Personal Finance Chapter 5
Terms in this set (71)
Allows you to write checks or transfer money electronically to make payments
aka checking account
cashes your check
check has been processed by the bank
check that has cleared your account
To make processing faster and more efficient, they exchange check information electronically by transmitting an image of the check
Advantages of a Checking Account
-It provides a convenient way to pay your bills.
-Writing a check is often safer than using cash, especially when making major purchases, paying bills, or buying products through the mail.
-It has a built-in record-keeping system that you can use to track expenses and create budgets.
-It gives you access to other bank services, such as loans, online banking, and 24-hour access to your money through automated teller machines (ATMs).
Electronic Check Conversion
convert a check into a debit transaction instead of processing the check
A check written for more money than your account contains
when a bank that does not honor a check usually stamps it with the words "not sufficient funds" (NSF) and returns it to the payee's bank
Floating a Check
Many people write checks, hoping to deposit money to cover them before they clear
provides an official signature that the bank can compare to the signature you write on your checks
Parts of a Check
-Name and Address of Maker
-Amount and Routing Numbers
-appears in upper right-hand corner
-top half of the fraction identifies the location and district of the bank
-bottom half identifies the specific area and bank for the account
What are some advantages of having a checking account?
A checking account is a good and secure way to pay your bills, it is safer than carrying cash, it is a built-in record-keeping system, it provides proof of purchases, and it gives you access to many other banking services.
Make sure to do the following when writing checks
-Always use a pen, preferably one with dark ink that does not skip or blot.
-Write legibly. Keep numbers and letters clear and distinct, without extra space before, between, or after them.
-Sign your name as it appears preprinted on the check and signature card.
-Avoid mistakes. If you make a mistake, write "VOID" across the face of the check to cancel it and then write a new check.
-Be certain you have deposited adequate funds in your account to cover each check you write.
complete a _ _ each time you want to deposit money into your account
Preparing a Deposit Slip
-Insert the date of the transaction.
-In the "Cash" section, write in the amount of currency and coins you are depositing.
-If depositing checks, write the amount of each check, together with the check number of each check, in the "Checks" section of the slip.
-Total the currency, coin, and check amounts. Write this figure on the "Subtotal" line.
-If you wish to receive some cash at the time of your deposit, fill in the desired amount on the "Less Cash Received" line
-If cash is received, subtract it from the subtotal. Write the final amount of the deposit on the "Net Deposit" line
-If you will receive cash, enter your signature on the line above the words "Sign here for cash received"
-The teller will give you either a copy of this deposit slip or a receipt. Keep the copy or receipt as proof of your deposit.
a booklet used to record checking account transactions
The process of matching your checkbook register with the bank statement
the signature of the payee written exactly as his or her name appears on the front of the check
a check that is signed over to a third person by the original payee
an endorsement that transfers the right to cash the check to someone else
restricts or limits the use of a check
Why is it important to reconcile your bank accounts?
Reconciling your account(s) can identify errors you may have made, checks not accounted for, and other important information such as fees or automatic payments from your account. Doing this also helps you avoid overdrafts and fees.
no service fees accounts
an account opened by two or more people
any person who signs on the account has the right to the entire amount deposited
an account offered to customers who have a small amount of activity in their accounts each month
has a small (or no) monthly service fee and no per-check fee
Money Market Account
an interest-bearing checking account that pays a higher rate of interest, but it usually has more restrictions
a savings account representing ownership interest
Share Draft Account
a checking account with low (or no) average daily balance requirements and, generally, no service fees
What are some types of Checking Accounts?
Joint, special, standard, money market, and share draft accounts are types of checking accounts.
How can you maximize your services and minimize your fees at a bank?
Choose the right account that has the right features and be aware of all fees that could be imposed, such as ATM fees, so that you can avoid them.
offers every possible kind of service, from savings and checking accounts to credit cards, safe deposit boxes, loans, and ATMs
a personal check that the bank guarantees or certifies to be good
Cashier's Check/ Bank Draft
a check written by a bank on its own funds
check forms in specific denominations that are used instead of cash while traveling
like a check, except that it can never bounce
a bank card that deducts money from a checking account almost immediately to pay for purchases
A bank service that covers checks even if you have insufficient funds in your checking account.
Electronic Funds Transfer
a computer-based system that enables you to move money from one account to another without writing a check or exchanging cash
Stop Payment Order
a request that the bank not honor a specific check
Safe Deposit Box
A place at your bank available to store valuable items or documents
a person or an institution that manages property for the benefit of someone else under a special agreement
A person who verifies a person's identity, witnesses the person's signature on a legal document, and then "notarizes" the signature as valid
Why is online banking such an important banking service today?
Because of technology, banks and their customers want the convenience of using online banking. It's faster and more convenient for the customer and often safer because of all the security.
Most common checking account fees
-Monthly Service Fees
-Safe Deposit Box Fees
overdraft fee assessed when you spend more than you have in your account and don't have overdraft protection
An amount typically charged by an ATM that does not belong to your own bank
How can you avoid service fees charged by banks?
To avoid fees, know the bank's policies and choose the type of checking account carefully.
Financial institutions usually do not charge a fee for checking account services.
Most financial institutions offer online and telephone banking services.
Electronic funds transfer (EFT) often involves the use of ATM machines.
It is important to reconcile your checkbook immediately when you receive the bank statement.
when a check you have issued has been lost or stolen, you should request a stop payment order
to open an account, either checking or savings, you first must fill out and sign a signature form.
when a minimum balance is not maintained in a checking account, the bank will usually waive a service charge.
a debit card is the same as a credit card
a money market account is an interest-bearing checking account that pays a higher rate of interest.
with online banking, you can make deposits and withdraawals
what is a check written by a bank on its own funds called?
Checks over----old may not be honored by a bank.
a----endorsement results when the payee signs over a check to a third person.
a check that has cleared your bank account is said to be a...
insurance up to ----on each account is provided for depositors by the FDIC.
when payment on a check is prevented by the bank before it can be made to the payee
a-----is a personal check that the bank guarantees to be good.
a----is a safe place to keep stocks and bonds, deeds, and other important documents.
safe deposit box
a----account charges customers fees based on the number of checks written each month; a minimum balance is usually not required
YOU MIGHT ALSO LIKE...
Principles of Economics
6e Personal Finance Chapter 9-full version
Finance Ch 5 Checking and Banking
Chapter 9 Checking & Banking
OTHER SETS BY THIS CREATOR
THIS SET IS OFTEN IN FOLDERS WITH...
Personal Finance Chapter 7
Personal Finance Chapter 9
PF Chapter 7 Vocabulary
Chapter 16 personal finance