Banking 101

What a bank account lets you do

• Handle your money, your way• Build your savings• Keep your money safe• Apply for credit cards and loans• Get advice from bank professionals

Banks can help

• By using a bank for your money needs, you can have access to your money:– At the bank– By phone– Through Automated Teller Machines (ATMs)– Using online banking

How to choose a bank account

• Start by asking important questions:– Is there someone dedicated to helping build your relationship

with the bank?– Are there fees for the services you want?– Does the bank offer:

• Financial education seminars?• Different lending programs?

Benefits of a checking account

• It’s safe – safer than carrying cash• Use a debit/check card or checks instead of cash or money

orders• Get cash at ATMs• Make purchases• Deposit cash or checks• Direct deposit of paychecks into your account• Convenient access using telephone banking and online banking• Pay bills conveniently• Keep records of all transactions

How much does a checking account cost?

• Every bank charges differently• Some things to look for when choosing a checking

account:– Minimum balance requirement– Monthly service fee– Fees for writing checks– Fees for bouncing checks– Access charges

• ATM• Online banking• Online bill payment

Features of a checking account

• Debit/check card– Used as an ATM card and to make purchases– Difference between selecting “debit” and “credit”– Fees for usage?

• ATM Card– Used to get cash, make deposits, check balances– Fees for usage?

• Checks– A standard feature of checking accounts– Comes with a register to keep track of the checks you write– Check writing limits?

Online banking

• Provides convenience, efficiency and effectiveness 24/7 – just a click away.

• e-Statements• Check balances frequently• View transaction history• Transfer money between accounts• Online bill payment service

Checking account fees

• When you open an account you receive a fee schedule that outlines all fees that may be charged on the account

• Common checking services for which a fee may be charged:ATM Money Orders Cashiers ChecksChecks Counter Checks Non Sufficient FundsStop Payment Deposited item return Cancelled check return

How to avoid fees

• Read the fee schedule that you are given when you open an account– Use your bank’s ATM or a “free” ATM whenever possible

• Avoid NSF fees with good management of your account– Balance your checking account– Check your balance online between bank statements– Record all transactions in your check register

ATM withdrawals ATM transfersCheck card purchases Checks writtenATM fees

Overdraft protection

• A safety net to avoid bouncing checks• An overdraft line of credit

– Application and approval process– Avoid NSF fees– Pay interest on the amount of credit you have used

• Linking a savings account– Transfers made from savings to checking in the event an

overdraft occurs– Avoid NSF fees– Use your own money to cover overdrafts

Writing a check

• A check is a payable on demand item– It is negotiable as soon as it is written. Checks cannot be

post dated (written for a future date).

• Stale Date– Some checks may be returned from the bank as "non-

negotiable - stale dated" – Normally, if the check is deposited six months after it is

written or after the negotiable date on the check.

1. Date - the date the check is written (cannot be a future date) 2. Maker - person/business who writes the check - the name will be printed on the

check3. Payee - person/business to whom the check is written 4. Signature line or lines - two or more signatures can be required on a check 5. Written amount - the amount written in numbers 6. Legal amount - the amount written in words 7. Check number - which is printed on the check and appears in the MICR line on

the bottom of the check 8. Banking information - both the name of the bank and the American Banking

Association number appear on the check 9. Account and routing numbers - appear on the bottom of the check in MICR line.

Check register

• Record all transactions– Checks written– ATM withdrawals– ATM transfers– Fees– Purchases– Automatic deductions– Direct deposits

• Paper version comes with your checks• Excel versions available online

Check registerCheck

Number Date

Why balance your checking account?

• It verifies that your records match the bank’s records• Banks can make mistakes (encoding, etc)• Transactions can be submitted incorrectly by the

merchant (or multiple times)• It’s likely that you’ll make a math error in your register

– or forget to record something• If you make a mistake or forget to post a transaction

you may start bouncing checks and incurring NSF fees

• If there’s a problem, you won’t need to wade through months of transactions to figure it out

Balancing your checking account

• Reconcile your checks– Have any checks not cleared the bank yet?

• Reconcile your deposits• Reconcile ATM withdrawals and debit card

purchases• Record bank fees• List outstanding checks• List outstanding deposits• The bank normally provides a form on the back of

your bank statement

Balancing your checking account1. Outstanding Deposits

(not included in your statement)

2. Outstanding Checks

(not included in your statement)

Date Amount Check Number Amount

1. Ending balance from your bank statement $ _______

2. Add total outstanding deposits + _______

3. Subtract total outstanding checks - _______

4. New balance (should equal your checkbook balance after you record interest and fees in your checkbook register)

= _______

Saving money

• Banks pay you interest for keeping your money in a savings account

• The sooner you start saving the more time your money has the chance to grow

Saving for the short term

• “Pay yourself first”• Save money for things you need and want• Consider an automatic savings plan• Withdraw money as needed to:

– Buy higher cost items– Purchase gifts– Cover emergencies (repairs, medical expenses)

Saving for the future

• Down payment on a car or home• Education expenses• A vacation or trip• Opening a small business• Financially secure retirement

– Start saving for retirement early– Saving even a small amount will make a big difference in

your future

Questions?