Chapter 26

Opening a Checking Account

Advantages of Checking Account Convenience – spend money through

paper (checks) or the EFT systems. Safety – from physically being damaged,

or from careless spending Proof of Payment – once the check is

cashed, it is a legal proof of payment Record of Finances – the bank will provide

a record of finances, demonstrating how necessary it is to keep track of all deposits and credits

Types of Checking Accounts Regular Checking Accounts – best when

planning on writing a lot of checks. There is not a service charge on most

regular checking accounts. Minimum balance – stated amount that the

account must not fall below. Average monthly balance – the sum of the

daily balance divided by the number of days in the month. This average needs to stay above a certain point, in order to avoid a service charge.

Additional Charge Service Charge – a fee a bank

charges for handling a checking account.

Types of Checking Accounts Interest Checking Accounts – These

accounts make it possible for a checking account to earn interest on the amount kept in the bank.

However, if this is the account that you want, there is normally a minimum balance or minimum average monthly balance of at least $500.

Money Market Rate The interest rate that big users of

money, such as governments and large corporations, pay when they borrow money.

As this rate changes, so does the rate the banks pay holders of certain accounts.

Other Types of Checking Accounts Credit Union – provide checking

accounts for its members. Members are called Shareholders when

they have money on deposit. Their checks are called Sharedrafts. With these accounts, interest rates may

vary and the number of sharedrafts per month may be limited.

Opening a Checking Account Signature Card – The official card which

the depositor signs, and the bank keeps, in order to use it as an official signature.

Joint Account – when two people and more have an account together.

Deposit Slip – a form on which you list all items you are depositing currency, coins, and checks.

Endorsing Checks for Making Deposits

Endorsement – is written evidence that you received

payment or that you transferred your right of receiving payment to someone else.

Purposes of Endorsements 1 – Endorsements allow the recipient

of the check to cash, deposit, or transfer it to someone else.

2 – Endorsements serve as legal evidence that the receiver cashed or transferred the check to someone else.

Purposes of Endorsements

3 – Endorsements mean that the endorser will pay the check in case the next owner of the check cannot collect the money.

Placement of Endorsement The bank has a stamp that they

must put on the back of the check The signature of the endorser must

sign in the designated area of the check If the check is not signed in the right

spot, it is not legible, or incomplete, the check may be returned.

Types of Endorsements Blank Endorsement

consists of only the endorsers name. makes a check payable to anyone who

has the check. Special Endorsement

includes the name of the person to whom the check has been transferred.

More types of Endorsements Restrictive Endorsements

limits the use of the check to the purpose given in the endorsement.

For deposit only – the check may only be deposited in your account.

Recording the Deposit Deposits can be made…

At the bank

At an ATM

Or sent through the mail

Recording the Deposit Checkbooks contain forms on which

a depositor writes a record of deposits made and checks written. Check Stub

• Attached to each check Check Register

• Booklet designed to record and keep track of funds in a checking account.