what are the benefits to balancing a checking account?

NEFE High School Financial Planning ProgramNEFE High School Financial Planning ProgramUnit 5 – Your Money: Keeping it Safe and Secure

1. What are the benefits to balancing a checking account?2. Why should the Federal Reserve oversee financial

institutions and the money circulation in the economy?3. What are the benefits to comparing financial institutions

and the services they provide?


Depository Institutions: Businesses which accept deposits and offer multiple services in banking and finance.

Bank: A for-profit financial institution owned by investors in its stock that provides financial services to any customers.

Credit Union: A not-for-profit financial institution owned by its members that provides services to its members at low fees.

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Financial InstitutionsFinancial Institutions

Others

Savings and Loan Association

Brokerage Firm


Depository Institutions

Why consumers may not use them:

• Fees are• Required minimum

balances• Privacy

Why consumers may use them:

• Safety• Interest• Cheap Loans

Automated Teller Machine: Electronic machine that customers/members can use to withdraw cash and make other financial transactions.


Commercial Bank• Largest financial institutions• Services: Checking/savings accounts, credit cards, safe-deposit boxes, CDs,

loans, investments, debit cards

• FDIC insured $100K/$250K• Examples – US BANK, BANK OF AMERICA

• Not-for-profit, member owned• Services: Share account, share draft account, safe-deposit box

share draft certificate, credit card, investing, loans, insurance

• NCUA insured• Usually lower fees/loan rates and higher interest rates• Examples: First Community, American Eagle

Credit Union


Interest Earning Accounts

1. Savings Account: An account that helps you save money and earn a small amount of interest at the same time (Share Account @ Credit Union)

2. Checking Account (sometimes): An account that allows withdrawals by means of check, debit card, etc. (Share draft account @ Credit Union)

3. Certificate of deposit (also known as a Share Certificate account at a credit union)– Insured interest-earning savings account w/ restricted access to the funds

4. Money market account: A deposit account, which has a relatively high rate of interest, typically requires a higher minimum balance to earn interest or avoid monthly fees, and has a restricted # of transactions– Higher interest rates than savings, may have limited check writing


Credit Unions and Banks

For-profit companies owned by shareholders

Not-for-profit institutions owned and controlled by their own

customers, who are known as members

Managed by a paid board of directors elected by the bank’s

shareholders

Managed by a member and volunteer board of directors,

who are elected by other members

Offer their services to everyone; anyone can become a customer

Offer their services to special groups of people and may be

employer-, church-, community-, or alumni-sponsored (among

others); customers must qualify for credit union membership

through their membership with these special groups of people

Banks Credit Unions

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Credit Unions and Banks

Owned by shareholders; customers do not have

ownership or voting privileges unless they also own stock in

the bank

Owned by each credit union member, who has equal ownership and one vote,

regardless of how much money a member has on deposit

Profits benefit a small group of stockholders

Profits are returned to members in the form of lower fees and

loan rates and higher interest on deposits

Accounts are federally insured up to $100,000 by the Federal

Deposit Insurance Corporation (FDIC)

Accounts are federally insured up to $100,000 by the National Credit Union Administration

(NCUA)

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Banks Credit Unions


Savings and Loan Association (S&Ls)

• Loans and mortgages to customers w/ savings account• Generally higher interest rate than commercial banks• Offer interest-earning checking accounts• Also insured• Example: Pioneer Federal Savings & Loan• Services: Checking/savings/retirement accounts, CDs, loans, investing


Financial ServicesFinancial ServicesAll of these services can be found in most banks or credit unionsAll of these services can be found in most banks or credit unions

Online Banking, Online Brokerage, Checking Accounts, Savings Accounts, Certificates of Deposit (CDs),

Individual Retirement Accounts (IRAs), Savings Bonds, Credit Cards, Check Cards, Gift Cards, Payroll Cards,

Commercial Prepaid Cards, Auto Loans, Boat Loans, RV Loans, Student Loans, Other Loans, Home Mortgages,

