Checks and Payment Methods Chapter 17-3
Opening a Checking Account • Convenient • Safe • Proof of payment • Record for financial management
The First Deposit • Two or more people have account together – joint account • When you deposit money into account use a deposit slip
What is an Endorsement • An endorsement is written evidence that you received payment or that you transferred the right to receive payment • Involves signing your name on the back of the left end of the check
Types of Endorsements • Blank endorsement • consists of only the endorser’s name. • Sign your name in ink exactly as it is written on the face of the check • Makes the check payable to anyone who has the check
Types of Endorsements • Full endorsement or Special • Allows you to transfer an check to another person • You write the words “Pay to the order of …..” • This is followed by your signature
Types of Endorsements • Restrictive Endorsement • Limits the use of the check to the purpose given in the endorsement • “For Deposit Only” above your signature • Restricts the use of the check to only being deposited in your account
Using a Checking Account • All check contain essentially the same information • Drawer is the owner of the account who signs the front of the check • Payee is the person to whom the check is written • Drawee is the bank or other financial institution that pays the check
Check Register • A place to record the account activities • Check stub is a form attached to the check by a perforated line • Check register is a separate book • Duplicate copy of check may also be automatically created when you write the check *Always fill out stub or register first then write the check
Writing a Check • Write checks in order by number so you know which checks have been paid • Write the date in the proper space • Write the payee’s name on the line following “Pay to the Order of “ • Write the amount of the check in figures after the printed $ (Write the amount close to the $ to prevent someone from altering the check and write the cents close to the dollar figures)
Writing a Check cont. • Write the dollar amount in words on the line below the payee’s name • Write cents in figures as a fraction of a dollar example: 25/100 is 25¢ • Begin writing at the far left end of the line and draw a line from the fraction to the printed “Dollars” to fill all unused space • Write the purpose on the line at the bottom of the check • Sign the check!!!!!
Proper Check Writing • Write checks only on the forms provided by the bank • Write checks in ink • Only write checks if money is available. Writing checks for more than that will cause an overdrawn account. • Use current date. A postdated check is one that is dated later than the date on which it is written
Proper Check Writing cont. • Avoid making checks payable to cash or bearer • Always fill in the amount • Void checks on which you make errors. Do not try to erase or retrace your writing • Record every payment from your checking account
Stopping Payment • A written notice that tells the bank not to pay a certain check. • Because banks charge a high fee for stopping payment on a check, use only for good reason.
Reconciliation Process • At regular intervals, usually monthly, the bank will send you a report on the status of your account know as a bank statement. • Bank statement includes: • Balance at the beginning of the month • Deposits made • Checks paid by the bank • ATM transactions • EFTs • Service charges • Interest earned • Ending balance
Reconciliation Process • The balance per your records with most likely not agree with the banks balance • Some check you have written have not cleared (been paid). These checks are known as outstanding checks. • You may have forgotten to record ATM transactions • Service charges • Deposit not reach bank yet • interest
Types of Payments • Certified Checks – a personal check for which a bank has guaranteed payment • Cashier’s Check – a check that a bank draws on its own funds. • Traveler’s checks –special form designed for making payments when you are away • Money Order – a form of payment that orders the issuing agency to pay the amount printed on the form to another party.