS

• Checks made out to Cash should only be done in front of a bank teller; if the check gets lost, ANYONE can cash it!

POSTDATED CHECK – dating the check with a future date on it (banks & other companies don’t pay attention to this & will deposit the check immediately upon receipt)

VOIDED CHECK – when you make a mistake on a check & you don’t want to continue completing it; you DON’T present it to the payee. Rip out the signature area

CLEARED or CANCELLED CHECK – a check that the bank has processed & the amount has been deducted from your account to the Payee; keep these as “proof of payment” for your bills & expenses.

“OUTSTANDING” CHECK or DEPOSIT – a transaction (check or deposit) that has not shown up on a bank statement yet; YOU KNOW about the transaction but the bank does not know about its existence so the bank balance doesn’t include it; has NOT CLEARED yet

BOUNCED CHECK/NonSufficient Funds (NSF) – when you present a check to someone as payment but you didn’t have enough money in the account to transfer to his or her account. Bank charges $30+ for each time a NSF check is presented.

OVERDRAWING YOUR ACCOUNT / OVERDRAWN ACCOUNT – Spending beyond what the account balance is; an account that has a negative balance

FORGERY – when someone signs another person’s name on a check or completes a check from an account that they don’t own

STALE CHECK – a check written & dated 6 or more months ago; not able to be cashed anymore; IF it’s an ON-LINE BANKING check, they are stale after 30 or 60 days.

STOP PAYMENT ORDER – asking the bank NOT to pay a check that has already been presented to the Payee (the check may be LOST in the mail). There is a $20+ charge to do this PER CHECK.

RETURNED CHECK – a check that was NOT able to be processed & deducted from the drawer/payer’s account (stop payment, bounced, closed account, stale).

ENDORSEMENTS – a signature or instructions written on the BACK of a check to authorize the bank what to do with it; when looking at a written check, flip it over, then sign on the LEFT side of the back of the check in ink. When you receive a check from someone & want to cash it, you must endorse it 1st!!

1. Blank Endorsement – the most “unsafe;” only a signature of the payee is written on the back. Use if you want a bit of cash back for yourself.

2. Restrictive Endorsement – The purpose of the transfer of monies is given, when entire check amount is being deposited into your checking account

e.g. “For Deposit Only” (top line), “to Acct # . . . ” (2nd line), then sign your name (3rd line)

3. Special Endorsement (‘endorsement in full’) – transferring the check to someone OTHER than the payee, written on the front of the check

e.g. “Pay to the order of . . . “ then sign your name

X. BANK STATEMENTS:

• Received once per month

• Reconciliation must occur! The balances shown on a bank statement will NEVER match up to the balance you show on your check register.

• Lists:

o Dollar amounts of checks cashed/cleared & the dates they “cleared”

o Dollar amounts of withdrawals on the account (ATM, debit card transactions, etc.) & the dates they were posted

o Dollar amounts of deposits on the account (automatic deposits, etc.) & the dates they were posted

o The beginning & ending balances for the month

o Any service charges or fees withdrawn from your balance

o Any interest that you may have earned during the month

XI. RECONCILIATION (Reconciling):

• Comparing the bank statement transactions with those written in your checkbook register

• After completing reconciliation, the ending balance on the bank statement must be equal to the ending balance in the check register

• FOLLOW the steps to reconciling your account!

• It is VERY IMPORTANT to “balance/reconcile” your checkbook each & every month!!

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