17.3 - Checks and Payment Methods Flashcards
when two or more people have an account together
joint account
a copy of the check that is automatically created when you write the check
duplicate copy aka carbon copy
What are the 3 main types of endorsements?
- blank endorsement
- full endorsement aka special endorsement
- restrictive endorsement
the bank’s account ID code for electronic sorting and routing
routing/aba #
(9 digit code written at the bottom of all checks)
a form issued by various organizations including traveler’s check companies, travel agencies, and many supermarkets, pharmacies, and convenience stores
express money order
- a service by which a bank deducts a payment from your account and transfers the funds to the appropriate companies
- this service requires a bank customer to authorize preset amounts of monthly expenses
automatic bill payment
if you make a mistake when writing a check, it is recommended that you ____
- erase it and correct it
- write ‘stop payment’ across the check
- rip it up immediately
- none of these choices
none of these choices
(should write ‘void’ on the check)
What are the 6 elements of a check?
- drawer
- payee
- drawee
- routing/ABA#
- account number
- memo
What is the purpose of a check register?
- to keep track of all transactions of a checking account
- includes checks written, debit card payments, cash withdrawals, and deposits
- this lets you know exactly how much you have in your checking account at all times
you owe your bank money that you have spent when there was no money in your account
overdrawn account
(you have negative amount in your account)
a digital reproduction of an original paper check known as a ____ check
- substitute
- cashier’s
- certified
- canceled
substitute
a report on the status of a bank account, usually sent monthly
bank statement
Who uses money orders?
normally a person who does not have a checking account and wants to send a payment through the mail
Why should you shop around for where to open an checking account?
- some banks charge a lot and high bank fees while other banks do not
- some banks give you interest earned on the money you have in your account while other banks do not
What are 8 tips that you should follow to avoid trouble when writing checks?
do not need to know word for word
- write checks only on the forms provided by your bank
- write checks in ink - helps prevent someone from erasing and entering different amount
- only write checks if money is available - writing a check for more money than what is in your account can result in an overdrawn account and will be charged a fee from bank
- use the current date
- avoid making checks payable to ‘cash’ or to ‘bearer’ - these checks can be cashed by anyone, instead write check to your own name
- always fill in the amount - if you leave it blank, you will be held responsible for whatever amount is written on check even if it is not correct
- void checks on which you make errors - do not try to erase or retrace your writing, just write ‘void’ across the check
- record EVERY payment from your checing account, whether the payment is by check, debit card or automatic payment
Balances shown in your account register and the bank statement may be different. What are the most common reasons for the difference?
- some of the checks you wrote may not have cleared (have not been paid by the bank yet)
- you may have forgotten to record a transaction in your register like a ATM deposit, automatic bill payment, or debit card purchase
- a service charge may appear on the bank statement
- you may have mailed a deposit to the bank that has not been received yet
- interest earned may have been added
- you may have recorded the amount of a check incorrectly in the check register, you may have added or subtracted incorrectly
the bank or other financial institution that pays the check
drawee
If you make deposits and withdrawals at an ATM close to your work but forget to record the transactions in your bank register and overdraw your account, what could you do better?
- you could keep your register with you at all times and record the transaction in it before using the ATM
- you could save your receipts and record the transaction in your register when you get home
- you could use online banking and check it regularly for items you forgot to record
a bank issued card used for ATM transactions
debit card
a fee a bank charges for handling a checking account
service charge
the owner of the account who signs the check
drawer
a device used for cash machine transactions
debit card
What do you do after you have reconciled your bank statement?
you correct any errors that you made on your register, the new balance should now agree with the bank statement
a ____ endorsement makes a check payable to anyone who has the check
a blank endorsement makes a check payable to anyone who has the check
(so…. if you sign the back of a check and do not write anything else on it and then lose it, anyone who finds it can then cash it or deposit it in their account)
what does ‘cleared’ mean?
that it’s been paid
a report sent by the bank to a depositor showing the status of his or her account
bank statement
a lost check made out to ‘cash’ can be cashed by anyone
- true
- false
true
a separate form on which the depositor keeps a record of deposits and checks
check register
- what you fill out when you are depositing money
- form lists all items you are depositing - currency (cash), coins or checks
- form shows your name, account number, the date, items deposited and total amount of the deposit
deposit slip
if you endorse a check with only your name, you have created a ____ endorsement
- blank
- restrictive
- full
- special
blank
number to identify the account you own at your bank
account number
(written at the bottom of all checks)
Kim’s bank statement shows a balance of $436.15 in her checking account. Her check register lists checks for $25.11 and $11.33 that have not cleared. There are no other outstanding deposits or payments. What balance does her check register show?
