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