Checking Accounts

I. Checking Account Basics a. A checking account allows you to write checks to make payments b. A check is a written order to a bank to pay the amount stated to the person or business named on it c. A checking account is also called a demand deposit because the money may be withdrawn at any time d. Checks follow a process through the bank i. The payee cashes your check ii. The bank that cashed the check returns it to your bank iii. Your bank withdraws the money from your account and send it to the other bank iv. Your bank then stamps the back of your check to clear the check 1. A canceled check is a check that is cleared e. Many banks no longer send paper checks to other banks for processing f. To make processing faster and more efficient they exchange check information electronically by transmitting an image of the check called a substitute check g. A substitute check can be used in the same way as an original check h. You must maintain enough money in your account to cover all the checks you write i. A check written for more money then you have in your account is called an overdraft i. A bank that does not honor a check usually stamps the check with the words not sufficient fund (NSF) and returns the check to the payees bank ii. When this happens the check has bounced iii. The bank will charge a fee you each NSF check that is processed j. Floating a check is writing a check and hoping to deposit money before the check is cleared k. Floating a check is very risky because todays electronic systems allow checks to process faster l. Floating a check is illegal in most states m. Checking Account Advantages i. Convenience ii. Safety iii. Built in record keeping systems iv. Access to bank services n. Opening a checking account i. Signature Authorization Form ii. Initial Deposit o. Using your checking account i. Writing checks

ii. Paying bills online iii. Making deposits iv. Using a checkbook register 1. A checkbook register is a booklet used to record checking account transactions p. Bank Reconciliation i. The process of matching your checkbook register with the bank statement q. Endorsing checks i. A check cannot be cashed until it is endorsed ii. To endorse a check the payee signs the top part of the back of the check in blue or black ink iii. There are three major types of endorsements 1. Blank endorsement a. A blank endorsement is the signature of the payee written exactly as his or her name appears on the front of the check 2. Special endorsement a. A special endorsement or an endorsement in full is an endorsement that transfers the right to cash the check to someone else b. Write Pay to the order of 3. Restrictive endorsement a. Restricts or limits the use of a check b. Example for deposit only r. Types of checking accounts i. Joint accounts ii. Special Accounts iii. Standard Accounts iv. Interest bearing accounts v. Share accounts