Mortgage Refinance Loans, Home Equity Loans, Military Bank, Student Centers, Accessible Banking,

Small Business Banking Services, Merchant Services , Home Buying, Investment Services, IRAs, Mutual Funds,

529 College Savings Plans, Life Insurance (various types), Long-Term Care Insurance, Homeowner’s Insurance, Renter’s Insurance, Condo Insurance, Auto Insurance,

Supplemental Income Insurance, Foreign Currency Exchange, Traveler’s Checks, International Wire Transfers, and More

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Types of Insurance

Federal Deposit Insurance Corporation (FDIC)– Protects depository institution accounts– Insures commercial banks and savings and loan

National Credit Union Administration (NCUA)– Provides insurance for credit unions

Federal Savings and Loan Insurance Corporation (FSLIC)– Provides insurance for savings and loan


Methods of PaymentCash: Money in the form of paper currency or coin

Personal Check: Written order to a financial institution directing the financial institution to pay stated amount of money, from the customer’s account.

Credit Card: Specially coded plastic card issued by banks & businesses authorizing the holder to purchase goods & services on credit.

Debit Card: Specially coded plastic card issued by a financial institution that allows the cardholder to transfer funds electronically and immediately from his/her checking account. As if were paying w/ check


Methods of Payment

Point-of-sale (POS) terminals: are located at stores and allows the consumer to use a debit card to make purchases.

Personal Identification Number: Pass-code # you use to get access to your savings and/or checking account

Money Order: A written order for the payment of a sum to a named individual; obtainable and payable at a bank, post office, or convenient store. For a fee usually $.99-$5 Usually smaller amounts of $. Less than $1,000


Methods of PaymentCashier’s Check: A check drawn by a bank (for a fee) on its own funds and signed by the bank's cashier. Guaranteed funds (larger amounts)

Traveler’s Check: An internationally redeemable draft (check) purchased in various denominations from a bank or traveler's aid company and payable only upon the purchaser's endorsement against the original signature on the draft.

Smart Card: A prepaid smart card contains stored value which the person holding it can spend at retailers. As well as personal info and other data

Contactless Payment: Swiping in front of sensor, (RF). May require signature if purchase is over $25.


Opening an Account• Photo Id: driver’s license, passport, etc…

• Social Security Number

• Signature Card

• Deposit

• May be charged

for checks


Deposit SlipDeposit Slip

Today’s date goes herePrint Your Name HerePrint Your Address Here

Sign Your Name Here33 3 3 3 3 3

x

4 75 2 5

5 0 0 0

4 2 5 2 5

5-E-15-E-1

4 75 2 5

Click the numbers


Completing 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


http://www.google.com/imgres?q=parts+of+a+check&hl=en&gbv=2&biw=1366&bih=629&tbm=isch&tbnid=KAk5_qzEivM2wM:&imgrefurl=http://www.gcflearnfree.org/moneybasics/6.5&docid=t9pT9UVgPmmeJM&w=550&h=300&ei=YlyTqmvIOKKsgKtpZnXCQ&zoom=1&iact=hc&vpx=706&vpy=323&dur=4578&hovh=166&hovw=304&tx=117&ty=87&page=1&tbnh=101&tbnw=172&start=0&ndsp=23&ved=1t:429,r:13,s:0

NEFE High School Financial Planning ProgramNEFE High School Financial Planning ProgramUnit 5 – Your Money: Keeping it Safe and SecureCheck DetailsCheck Details

11 22 33 44 55 99887766 1010

This is the Routing Number for your bank (used for electronic This is the Routing Number for your bank (used for electronic transfers of funds from your account to the payee’s account)transfers of funds from your account to the payee’s account)This is your Account Number. (Note that sometimes these two This is your Account Number. (Note that sometimes these two numbers are the reverse of what is shown here.)numbers are the reverse of what is shown here.)This is just your check number again (see above right).This is just your check number again (see above right).Here is where you write the name of the party you are writing your Here is where you write the name of the party you are writing your check to (the payee). Be sure to write or print legibly!check to (the payee). Be sure to write or print legibly!On the lower line, write out the amount like this.On the lower line, write out the amount like this.Legibly print the amount of money this check is for. Legibly print the amount of money this check is for. Enter the date you write each check.Enter the date you write each check.Place to add any information you want to related to this check.Place to add any information you want to related to this check.Put your personal signature here.Put your personal signature here.Make sure your personal information on the check is correct.Make sure your personal information on the check is correct.Here is the number of this Check.Here is the number of this Check.

