Unit 3 Banking

Automated Loan Payment

have your loan (house, car, school ...) automatically deducted each month

How to write a check

1 The current date 2 Payee - who can cash the check 3 Dollar and cents written in numbers 4 Dollars and cents written in words 6 Memo - purpose of the check 5 Your signature

Debit Card

issued by financial institutions; allows consumers to make purchases online or at a retail store or business. This does not include gift cards, store-value cards, credit cards and prepaid phone cards, which are excluded from the EFTA.

Online Bill Pay

set up an automatic payment each month that comes directly from your bank account

Memo (on a check)

purpose of the check

Restrictive Endorsement

By signing "for deposit only" the check can only be deposited into your account and not cashed. This is the most secure endorsement.

What should you do if you lose your Debit Card?

Call your bank ASAP! The sooner you report it, the less damage can be charged to you After 2 days you can be liable up to $500

Why should you keep cancelled checks?

Cancelled checks provide legal proof of payment.

What transactions should you put in the check register (At least 5)

Checks you write, deposits, withdrawals from ATMs, transfers, debit card transactions

Why is a check register important?

It keeps track of how much money you have and will help you avoid overdrafts

Blank Endorsement

Just sign your name. This is the least secure and should only be done at the bank right before you cash

What does Non-sufficient funds mean?

Non-sufficient funds is when you do not have enough money to pay for the amount of check you wrote or atm withdrawal or point of sale.

Is the bank FDIC insured? What does that mean?

Not FDIC insured. FDIC means it is an independent agency of the United States government that protects you against the loss of your insured deposits if an FDIC-insured bank or savings association fails. FDIC insurance is backed by the full faith and credit of the United States government

What actually happens when you make a purchase with your debit card?

The amount charged is automatically deducted from your checking account.

What is overdraft protection?

The bank might automatically transfer money from your saving to checking to cover a check that would otherwise bounce.

What is the EFT act of 1978 - how does it affect you?

This act protects consumers using some forms of electronic banking. The act says that banks must offer consumer a record or receipt for all computer transactions, they must also investigate errors and report back to the consumer within ten days.

What does it mean to reconcile an account? What two things are you comparing?

To reconcile a bank account means to bring the bank statement and your own record of transactions into agreement. You are comparing what your register states and what the bank statement says.

What is a check?

a written order that instructs a bank to pay a specific amount of money to a particular person or business.

Cancelled check

a check that has been cashed by the payee

Electronic Check Conversion

enables a business to convert a paper check into an electronic payment by scanning the check and capturing the bank name, address, account number and routing number. After the paper check is scanned into an electronic payment, it becomes null and void.

Pay-by-Phone

enables you to instruct and authorize your financial institution to make payments or transfer funds via telephone. Banks are required to confirm your identity by asking account-specific questions.

Interest

fee paid for the opportunity to use someone else's money over a period of time.

What is a bank?

A bank is a financial institution that accepts deposits from the public and creates credit.

Outstanding (items from your checking account)

A check or online payment you have made or planned that is in your register but not on the bank statement

What is an overdraft fee?

A fee that a bank charges customers who do not have enough money in their account to cover the check that was written.

What is the difference between a voided check and a cancelled check?

A voided check is when you cancelled the payment yourself through the bank. A cancelled check is a check that has been paid.

What can you do at a ATM Machine?

ATM - Automated Teller Machine - gives you access to your account at all times Deposit money Withdraw cash Make transfers Check balances

One of the benefits to having a checking account at your bank is that you will be able to use all the ATMs conveniently located around town. All of the following statements are true about ATMs EXCEPT

ATMs do not require customers to enter a PIN code before making a transaction

Banking electronically

Advantages: cheaper, convenient, check information at your fingertips

ATM

Automated Teller Machine enables virtually 24-hour access to make withdrawals or deposits. If the ATM is owned or operated by an institution other than your bank, you may be charged a fee. This charge must be disclosed at the time of transfer.

What does ATM stand for?

Automated teller machine

How does a bank work?

Banks pay interest for the opportunity to use someone else's money over a period of time. Banks charge interest on loans and then pay interest to checking and saving account holders

Reconcile (Balancing your checkbook)

Compare your records (check register) to the bank's record (bank statement)

Instead of choosing a commercial bank, you could've considered opening an account at a non-profit credit union that is affiliated with your mom's employer. Which of the following statements best describes the difference between commercial banks and credit unions?

Credit unions typically offer a more competitive interest rate on savings accounts and loans to their members than commercial banks offer to the general public

Overdraft protection

If you do not have enough money in your checking account the bank will transfer money from your savings account to cover it, but they will charge you a fee

What is needed for you to open a Checking Account?

Must be at least 18 years old ID and Social Security Card money or check to deposit in checking account knowing what type of checking account you want to open. Know all fees and monthly fees

How do commercial banks remain profitable?

Pay a lower interest rate to depositors than they charge to borrowers.

PIN (debit card use)

Personal Identification number when using your debit card

While on vacation with your family in Florida, you lose your debit card. You don't know what to do and immediately go to your mom and dad for help. What should be the first piece of advice they give you regarding the lost debit card?

Report the lost card to your bank immediately.

Using a Debit Card (can use two ways)

Use as Debit Card- enter your PIN, money is immediately taken from account and you can get cash back during transaction Use as Credit Card- sign and temporary lag in withdrawal-no cash, no PIN

Special Endorsement

Used to help change who can cash the check. The original payee (John Doe) can no longer cash this check and Jane Doe can cash it

Check register

Your record of transactions record ALL transactions in your checking account

Internet

allows you to access your accounts through financial institutions' web portals, enabling account monitoring, transfers and online bill payment.

Overdraft

lack of sufficient funds in your checking account to cover the full amount of the check "bouncing a check"

Advantages of a Checking Account

more secure than cash (only usable by you) & cancelled checks serve as proof of payment

Credit Union

nonprofit owned by members example: Dupage Credit Union

Direct Deposit

offered by most banks; allows you to preauthorize deposits (e.g. payroll checks or government benefits) or recurring bill payments (e.g. mortgages, insurance payments or utility bills). You have the right to stop preauthorized transfers at any given time, regardless of any opposing contract terms. To stop future automatic payments, notify your bank at least three days before the next scheduled transfer.

Commercial Banks

operate to make a profit example: Chase Bank

Internet bank

operates solely on the internet example: Ally

EFT Electronic Funds Transfer

the movement of funds by electronic means

Void Check

when you cancelled the payment yourself through the bank.

Payee (on a check)

who can cash the check