checking account simulation powerpoint presentation 171g1[1]
Transcript of checking account simulation powerpoint presentation 171g1[1]
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Checking Account Simulation
Understanding Checking Accounts
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1.7.1.G1What is a Checking
Account?
Tool used to transfer funds deposited into the account to make a cash purchase
Could also be named a transaction account
Common financial service used by many consumers
Available at depository institutions Traditionally called banks
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1.7.1.G1Checking Accounts
continued
Services and fees will vary depending upon the financial institution Research the financial institution and
type of account before choosing Many financial institutions offer
telephone and internet banking services to customers
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1.7.1.G1
Benefits
Can help to manage money Written record of expenses
Check register Makes bill paying more convenient Reduces the need to carry large
amounts of cash Most liquid of cash management tools
Considered cash
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1.7.1.G1
How Do They Work?
Money is deposited into the account with a deposit slip
Pay the transaction by: Writing a check Using an ATM and/or debit card Using electronic banking
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1.7.1.G1
Characteristics
Funds are easily accessible through: A check Automated teller machine (ATM) Debit card Telephone Internet
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1.7.1.G1
What is a Check?
Piece of paper pre-printed with the account holder’s: Name Address Financial institution Identification numbers
To completed check, fill in the: Amount Payee
To whom the check was written
Date Signature
Used at the time of purchase as the form of payment
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1.7.1.G1
Bouncing a Check Check written for an amount over the
current balance held in the account ‘Bounces’ due to insufficient funds
Assessed a substantial fee by both the financial institution and the payee
Can cause harm to credit report Financial institutions report to credit
bureaus the account holder’s failure/success to manage his/her checking account properly
Used as a guide for future inquiries for credit
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1.7.1.G1Other Checking
Components
Register Place to immediately record all monetary
transactions for a checking account Written checks, ATM withdrawals, debit
card purchases, deposits, fees, etc.
Checkbook Contains the checks and the register to
track monetary transactions
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1.7.1.G1
What is an ATM?
Automated teller machine (ATM) Also called cash machines Electronic computer terminals
offering automated, computerized banking
Allows customers to perform transactions just as they would through a teller Deposits, cash withdrawals, account
transfers, check account balances
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1.7.1.G1
ATMs continued
Transactions at an ATM are automatically posted to account
Immediately record all transactions into the checkbook register
Good option for evenings or weekends when financial institutions are closed
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1.7.1.G1
ATM Availability
Available most places around the U.S. giving customers access to money when away from home Can also be found worldwide
Found in a variety of places including: Financial institutions Supermarkets Convenience stores Shopping centers
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1.7.1.G1
ATM Fees
ATMs are owned by different financial institutions
Fees may be charged to the account for ATM use
Fees range from $0.50 to $5.00 Usually free to account holders of the
financial institution
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1.7.1.G1
ATM Card
Card given to account holder to make financial transactions at ATMs
In the shape of a credit card, but can only be used in designated places
Must use personal identification number (PIN) to access the account A protected number given or chosen by
the account holder to allow access to the account
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1.7.1.G1
PINs
Required at ATM as a safety measure so other people cannot access the account with the only the ATM card
Choose a PIN which is not easily identified For example – phone number, birthday
Instead of requiring a PIN, some ATMs may read a person’s face, fingerprint, or eye’s iris to confirm identity
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1.7.1.G1
What is a Debit Card?
Looks like a credit card, but is connected to the cardholder’s checking account for transactions
Money is automatically withdrawn from account when transaction occurs
Prevents overdrafts Transaction cannot be completed without
sufficient funds
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1.7.1.G1
Debit Cards continued
Some are dual function cards One card performs both
functions for ATMs and debit cards
Clarify whether or not the card is an ATM card, a debit card, or both
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1.7.1.G1
Using a Debit Card
To make a purchase Debit card is swiped like a credit card Cardholder signs a printed receipt
Record transactions immediately into check register
Most can be used at retail establishments accepting major credit cards Many have the Visa or MasterCard logo
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1.7.1.G1
Debit Cards continued
Convenient Small Can be used like
a credit card Allows a person
to carry less cash
Does not allow overspending
Can lose track of balance if transactions are not immediately written down
Opens checking account up to credit card fraud
If lost, anyone can use it Someone else can gain
access to account if card is found and PIN is learned
Pros Cons
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1.7.1.G1Types of Accounts
Available
Financial institutions offer different types of checking accounts All have own characteristics Research all of the requirements and
restrictions before opening the account Basic types/guidelines include:
Regular checking Free checking Special checking Interest-Earning checking
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1.7.1.G1
Regular Checking
No monthly charge if minimum balance is maintained
No interest is given Unlimited check writing
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1.7.1.G1
Free Checking
No charges or fees for using the account
No minimum balance required Unlimited check writing Usually for a specific group:
Students Seniors
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1.7.1.G1
Special Checking
Generally for people who write only a few checks and keep a low balance
Basic account which pays no interest Monthly service charge or fee for
