unit 2A Flashcards
What is a Checking Account?
is a deposit account that allows you to easily make withdraws, deposits, and transfers.
How to get money into your Checking account
- Make a cash deposit to your bank
- Deposit a check to your bank
- Use an ATM to deposit your money
- Make a mobile deposit
- Use Direct deposit
- Transfer money from another account
How to get money out of your Checking account
- ATM withdrawal using a Debit card
- Visit a bank teller to make a withdrawal
- Make a purchase using a debit card
- Write a check
- Use online bill pay
- Transfer money from another account
Benefits of a Checking Account
- Making it easier to pay bills
-The ability to make purchases with a debit card
-Access to cash at an ATM
Commercial Banks and operation
-For-profit: Make their money from a variety of fees, service charges & by earning interest.
-Typically, provide lower interest rates and charge higher fees.
-Open to anyone who wants to utilize a depository institution.
-Offer numerous financial services such as: investment accounts, financial advisory services, etc.
-Have more brick-and-mortar (physical store) locations.
Credit Unions and operation
-Non-profit companies
-Typically, provide higher interest rates and charge lower fees.
-Owned and operated by their members who share a common bond.
-Offer many services but usually not as many as a bank. Typically, they offer better rates.
-Have fewer brick-and-mortar (physical store) locations.
FDIC
Insures Commercial banks
Both Federal Agencies protect up to $250,000 per depositor, per insured institution, for each type of account owned.
NCUA
Insures Credit Unions
Both Federal Agencies protect up to $250,000 per depositor, per insured institution, for each type of account owned.
Calculating Interest
Scenario: $100 deposited in an account earning 2% interest. Calculate below:
$100 x .02 =$2
Interest earned
Interest charged
Checking account
- Provides a safe place to keep your money.
- Easily accessible to your money.
- Typically don’t provide much, if any, interest. National Average = 0.06%
- Designed for short-term expenses and/or day-to-day expenses.
- Withdrawing Your Money By:
- Writing Checks
- Using a debit card
- Withdrawing Cash
- Electronically Transferring Money
Savings account
- Designed to hold your money not to spend on current consumption.
- Access to money is more limited.
- Typically, provide higher interest rates.
- Designed for long-term expenses.
Withdrawal (examples)
- involves removing funds (money) from / out of your bank account. To withdraw money, you would…
-Cash withdrawal at ATM by using a Debit / ATM card
-Cash withdrawal in person at the bank
-Write checks
-Use a debit card for purchases
-Transfer funds between bank accounts
-Use mobile payments such as PayPal, Venmo,
Cash App, etc.
-Electronic bill payment
Deposits (examples)
-refers to the depositing of funds (money) into your bank account. To deposit money, you would…
-Use a Debit Card at an ATM
-Payroll District Deposit
-Deposit cash and/or checks in person at the bank
-Deposit Checks via the bank’s mobile phone app
-Endorse Physical Checks
Debit card components, purpose, and capabilities.
a plastic card that is electronically connected to the cardholder’s depository institution account.
Use a Personal Identification Number (PIN) or signature to authorize transactions.
Reduces the need to carry cash or physical checks to make purchases.
Components of a check
-Current Date: written in numbers or words
-Payee Line: the person or business being paid
-Dollar amount written in numbers AND in words
Dollar Box: $23.00
Amount of Check: twenty-three dollars & 00/100
-Memo Line: the purpose of the check
-Signature Line: Your signature
If you make a mistake, write VOID on the check and in the register.
Writing a check
is a written, dated, and signed instrument that directs a bank to pay a specific sum of money to a person or business.
MUST be written in ink
Endorsements
Blank endorsement: the least secure way of endorsing a check but it’s also the most common.
Sign your name on the back of the check to deposit it into your bank account.
Use this endorsement when you deposit a check in an ATM.
Restrictive Endorsement: the most secure approach because it instructs your bank that your funds should only be sent to the account you’ve specified. Funds can’t be given out as cash or deposited into any other account. To restrict a deposit to a specific account:
Write “For deposit only” on one line.
Write the account number on another line.
Sign your name on a third line.
Special endorsement: allows you to make your check payable to someone else. You would…
Write “Pay to the order of ___” and then sign your name on the back of the check.
This effectively turns the check ownership over that person.
Reconciling your checkbook (2 things needed)
- Check Registar
- Monthly bank statement
Banking Fees Overdraft and to avoid fee
Charged if you withdraw more money from your account than is available.
Most frequently charged fee.
The average charge is per $35 overdraft.
Sign up for direct deposit so money is consistently being added to your account.
Purpose of Online Banking and what can you do with it?
allows you to conduct financial transactions via the Internet and/or a mobile app instead of physically visiting a bank institute.
What you can do with online banking…
Pay bills / set up recurring bill payments
Access account information
Transfer Money
Remote check deposit through mobile app
What is Person-to-person Payment (examples)
allows users to send one another money from their mobile devices through a linked bank account or card. Examples:
Venmo
Cash App
PayPal
Apple Pay
Banking Fees ATM and to avoid fee
Charged for using an ATM that belongs to another depository institution.
The average charge is $2.50 to $5 for using a non-network ATM.
Take out a larger dollar amount so the fee is only a one-time charge. Or try to get cash back by using your debit card
Banking Fees Minimum Balance and to avoid fee
Some bank institutes require you to maintain a minimum amount in your account; a fee will be charged if you go below that limit.
Maintain a minimum balance.
Banking Fees Low Balance and to avoid fee
The money in your account does not meet the financial needs you or the bank have.
Maintain your money