- $36.44
- $472.59
- $399.71
- $436.15
$399.71
(436.15-25.11-11.33 = $399.71)
a written notice that tells the bank not to pay a certain check
stop payment order
(banks charge a high fee for stopping payment on a check so only use this process for good reason - ex. a check was stolen or lost)
a personal check with guaranteed payment is a
- cashier’s check
- money order
- certified check
- traveler’s check
certified check
What information do most bank statements contain?
see example…
- the balance at the beginning of the month
- the deposits made during the month
- the checks paid by the bank during the month
- any automated teller transactions (ATM) made during the month
- any electronic fund transfers (EFT) or special payments the bank made
- service charges for the month, including charges for services like stopping payment on a check or fee for overdrawn account
- any interest earned on the account
- the balance at the end of the month
a document used to verify your signature
signature card
a transaction in which a merchant accepts debit cards to pay for purchases
point-of-sale transaction (POS)
a form sold by a bank stating that money is to be paid to a specific person or business
bank money order
checks that have not been deducted from the bank statement balance
outstanding checks
How do you determine the true balance in your account?
- subtract the total of the outstanding checks from the bank statement balance
- add any deposits that have not been received by the bank yet
- subtract service charges, fees and automatic payments from your checkbook balance
- add any interest earned to your check register balance
- if the balances do not agree, either you or your bank has made an error. carefully go over all calculations in your check register and make sure everything on the statement is in the register
a digital reproduction of the original paper check, sometimes sent with bank statement (basically a photocopy of check)
substitute check
How does recording your signature when you open a checking account protect you and the bank?
- it helps stop a person from cashing a check that was not written and signed by you (helps stop forged checks)
- if a bank cashes a forged check, the bank must pay you the money back that was illegally taken
outstanding checks are checks that _____
- the bank has guaranteed will be paid
- have not cleared the bank as paid
- travelers use outside the US
- require an endorsement
have not cleared the bank as paid
check taken to the bank that is over 6 months old, the bank may refuse to accept it or have the person that wrote the check verify that it is still good
stale-dated check
why should you always fill out the check stub or register first when writing a check?
because if you write the check first you might forget to record the info into your register or stub and then not know who the check was written to or the amount, this would then mess up your balance in your register
an endorsement of a check that consists of only the endorser’s name
blank endorsement
a ____ writes the check to the _____ who is paid from funds deposited with the _____
- drawee; payee; drawer
- drawer; payee; drawee
- drawee; drawer; payee
- drawer; drawee; payee
a drawer writes the check to the payee who is paid from funds deposited with the drawee
the line at the bottom of a check where you write the reason of check
memo
(ex. tennis lesson, electricity bill, shoes, etc)
writing a check for more than is in your account can result in a(n) _____
- canceled check
- overdrawn account
- postdated check
- stop payment order
overdrawn account
your _____ _____ should be used for maintaining a record of debit card payments, cash withdrawals and deposits
your check register should be used for maintaining a record of debit card payments, cash withdrawals and deposits
the first document that must be completed when opening a check account is the:
- deposit slip
- reconciliation statement
- check register
- signature card
signature card
today, signature cards are not actual _____. instead, all your personal information is entered into computer system as well as your signature.
today, signature cards are not actual cards. instead, all your personal information is entered into computer system as well as your signature.
What are the 7 steps to properly fill out a check?
don’t need to know word for word
see sample check in answer
- 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 only numbers after the pritned dollar sign, write the amount close to the dollar sign to prevent someone from changing the amount, write the cents part close to the dollar numbers so additional numbers cannot be inserted (you wrote 101.35 but someone changed it to 1010.35 because you left room)
- write the dollar amount in words on the line below the payee’s name, begin writing at the far left end of the line, draw a line from the written numbers to the cents to fill all unused space and prevent someone from adding more words (One hundred one dollars and —————–35/100)
- write the purpose of the payment on the line at the bottom of the check
- sign checks with the same signature you wrote on the signature card
a written notice telling the bank not to pay a certain check
stop payment order
Who are the 3 parties shown on each check?
