Check and Payment Methods
Goals:
Key Terms:
Opening a Checking Account – Checking accounts provide many benefits for consumers:
- Convenience and ease of making payments
- Safety to make payments with less risk than using cash
- Proof of payment
- A record of finances for managing your money
The First Deposit –Opening a checking account starts with signing a signature card. This document is used to verify your signature. The bank compares the signature on checks to the one on the signature card.
Sometimes two or more people have an account together called a joint account. Each person who will write checks on the account must sign the signature card. Any signer of the card in a joint account can write checks on the account as if he or she were the only owner.
When you deposit money in a checking account, you fill out a deposit slip. This form lists all items you are depositing –currency, coins, or checks. The deposit slip shows your name, account number, the date, the item deposited, and the total amount of the deposit.
Types of Endorsements – Before you can deposit a check, it must be endorsed. This involves writing your name on the back of the left end of the check. The endorsement is written evidence that you received payment or that you transferred your right of receiving payment to someone else.
When you endorse a check, your responsibilities are almost as great as if you had written the check yourself. As an endorser, you are actually making this promise: “If this check is not paid by the bank, I will pay for it.”
Blank Endorsement – An endorsement that consists of only the endorser’s name is a blank endorsement. To endorse the check, sign your name exactly as it is written on the face of the check.
A blank endorsement makes a check payable to anyone who has the check.
Full Endorsement – The use of a full endorsement, also called a special endorsement, allows you to transfer a check to another person. You write the words “Pay to the order of…”followed by the name of the person or business to which the check is being transferred. This is followed by your signature. Endorsing a check in this manner results in only the person you have named being able to sign and cash the check.
Restrictive Endorsement – A restrictive endorsement limits the use of the check to the purpose given in the endorsement. By writing “For Deposit Only” above your account number, the use of this check has been restricted so that it can only be deposited to your account.
Using A Checking Account – Checking accounts are an easy way to access funds. Certain information and some simple procedures must be know (followed) to properly use a checking account.
Check Writing –No matter what they look like, all checks have essentially the same information.
The Check Register – Your checkbook will have a place for recording account activities. The check stub is a form attached to the check by a perforated line. A check register is a separate book, usually the same size as the checkbook with blanks within which to fill in information about the check. A duplicate copy of the check may also be automatically created when you write the check.
Always fill out the check stub or register first. If you write the check first, you may forget to record the information in the check register.
Writing a Check:
1. Write checks in the order by number so that you know which checks have been paid.
2. Write the date e in the proper place
3. Write the Payee’s name on the line following Pay to the Order of.
4. Write the amount of the check in numbers after the printed dollar sign.
5. Write the amount in words on the line below the payee’s name.
6. Write the purpose for the payment on the line at the bottom of the check.
7. Sign your checks with the same signature you wrote on your signature card.
Proper Check Writing:
1. Write checks only on the forms provided by your bank.
2. Write check in ink.
3. Only write checks if money is available.
4. Use the current date.
5. Avoid making checks to “Cash” or to “Bearer.”
6. Always fill in the amount.
7. Void checks on which you make errors.
8. Record every payment from your checking account, whether the payment is by check or EFT.
Stopping Payment – In certain situations, you may not want the bank to cash a check that you have written. To do so, you will fill out a stop payment order, a written order that tells the bank not to pay a certain check. You may want to stop payment on a lost or stolen check.
The Reconciliation Process – Usually monthly, the bank will send you a report on the status of your account known as a bank statement. This statement typically shows:
- The balance at the beginning of the month
- The deposits made during the month
- The checks paid by the bank during the month
- Any ATM transactions made during the month
- Any EFT or special payments the bank has made
- Service charges for the month
- Any interest earned on the account
- The balance at the end of the month
Determine Checks Paid – When your bank statement arrives, compare the checks you wrote to those that have been paid by your bank. All banks do not return cancelled checks. Instead, banks can use a substitute check, which is a digital reproduction of the original paper check.
There are times when you need to show proof of payment. The information on the bank statement, cancelled or substitute check will be sufficient to prove payment.
Find Differences – You keep a record of your checking account, usually the check register. The bank statement is the bank’s record of your account.
The document created to show how the two balances were brought to agreement is called the bank reconciliation.
The balance shown on your records and the bank statement may be different. Some of the most common reasons for the difference are:
- Some of the checks you wrote may not have cleared (been paid) the bank. These
checks are called outstanding checks.
- You may have forgotten to record a transaction in your register
- A service charge may appear on your bank statement
- You may have mailed a deposit to the bank that has not yet been received
- Interest earned may have been added
- You may have recorded the amount of a check or deposit incorrectly
Calculate Adjusted Balance – To determine the true balance in your account, do the following.
1. Subtract the total of the outstanding checks from the bank account balance
2. Add any deposits in transit to the bank statement balance
3. Subtract service charges, fees, and automatic payments from your checkbook balance
4. Add any interest earned to your checkbook register balance
At this point, if the balances do not agree, either you or your bank has made an error. Retrace your steps. Check your calculations, check deposit and withdrawal amounts to make certain amounts are recorded accurately. If you do not find an error in your calculations, you should call your bank. Do not wait too long to contact the bank. There are time limits beyond which corrections will not be made.
Other Types of Payments – Sometimes, you may need to make a payment in a situation when a personal check is not accepted. Several payment alternatives are available.
Certified Checks – A certified check is a personal check for which a bank has guaranteed payment. The certification is stamped on the front of the check and is signed or initialed by a bank officer.
Cashier’s Check – A bank usually keeps funds in an account of its own on which it writes its own checks. A cashier’s check is a check that a bank draws on its own funds. A cashier’s check costs the amount of the check plus a service fee. These banker’s checks are more accepted than the personal checks of an individual whom the payee may not know.
Traveler’s Checks – Carrying a large sum of money when you travel is risky. Also, paying for your expenses while traveling may be difficult. Traveler’s checks are special forms designed for making payments when away from home.
Money Orders – A person who does not have a checking account and wants to send a payment through the mail may purchase a money order. A money order is a form of payment that orders the issuing agency to pay the amount printed on the form to another party.
Banks sell bank money orders that pay money to a specific person or business.. The US Post Office issues postal money orders that can be sent safely through the mail. An express money order is issued by various organizations including Traveler’s check companies, travel agencies, and many super markets, pharmacies, and convenience stores. A telegraphic money order involves buying a message to direct a telegraph office to pay a sum of money to a certain person or business.
If a money order is lost or stolen, the receipt copy may be used in making a claim.
Assignments:
Define Key Terms (Pg. 435)
Go to Online Resources (see link below). Select Chapter 17.
1 - Click on and complete the Crossword Puzzle, When you are finished, print out your puzzle, write your name on it and turn it in for a grade.
2 - Click on Online Quiz Prep. Take the Web Quiz. When your quiz score is displayed, call the teacher over to see and record your score.
3 - Click on Study Tools
Complete Lessons 1 - 3
Lesson 1 - Sort It Out - Types of Financial Institutions
Lesson 2 - Beat the Clock - Financial Services and Electronic Banking
Lesson 3 - Labeler - Types of Endorsements
When your quiz scores are displayed, call the teacher over to see and record your scores.
Online Resources
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