BANKING and BANKING and CHECKINGCHECKING

Chapter 7Chapter 7

Why Do We Have Why Do We Have Banks?Banks?

BanksBanks Banks are a private businessBanks are a private business How do banks earn their money?How do banks earn their money?

Interest RatesInterest Rates Service FeesService Fees

Example:Example:

Deposit $100 * .04% int. = $104Deposit $100 * .04% int. = $104

Borrow $100 * .06% int. = $106Borrow $100 * .06% int. = $106

Bank Income = $2Bank Income = $2

BanksBanks

Provide securityProvide security Protects your Protects your purchasing powerpurchasing power

The amount your money can buyThe amount your money can buy Banks are regulatedBanks are regulated

FDICFDIC ReservesReserves

BankingBanking

Deposits are insuredDeposits are insured FDIC – Federal Deposit Insurance FDIC – Federal Deposit Insurance

CorporationCorporation $100,000 max$100,000 max

Money lent to borrowersMoney lent to borrowers People: houses, cars, etc.People: houses, cars, etc. Business: start-up, buildings Business: start-up, buildings

equipmentequipment Credit is verified to ensure paybackCredit is verified to ensure payback

PARTS OF A CHECKPARTS OF A CHECK

DrawerDrawer = person writing = person writing the checkthe check

DraweeDrawee = the bank that is = the bank that is instructed to payinstructed to pay

PayeePayee = person that the = person that the check is made out tocheck is made out to

WHY Checks?WHY Checks?

Provide safetyProvide safety Only the payee can cashOnly the payee can cash Bank, not payee, is responsible for Bank, not payee, is responsible for

illegally cashed checkillegally cashed checkBank suffers lossBank suffers lossBank asks for identificationBank asks for identification

If lost, can stop paymentIf lost, can stop payment ConvenienceConvenience Records of transactionsRecords of transactions

Opening a Checking AccountOpening a Checking Account

18 yrs. or older18 yrs. or older Joint Checking? Joint Checking? Complete signature cardComplete signature card

Protects against forgeryProtects against forgery Valid IdentificationValid Identification Minimum DepositMinimum Deposit Social Security NumberSocial Security Number Proof of addressProof of address

Writing a CheckWriting a Check Write in inkWrite in ink Blue or Black Blue or Black

inkink Write in words, Write in words,

cents in fractioncents in fraction Write at left of Write at left of

column, fill rest column, fill rest with linewith line

Date checkDate check Name of payeeName of payee Amount in Amount in

words and words and numbersnumbers

Your signatureYour signature

50.00

July, 2 2006

Mrs. Monticello

Fifty and 00/100

Signature

Check Number Number

Words

Payee

Date

Electronic Banking Electronic Banking ATM’sATM’s

Automated Teller Machine (ATM)Automated Teller Machine (ATM) Make depositsMake deposits Withdraw cashWithdraw cash Transfer moneyTransfer money Check account balances Check account balances Pay billsPay bills ConvenienceConvenience Usage feesUsage fees Use ResponsiblyUse Responsibly

Need the following:Need the following: ATM cardATM card Personal Identification Number (PIN)Personal Identification Number (PIN)

More TermsMore Terms

Debit Cards (Check Cards)Debit Cards (Check Cards) Don’t have to carry or write checksDon’t have to carry or write checks Can’t overdrawCan’t overdraw Stores appreciate because they Stores appreciate because they

receive payment immediatelyreceive payment immediately

Direct DepositDirect Deposit Non-negotiable checkNon-negotiable check

Automatic WithdrawalAutomatic Withdrawal Will automatically withdraw on Will automatically withdraw on

specific day each monthspecific day each month

Card Cautions!!!!Card Cautions!!!!

Keep your card in a safe place Keep your card in a safe place Memorize your ID Memorize your ID Never give it out Never give it out Never say it out loud Never say it out loud Keep all receipts! Keep all receipts! Record transactions Record transactions Notify bank immediately if card lostNotify bank immediately if card lost

Certified Check Certified Check

Personal check Personal check Stamped and signed by bank Stamped and signed by bank

officer officer Charges a fee - $5-$20 Charges a fee - $5-$20 Withdrawals money to ensure Withdrawals money to ensure

you have funds you have funds

Cashier’s Check Cashier’s Check

Checks written from bank’s Checks written from bank’s account account

Signed by bank’s cashier Signed by bank’s cashier Bank makes check to payee Bank makes check to payee $25 fee approximately $25 fee approximately Down payments on houses, Down payments on houses,

cars, large amounts cars, large amounts Confidence knowing from bankConfidence knowing from bank

Money orders Money orders

Less expensive ($1-$10) Less expensive ($1-$10) Maybe you don’t have a Maybe you don’t have a

checking account? checking account? Can be purchased from bank or Can be purchased from bank or

other financial institute other financial institute Amex office Amex office

Post office Post office Lists you as the drawer and is Lists you as the drawer and is

written to payeewritten to payee

Traveler’s Checks Traveler’s Checks

Never good to carry large amounts of cashNever good to carry large amounts of cash Lost Lost StolenStolen

Some businesses do not accept out-of-Some businesses do not accept out-of-town checks town checks

Can be replaced quickly (serial #’s) Can be replaced quickly (serial #’s) Receipt given and used as a register Receipt given and used as a register Banks, Amex, travel agencies offer Banks, Amex, travel agencies offer Increments $20, $50, $100 Increments $20, $50, $100 Fee of 1% Fee of 1% 2 signatures required and ID upon usage2 signatures required and ID upon usage

Safe Deposit Boxes Safe Deposit Boxes

$30/$40 annually $30/$40 annually Need ID, signature, key—very Need ID, signature, key—very

secure secure Valuable, documents—non Valuable, documents—non

monetary items monetary items