1111

5-F5-F

Click the numbers

John M. Smith


Endorsements

Blank Endorsement: Signature of payeeRestrictive Endorsement: Signature of payee w/ words “For Deposit Only” & account number

Student NameX

Endorse Here

XFor Deposit Only—Acct. #

987654321

Students Name

Endorse Here

Endorse: To sign the back of a check to make it payable to the specified payee.


Special Endorsement: Forwarding a check to someone by writing “pay to the order of” + their name and then putting your blank endorsement

Pay to the Order of Jonathon Smith

Student Name

X

Endorse Here

John DoeJane DoeX

Endorse Here

Endorsements

Joint Endorsement: Multiple payeesendorsing the same check


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


OverdraftOverdraft: A deficit in a bank account caused by drawing more money than the account holds(debit card, ATM withdrawal, or check)• Overdraft charge typically between $20-$35

• Over 50 million Americans overdraw annually costing 24 billion in overdraft fees

Overdraft protection: which draws from a savings account, credit card, or another checking account• This usually costs $5-$10

• New regulation will decline transaction unless specified otherwise

Stop payment order: request to not fulfill payment on a check you have written. Typically costs between $20-$30


Reading a Bank Statement

Teens – Lesson 6 - Slide 6-H


Check Register

• Date– The date the check was written or transaction was made(B&PF p.142)


Check Register

• Check Number– The number of the written check; if a debit card or

ATM was used, write DC or ATM


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


Check Register

• Payment/Debit(-)– Amount of the transaction– Deducted from the balance


Check Register

• Deposit/Credit(+)– Amount of the transaction– Added to the balance


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


Check Register

• Fee (if any)– Any extra fees charged to the account– Listed on the bank statement


Check Register

• Balance– The running total of the checking account– Calculated by adding or subtracting each transaction– Keep this updated


100100 1/11/155

Fine FoodsFine FoodsGrocerieGroceriess

DepositDeposit

AutoAuto 1/111/11

1/111/11

23 23 1111

Deposit to CheckingDeposit to Checking

Charge for Personalized ChecksCharge for Personalized Checks

200 00200 00

20 0020 00

23 23 1111

200 00200 00200 00200 00

156 89156 89

Keep a RecordClick HereClick Here

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20 0020 00 180 00180 00WDWD

11 22 33


Reconciling a Checking Account

Reconcile: Comparing the bank statement to your checkbook register and accounting for any differences.

Step 1: Obtain the current balance from your bank statement.

Step 2: Add any deposits that you have recorded in your check register but that are not on this statement.

Step 3: Subtract any outstanding checks (checks you have written but that have not yet cleared the banking system).

step 4: Compare result with the current balance in your check register

* Helps you avoid bouncing checks

* Lets you know how much is in your account

* Keeps you in control of your finances

(B&PF p.145)


Steps for Reconciling• View the monthly bank statement and check register

$275.00

$275.00

$74.94


√ √ √ √ √ √ √

Place a check mark in the √ T column for all transactions that have been cleared and are shown on the bank statement $275.

00


Determine the current account balance from the bank statement

$275.00


Add any outstanding deposits – transactions that have not cleared the bank

Calculate the Subtotal


Subtract any outstanding withdrawals and calculate

Compare the total with the checkbook register. If the totals are different, double check the math and make sure all service fees and bank charges are recorded in the check register.

what are the benefits to balancing a checking account?

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