each transaction May have restrictions on number of
transactions each month
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1.7.1.G1Interest-Earning
Checking
Pays interest on money in account Usually the lowest interest rate of all the
cash management tools Minimum balance required Unlimited check writing Called a share draft at credit unions
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1.7.1.G1Opening a Checking
Account
Most applications are completed on a computer to process quickly Customer may have to complete a brief
hand-written application to be entered into the computer by new accounts personnel
Customer must have: Picture identification Name, address, phone number, and social
security number
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1.7.1.G1
Opening continued
If customer is approved, he/she completes a signature card Contains account information about the
new account and his/her signature Used to verify the signature for each
signed transaction for the account to prevent fraud
Completion of the signature card means the customer agrees to all terms and conditions of the account
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1.7.1.G1
Signature Card example
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1.7.1.G1
Opening continued
If offered, customers may choose to have an ATM and/or debit card for the account May be required to complete another form
An initial deposit must be made Amount will vary among different financial
institutions and type of account
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1.7.1.G1
Ordering Checks
New customers are provided starter checks to use until the ordered checks arrive Generic checks with account number and
financial institution pre-printed Customer information is hand written
Many businesses do not accept starter checks Take this into consideration before making the
initial deposit Ordered checks may take 5 to 10 business days
to arrive
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1.7.1.G1
Ordering continued
Personal information on checks Name Address Optional: phone number, driver’s license
number DO NOT put the account holder’s social
security number on the check for security reasons
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1.7.1.G1
Ordering continued
Design of the check is customer’s choice Customer pays for checks
Price depends on the style Style of the check does not change how a
check works Some financial institutions may offer basic
checks free of charge Single or duplicate checks are available
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1.7.1.G1
Ordering continued
No records of written checks
Each check must be logged in the register immediately to track transactions
Provides a written record of each check with the carbon copy
Convenient in case the check was not recorded into register immediately
Single Duplicate (carbon copy)
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1.7.1.G1
Endorsing a Check Endorsement
Signature on the back of the check from receiving person approving it for deposit
A check must be endorsed to be deposited Three types
Blank Restrictive Special
Safest way to endorse the check is to wait until going to the financial institution to deposit or cash the check
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1.7.1.G1
Blank Endorsement
Receiver of the check signs his/her name
Anyone can cash or deposit the check after has been signed
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1.7.1.G1
Restrictive Endorsement
More secure than blank endorsement
Receiver writes “for deposit only” above his/her signature Allows the check to
only be deposited
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1.7.1.G1
Special Endorsement
Receiver signs and writes “pay to the order of (fill in person’s name)”
Allows the check to be transferred to a second party Also known as a
two-party check
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1.7.1.G1
Making a Deposit
Deposit slip Contains the account holder’s account number
and allows money (cash or check) to be deposited into the correct account
Located in the back of the checkbook Complete a deposit slip to make a deposit
Give to financial institution along with cash and/or check
Checks must be endorsed to be deposited Deposited amount must be recorded in the
check register to keep the balance current
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1.7.1.G1Completing a Deposit
Slip
Date The date the deposit is being made
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1.7.1.G1Completing a Deposit
Slip
Signature Line Sign this line to receive cash back
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1.7.1.G1Completing a Deposit
Slip
Cash The total amount of cash being deposited
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1.7.1.G1Completing a Deposit
Slip
Checks List each check individually
Identify each check on the deposit slip by abbreviating the name of the check writer
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1.7.1.G1Completing a Deposit
Slip
Checks If more checks are being
deposited than number of spaces on the front, use the back
List each check Add the total, enter it on
the front
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1.7.1.G1Completing a Deposit
Slip
Total from Other Side The total amount from all checks listed on
the back
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1.7.1.G1Completing a Deposit
Slip
Subtotal The total amount of cash and checks
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1.7.1.G1Completing a Deposit
Slip
Less Cash Received The amount of cash back being received This amount is not deposited into account
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1.7.1.G1Completing a Deposit
Slip
Net Deposit The amount being deposited into the account To calculate the amount, subtract the cash received
from the subtotal
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1.7.1.G1
Writing a Check
To pay for items using a checking account A check is given as a form of payment Must be completed and given to the
person or business Pre-printed items on a check
Name and address of account holder Name and address of financial institution Check number Identification numbers (account, routing)
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1.7.1.G1
Writing a Check
Personal Information Account holder’s name and address May include a phone number, not required DO NOT list a social security number for safety reasons
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1.7.1.G1
Writing a Check
Check Number Numbers used to identify checks Printed chronologically
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1.7.1.G1
Writing a Check
Date The date the check is written
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1.7.1.G1
Writing a Check
Pay to the Order of The name of the person or business to
whom the check is being written
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1.7.1.G1
