Chapter 9 Personal Finance

When you open a checking account, most banks will require you to have an initial deposit of at least

$50

Steps to reconcile a checking account

1. Write ending balance from bank statement. 2. Add credits or deposits not on statement. 3. Total lines 1 and 2. 4. List checks, withdrawals, and debits made but not shown on statement. 5. Total outstanding checks/debit transactions. 6. Subtract line 5 from line 3.(Result should match checkbook balance)

Routing Number

9 digit number that identifies your bank

share account

A savings account at a credit union

Examples of what to keep in a safety deposit box

Birth, marriage, and death certificates Deeds and mortgage papers Stocks and bonds Jewelry Coin collection

Safe deposit box

Can store valuable items or documents and ensures that the items won't be stolen, lost, or destroyed. Banks charge a yearly fee based on the size of the box.

What should not be kept in a safe deposit box?

Cash

Advantages of checking accounts

Convenience Safety Built-in record keeping system Access to bank services

True or false Paying bills online is generally considered slower and riskier than writing checks.

False

Advantages of online and telephone banking

Information is up-to-date and can be checked any time.

Darren writes a check to the phone company for $45.60. He should record this amount in his checkbook register in the

Payment/Debit column

financial sevices

Purchasing or selling savings bonds Investment brokerage services

Writing the words "For Deposit Only" on the back of a check before your name constitutes which of the following?

Restrictive endorsement

What do you need to open a checking account?

Signature authorization form, Signature Card, Initial deposit

A check is written to Taylor Thomas. On the back of the check, Taylor writes "Pay to the order of Rose Dryer," then signs her name. What kind of endorsement is this?

Special endorcement

What happens when you overdraft your account?

The bank does not honor the check and usually stamps the check with the words "not sufficient funds" (NSF) and returns the check to the payee's bank. When this occurs, the check has bounced. Your bank will charge you a fee for each NSF check processed.

Which part of a check provides a place for you to write the purpose of the check?

The memo line

The process a check follows in a banking system

The payee cashes your check. The bank that cashed the check returns it to your bank. Your bank withdraws the money from your account and sends it to the other bank. Your bank then stamps the back of your check, indicating that it has cleared.

floating a check

The practice of writing a check on insufficient funds and hoping a deposit will clear before the check is cashed

Bank reconciliation

The process of matching your checkbook register with the bank statement

Why do banks charge fees to their customers?

To help cover their operating costs.

endorse

To sign your name on the back of a check.

post date

To write a future date on a check.

Ways you can use your checking account

Writing checks Paying bills online Making deposits

Do banks usually charge fees for processing overdrafts

Yes

Should debit card transactions be recorded in your checkbook register?

Yes

checkbook register

a booklet used to record checking account transactions

canceled check

a check that bears the bank's stamp, indicating that it has cleared

Cashier's Check

a check written by a bank on its own funds

overdraft

a check written for more money than your account contains

electronic funds transfer

a computerized cash payments system that transfers funds without the use of checks, currency, or other paper documents

substitute check

a digital reproduction of the original paper check

Trustee

a person or an institution that manages property for the benefit of someone else under a special agreement.

certified check

a personal check that the bank guarantees or certifies to be good

money order

a printed order for payment of a specified sum, issued by a bank

stop payment order

a request that the bank not cash a specific check

check

a written order to a bank to pay a stated amount to a person or business

demand deposit

aka checking account the money may be withdrawn at any time—that is, "on demand."

Overdraft protection

allows you to cover checks or withdrawals up to a specified amount, usually between $100 and $1,000, depending on the typical balance in your account.

online and telephone banking

allows you to pay bills, check your balance, etc. at any time

checking account

an account that allows depositors to write checks to make payments. A banking service wherein the customer deposits funds in an account and writes checks to withdraw money.

special endorsement

an endorsement that transfers the right to cash the check to someone else

safe deposit box

birth and marriage certificates, stock and bonds, coin collections, jewelry

What do banks offering national credit cards usually charge?

both an annual fee for use of the card and interest on the unpaid account balance

When a check is returned to the payee's bank due to insufficient funds, the check is said to have

bounced

A money order is like a check, except that it ....

can never bounce

traveler's check

check forms in specific denominations that are used instead of cash while traveling

FDIC insurance protects the ___________________ of customers against loss up to ....

deposits $250,000 per account

Banks sell money orders to people who....

do not wish to use cash or do not have a checking account

You can not purchase a money order through an ____________________________

electronic funds transfer

_____________ a check is illegal in most states

floating

special account

for customers with small amount of activity

A financial institution that offers all types of services is called a ________________________.

full-service bank

standard accounts

have a monthly charge

Checking advertised as "free" must not have...

hidden charges or conditions

FDIC

insurance that protects the deposits of customers against loss up to $250,000 per account.

Another term for a survivorship account.

joint account

An automated teller machine can be used to ...

make a loan payment

What can ATMs do?

make withdrawals, check account balances, and make loan payments

joint account

opened by two or more people survivorship accounts

Your checks will be covered even if you have insufficient funds in your checking account with ________________________

overdraft protection

Where can you purchase money orders?

post office and local merchants

A canceled check is one that has been ______________ by the bank.

processed

There is a charge for ______________ a money order.

purchasing

restrictive endorsement

restricts or limits the use of a check

To endorse a check, the payee.....

signs the top part of the back of the check in ink

A request that a bank not honor a specific check is called a

stop-payment order

What is the usual reason for a stop-payment order?

the check has been lost or stolen

payee

the person or company to whom the check is made payable. The person who cashes the check

Reconciliation

the process of matching your checkbook register the the bank statement

blank endorsement

the signature of the payee written exactly as his or her name appears on the front of the check

A person or institution that manages property for the benefit of someone else under a special agreement is called a

trustee

Banks can act as __________________ of estates for minors and others

trustees

Notary public

verifies a person's identity, witnesses the person's signature on a legal document, and then "notarizes" the signature as valid.

Interest bearing account

your account balance must not fall below a minimum average set by the bank during any month