Banking Basics

Getting the ideaBanks have different types of accounts for your

money. A bank account earns interest if the bank pays you an additional amount each month for keeping your money at the bank.

A checking account is used to pay bills and earns little or no interest.

A savings account is used to save money and always pays you some amount of interest.

Checking Accounts

When you open a checking account you receive:• Checkbook: holds your checks, the register,

and usually deposit slips.• Register: used to record the checks you write,

withdrawals you make, and the deposits you make.

• Deposit slip: used to deposit money to your account.

Checking Accounts

• Debit card: used to make purchases electronically or to withdraw money from an automated teller machine (ATM).– The money is quickly deducted from your checking

account.

Example 1• Casey wants to open a checking account. Her

bank provides her with two choices. A description of each is shown in the table. Casey plans to have her paycheck deposited to the account each week and expects to keep a balance of about $5,000 in her account. Which checking account should Casey choose?

Checking Account Options

Checking Account 1 Checking Account 2

•No fee if you maintain a balance of $1,500 in the account or if you have at least one direct deposit of $250 or more per month. Otherwise there will be a monthly $12 fee.•The account earns no interest.

•No fee if you maintain a balance of $10,000 in the account. Otherwise there will be a monthly $25 fee.•The account earns interest.

Strategy: Use the information from

the table• Step 1: Compare how Casey will use the

account to the accounts offered by the bank.– Casey plans to have her paycheck direct

deposited, so she will not be charged a monthly fee if she chooses Checking Account 1.

– She expects to keep a minimum balance of $5,000 in her account. If she chooses Checking Account 2, she will be charged $25 per month.

Strategy: Use the information from

the table• Step 2: Make a decision– Checking Account 2 earns interest, but probably

not enough interest to earn as much as the monthly fee of $25. She is better off opening the account where she will not be charged a fee.

SolutionCasey should choose Checking Account 1.

Example 2Toni’s check register is show below. Balance her account for her.

Date Check Number

Description Payment/Withdrawal

Deposit Balance25|50

6/19 Deposit 250 00

6/19 1267 Electric Company 122 15

6/21 1268 Ben’s Flowers 31 25

6/25 Transfer 100 00

6/25 1269 Cars R Us 185 00

Strategy: Work in an organized manner – top

to bottom• Step 1: Make a plan– Start with existing balance. Add the deposits and

transfers and subtract the checks and withdrawals in order.

• Step 2: Complete the table– Start with the $25.50 and add $250.00– Next start with the $275.50 and subtract $122.15– And so on.

Example 2 Solution

Toni’s completed check register is show below.

Date Check Number

Description Payment/Withdrawal

Deposit Balance25|50

6/19 Deposit 250 00 275 50

6/19 1267 Electric Company 122 15 153 35

6/21 1268 Ben’s Flowers 31 25 122 10

6/25 Transfer 100 00 222 10

6/25 1269 Cars R Us 185 00 37 10