Writing a Check
Amount of the Check in Numerals The amount of the check written numerically in the box Write the cents smaller and underline Write the numbers directly next the dollar sign to prevent
someone else from adding numbers to change the amount
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1.7.1.G1
Writing a Check
Amount of the Check in Words The amount of the check written in words on the second line Start at the far left of the line, write the amount in words,
followed by ‘and’, and the amount of cents over 100; draw a line from the end of the words to the word ‘dollars’
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1.7.1.G1
Writing a Check
Memo Space used to identify the reason for writing a check;
optional Good place to write information requested by a company
when paying a bill, generally the account number
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1.7.1.G1
Writing a Check
Signature The account holder’s signature agreeing to the
transaction
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1.7.1.G1
Writing a Check
Identification Numbers First - routing numbers to identify the account’s financial
institution Second - account number Third - check number
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1.7.1.G1
Check 21
Check Clearing for the 21st Century Act (Check 21) Current trend that changes how money is
withdrawn from customers account and deposited into businesses account
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1.7.1.G1
How Check 21 Works
Prior to Check 21 Paper checks physically moved from customer
to business to various banks and the transfer of money from customer’s bank to business’ bank took days
After Check 21 Paper checks are scanned into a computer
system at the place of business and immediately returned to the customer. This electronic copy of the check is called a substitute check. The substitute check is then transferred electronically to various banks and the transfer of money customer’s bank to business’ bank takes hours
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1.7.1.G1
Check Register
Place to immediately record all monetary transactions for a checking account
Written checks, ATM withdrawals, debit card purchases, deposits, fees, etc.
Used to keep a running balance of the account
Remember - Record every transaction!
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1.7.1.G1
Check Register
Date The date the check was written or
transaction was made
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1.7.1.G1
Check Register
Number The number of the written check; if a debit
card or ATM was used, write DC or ATM
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1.7.1.G1
Check Register
Description of Transaction The person/business the check was written to or
where the debit card was used Gray line can be used to write the memo
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1.7.1.G1
Check Register
Payment/Debit(-) Amount of the transaction Deducted from the balance
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1.7.1.G1
Check Register
Deposit/Credit(+) Amount of the transaction Added to the balance
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1.7.1.G1
Check Register
√ T A box used to track whether the check has cleared
on the monthly bank statement when reconciling at the end of each month
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1.7.1.G1
Check Register
Fee (if any) Any extra fees charged to the account Listed on the bank statement
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1.7.1.G1
Check Register
Balance The running total of the checking account Calculated by adding or subtracting each transaction Keep this updated
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1.7.1.G1
Monthly Statement Lists each monetary transaction and the
current account balance for a specified time period
Includes: Dates Identification for each transaction (number
or type, date, amount) Transaction amounts for withdrawals and/or
deposits Interest earned (if applicable) Fees or charges (if applicable)
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1.7.1.G1Monthly Statement
continued
If customer holds more than one account at the same financial institution May receive one statement
for both For example: a checking
and a savings account May be mailed separately
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1.7.1.G1Reconciling a Checking
Account
Reconcile Balance the checkbook register each
month to the balance shown on the statement
Do this every month to ensure the correct balance in the checkbook Knowing the correct balance can help to
avoid bouncing checks
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1.7.1.G1
Steps for Reconciling Make sure every transaction listed on the
statement matches the check register Place a check next to each item once it has
been double-checked between the statement and register Do this for both withdrawals and deposits
Identify any outstanding transactions in the check register Items which have not cleared through the
financial institution and are not listed on the statement
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1.7.1.G1Steps for Reconciling
continued
Start with checking account balance on the statement
Add any outstanding deposits Subtract any outstanding withdrawals Compare this result with the current
balance in the check register They should be the same
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1.7.1.G1
Reconciling Example Statement balance
$204.00 Add $154.01+
Outstanding deposits 8/30 - $154.01
Subtract $44.75- Outstanding withdrawals
#299 - $19.75 #300 - $25.00
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1.7.1.G1Reconciling Example
continued
Total $313.26
Remember - this figure should be the same as the check register
If not, double-check the math, look for mistakes Make sure all service fees and charges
have been added to the check register
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1.7.1.G1
Checking Account Safety
If a checkbook, ATM, and/or debit card becomes lost or stolen Immediately report it to the financial
institution File a report with the police
Reported lost/stolen checkbook: Financial institutions generally do not
hold the account holder liable for any fraudulent charges
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1.7.1.G1
Safety continued
Reported lost/stolen ATM/debit card: Within 2 business days
Cardholder is only liable for $50.00 Longer than 2 business days
Could be liable for up to $500.00 Varies depending upon the financial
institution May not charge the account holder
anything if the correct steps were taken to report the lost/stolen card
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1.7.1.G1
Conclusion
Research before choosing a financial institution and checking account!
Follow the precautions to prevent checking account fraud!
Report a lost/stolen checkbook, ATM, and/or debit card immediately!