Checks & Payment Methods
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Transcript Checks & Payment Methods
Checks & Payment Methods
Ch. 17-3 PoB 2011
Opening a Checking Account
The First Deposit
Starts with providing personal data and a sample of your signature
Signature Card – document usually requires your legal name, address,
phone, Social Security number, driver’s license number and e-mail
address
Types of Endorsements
Endorsement – is written evidence that you received payment
or that you transferred your right of receiving payments to
someone else
Must be made in the 1 ½ inch space on the back left side of the
check
Types of Endorsements
Blank Endorsement – consists of only the endorser’s name
Full Endorsement (special endorsement) – allow you to
transfer a check to another person
You write the words: “Pay to the order of…” followed by the name
of the person or business; then followed by your signature
Restrictive Endorsement – limits the use of the check to the
purpose given in the endorsement
“For Deposit Only”
Types of Endorsements
Elements of a Check
Drawer – is the owner of the account who signs the check
Payee – is the person to whom the check is written
Drawee – is the bank that pays the check
Check Register
Checkbook provides one of three formats for recording
account activities
Check Stub – is a form attached to the check by a perforated line
Check Register – is a separate book that allows you to maintain a
record of the checks written
Duplicate Copy – may be automatically created when you write
the check
Fill out the register before filling out the check so that all
information is recorded accurately
Writing a Check
1. Write checks in order by number
2. Write the date
3. Write the payee’s name on the line following:
Pay to the Order of
4. Write the amount of the check in figures after the printed
dollar sign
5. Write the dollar amount in words on the line below the
payee’s name
6. Write the purpose of the payment on the notes line
7. Sign checks with the same signature as on your signature card
Parts of a Check
Proper Check Writing
1.
2.
3.
4.
5.
6.
7.
8.
Write checks only on the forms provided by your bank
Write checks in ink
Only write checks if money is available
Use the current date
Avoid making checks payable to “Cash” or to “Bearer”
Always fill in the amount
Void checks on which you make errors
Record every payment from your checking account, whether
the payment is by check, debit card, or automatic payments
Stopping Payment
Stop Payment Order – a written notice that tells the bank not
to pay a certain check
Banks may charge a high fee
Use this process for only good reasons
Use if a check has been lost or stolen
The Reconciliation Process
As a depositor, you will need to review the record of
your account that the bank keeps
At regular intervals, usually monthly, the bank will
send you a report on the status of your account
known as a bank statement
Bank Statement Information
The balance at the beginning of the month
The deposits made during the month
The checks paid by the bank during the month
Any automated teller transactions made during the month
Any electronic fund transfers (EFT) or special payments the
bank has made
Service charges for the month
Any interest earned on the account
The balance at the end of the month
Determine Checks Paid
When you bank statement arrives, compare the checks you
wrote to those that have been paid by your bank
Canceled Checks – checks that have been paid; may not be
returned by your bank
Substitute Check – is a digital reproduction of the original paper
check
Monthly Account Statement
Find Differences
Bank Reconciliation – the document created to show
how the two balances (statement and checkbook)
were brought into agreement
Reconciling the Bank Balance – bringing the balances
into agreement
Most Common Differences
Some of the checks you wrote may not have cleared (been
paid)
Outstanding Checks – checks not deducted from the bank
statement balance
Forgotten transactions, not recorded
Service charges
Mailed a deposit that has yet to be received
Interest earned
Recorded check amounts incorrectly
Sample Bank Reconciliation Form
Calculate Adjusted Balance
To determine the true balance in your account, take the
following steps:
1.
Subtract the total of the outstanding checks from the bank
statement balance
2. Add any deposits in transit to the balance statement balance
3. Subtract service charges, fees and automatic payments from
your checkbook balance
4. Add any interest earned to your check register balance
Other Types of Payments
Certified Check – is a personal check for which a bank has
guaranteed payment
Cashier’s Check – is a check that a bank draws on its own
funds and has a fee
Traveler’s Check – are special forms designed for making
payments away from home
Other Types of Payments
Money Order – is a form of payment that orders the issuing
agency to pay the amount printed on the form to another
party
Bank Money Order – is sold by a bank stating that money is to be
paid to a specific person or business
Postal Money Order – purchased from the US Post Office can be
sent safely through the mail
Express Money Order – is issued by various organizations
Telegraphic Money Order - involves buying a message to direct a
telegraph office to pay a sum of money to a certain person or
business
Review
1. What are the three types of endorsements?
2. What is the purpose of a check register?
3. What are causes of difference between the bank
statement balance and a person’s check register?
4. How does a certified check differ from a cashier’s
check?