Banking and Investing

Certified checks

(book definition) Personal check that a bank certifies is genuine and that there is enough money in the account to cover the check (class definition) A personal check that has been stamped and signed by a bank officer - written guarantees the account can pay

Cashier's check

(book definition) Special type of check that the bank guarantees to pay (class definition) A bank's check endorsed by the cashier - bank responsible for payment - used for large purchases

Commercial Bank

(book) Business owned by investors and its primary functions are to receive, transfer, and lend money to individuals, businesses, and governments

Credit Union

(book) Nonprofit financial cooperative owned by and operated for the benefit of its member

Money Order

(book) Payment order for a specific amount of money payable to a specific payee (class) A certificate you "purchase" with cash which is payable to the receiver of funds - guaranteed payment - used if you don't have a checking account - post office or bank

Check Register

(book) Record of account deposits, withdrawals, checks, fees, and interest (class) Checkbook log where you keep track of ALL your checking account transactions - should include the following for withdrawals: check number or DC for debit card transaction, amount of check, date of check, name of payee - should include the following for deposits: Only write Deposit, place the dollar value in the appropriate location

Writing a check

- ONLY blue and black ink - always start writing at the far left - write legibly (if the numbers aren't clear or they differ from the written dollar amount, the written amount applies) - sign your name last and sign it the same way every time (the bank does keep track based on previous ones)

Deposit Slip

- allows cash or checks to be deposited into an account - slips are located in the back of the checkbook or at the bank - record ALL deposits in the check register - deposits can be made at an ATM or with a bank teller

Why do people use checking accounts?

- reduces need to carry large amounts of cash - convenience - written record - safety

The elements of a check

- to pay for items using a CHECKING account (given as a form of payment, must be completed and given to the person or business) - pre-printed items on a check (name and address of account holder or financial institution, check number, and identification numbers such as account and routing) - Three Parties involved (Payee, Drawer, Drawee)

What are the parts of a check?

1. Date 2. Payee 3. Dollar amount in numbers 4. Dollar amount in words 5. Memo line to tell you what the check was for 6. Signature line

401k vs 403b

401k - double the money, matches business (there's a limit) 403b - not going to put money in pension and retirement fund. Only one

Debit/Check Card

Card that allows a person to make purchases by swiping the card through a point-of-sale terminal that is usually located at the merchant's checkout counter Used to make purchases - immediately comes out of your checking account

Overdraft

Check written for more money than the balance of an account

Postdated check

Check written with a future date

Checks outstanding

Checks that were recorded in your check register but not yet cleared by the bank

What are the two types of depository institutions?

Commercial banks and credit unions

Depreciation

Decrease in the value of property as a result of use and age

Deposits outstanding

Deposits made that were after the ending date of the bank statement

Mutual Savings Bank

Financial institution that is owned by its depositors

Savings and Loan Association

Financial institution that provides many of the services offered by commercial banks

Endorsement

In banking terms, signature on the back of a check that transfers ownership of the check. In insurance terms, an attachment to existing insurance coverage, such as family policy, to protect expensive items taken to college Your signature on the back of a check - use pen (blue or black) - sign your name exactly as it's written on the front of the check

Charter

License that authorizes a bank to operate

Balancing your check book

Matching the amount of money you say you have with the amount of money the bank says you have - also known as reconciliation - only way to catch errors is to keep good records and regularly balance your account

Payee

Person who the check is written to

Drawer

Person who wrote the check

Bank Statement

Record of checks, ATM transactions, deposits, and charges to an account that is provided by the bank - The bank's record of all the transactions in your checking account - includes a record of all withdrawals, deposits, interests, and fees

Special endorsement

Sign the check over to a 3rd party (not on the check) - check is signed over to someone else who then cashes the check - banks rarely allow anymore, now you have to go to the bank with the third party with your ID, etc. - Format: Pay to the order of X Sign your name

Traveler's Check/Card

Special form of check that functions as cash - if lost, can be canceled and reissued at another bank if you have the receipt - vacation dollars!

Drawee

The bank

Restrictive endorsement

To deposit into your checking account (the entire check is deposited) - Format: For Deposit Only Sign your name 1234567890 (your bank account number)

Blank endorsement

To receive cash - only sign your name

Community bank

Type of commercial bank that is locally owned and operated

Credit Card

Used to make purchases - you receive a bill every month - pay interest on outstanding balance

Investing

Using your money to make money (different from savings b/c savings just sit there and save) - include 401k, stocks, bonds (a little safer, backed by gov or bank), mutual funds, annuities, real estate, collectibles, savings accounts

ATM card

card issued by a bank that allows the holder to check account balances, withdraw and deposit cash, and transfer money from one account to another using an automated teller machine (ATM)

Electronic funds transfer (EFT)

movement of money electronically from one financial institution to another

Check

written order for the bank to pay a specific amount to the person to whom the check is written