- drawer
- payee
- drawee
how is a signature card used?
used to verify and compare your signatures if a bank suspects a forged check or when cashing a check that is for a high dollar amount
the process by which funds are deposited electronically and available automatically for your use
direct deposit
a statement showing hwo the checkbook balance and the bank statement were brought into agreement
bank reconciliation
checks that have not been deducted from the bank statement balance
outstanding checks
what is a forged check?
a check that someone took from a person and then signed their signature illegally
an endorsement that allows you to transfer a check to another person
full endorsement aka special endorsement
the use of computers and other technology for banking activities, including the use of automated teller machines (ATM), point of sale transactions, direct deposit, and automatic bill payment
Electronic funds transfer (EFT)
a personal check for which a bank has guaranteed payment, the bank stamps the front of the check and is signed or initialed by a bank officer
certified check
(the bank stamps the check which says that there are enough funds in your bank account to cover the amount of the check)
written evidence that you received payment or that you transferred your right of receiving payment to someone else
endorsement
account that two or more peoplel have together
joint account
What is required on a signature card?
- legal name
- address
- phone number
- social security number
- driver’s license number
- email address
- signature
- a check that a bank draws on its own funds
- service fee charged by the bank
- these checks are more acceptable than a personal check
cashier’s check
(the bank withdraws the money out of your account when you get the cashier’s check and puts the money into the bank’s account)
involves buying a message to direct a telegraph office to pay a sum of money to a certain person or business
telegraphic money order
a check that is dated later than the date on which it is written
postdated check
the person to whom the check is written
payee
actual checks that were paid during the month, sometimes included with bank statement
canceled checks
If your bank statement shows a balance of $401.19 and your register shows a balance of only $364.52, what are the most likely reasons?
- you forgot to record a deposit that you made
- you made a math error in your register
- you could have outstanding checks, EFT, POS or ATM transactions
- you could have earned interest and you did not record it in your register
a form of payment purchased from the US Post Office that can be sent safely through the mail
Postal Money Order
written evidence that a person received payment or transferred the right to receive payment to someone else
endorsement
why would you want to place a stop payment on a check?
- if a check is lost in the mail
- if a check was stolen
Why do you have to give a sample of your signature when you open a bank account?
so the bank can compare the signature on record to the signature on a check being cashed (normally a large dollar amount check) or when the bank suspects a forged check is being presented for payment
when you use a debit card to make a purchase, you are borrowing from the bank
- true
- false
false
(when you use your debit card you are using money from your checking account)
a ____ endorsement allows you to transfer a check to another person
a full endorsement allows you to transfer a check to another person
(you write the words ‘Pay to the order of’ then person’s name then sign your name under it, now only the person you want to cash the check can - even if lost)
special ink used in checks so they cannot be copied
MICR ink
(Magnetic Ink Character Recognition)
a _____ endorsement limits the use of the check to the purpose given in the endorsement
a restrictive endorsement limits the use of the check to the purpose given in the endorsement
(ex. if you have several checks you want to mail to the bank, you could write ‘for deposit only’ then your signature, then your account number. this only allows the checks to be deposited into your account. if they get lost in the mail or stolen, no one can take them)
an endorsement that limits the use of the check to the purpose given in the endorsement
restrictive endorsement
the document created to show how your own record of your checking account and the bank’s record of your account were brought into agreement (how they equal)
bank reconciliation
aka reconciling the bank balance
a form of payment that orders the issuing agency to pay the amount printed on the form to another party
money order
a form attached to the check by a perforated line
check stub
special forms designed for making payments when away from home, normally when traveling to another country
traveler’s checks
- can be bought at banks, credit unions and travel agencies. these checks can be bought in certain amounts such as $10, $20, $50 and $100.
- these checks require your signature in two places - first you sign each one when they are bought and then again when you cash a check or pay for a purchase with it
true or false
you must sign traveler’s checks at the time you purchase them
true
(and then sign again when you use them)
a separate book form on which the depositor keeps a record of checking account activities (deposits, withdraws, debit card purchases, etc), usually the same size as the checkbook
check register
before depositing a check, it must be _____
before depositing a check, it must be endorsed (signed on the back)
What kind of endorsement is required when a check is made out to two or more people?
restrictive endorsement - two signatures required
(both payees must sign the back of the check)
