CHECKING ACCOUNTS
1. What is a checking account?
A checking account is a type of bank account that allows you to transfer money from that account to other locations and pay bills that you owe, for example: rent, auto payment etc.
A checking account is insured up to $100,000 by the federal government, the insurance is called FDIC, and you should verify that your bank and/or credit union has this coverage. With this insurance, if the money in your checking account is stolen or lost by the financial institution that manages the account, the federal government will replace the money up to the $100,000.
You can open a checking account with any bank/credit union but you should open a checking account that suits your needs.
Each bank/credit union offers variations of checking accounts and it pays to do your homework with different banks/credit unions before you decide where to open your checking account.
The general types of checking accounts are:
-
Basic checking
-
Free checking
-
Interest checking
-
NOW checking
-
Lifeline checking
-
No-frills checking
-
Credit Union share draft accounts
2. Opening a checking account
When you have decided which bank or credit union to open your checking account with, they’ll run a credit check to see what your credit history is and will also verify your banking history, if any, through Chexsystem.
This system will show them if you have a history of bounced checks or if you owe any outstanding money to a bank.
To open an account you will need two pieces of identification, for example:
-
Valid state I.D or Drivers License
-
Credit card
-
Government I.D
Depending on the bank, you will need to deposit a minimum amount of money into the new checking account; this is usually $100 but may vary depending upon the banks requirements.
The bank will issue you with a checkbook, which contains your account number, your name, address and usually your phone number. This checkbook can now be used in several ways:
-
Obtain cash at a store
-
Obtain cash at the bank
-
Pay for goods by writing a check
-
Pay bills (car payment, rent, utilities, etc)
In addition to the checkbook, the bank may issue you with an ATM card (see section 3).
Each individual check is sequentially numbered and this allows you to keep track of the checks issued in either the checkbook log or from the duplicate copy.
3. ATM Cards
An ATM Card stands for Automated Teller Machine Card. The ATM card is NOT a credit card and does NOT build your credit.
This is card allows you to obtain cash and pay for goods, without having to write a check or visit the cashier at the bank.
Each time you use the card the money is debited from your checking account.
You must keep track, by keeping your receipts, EVERY time you use your ATM Card.
4. How to write a check
There are 4 main things to remember when writing a check:
-
Always use a ballpoint pen, never use a pencil – if you use pencil, information could be altered.
-
Never write post dated checks – the check could be deposited before the date and you may not have the money in your account to cover it, or you may forget that you issued a post dated check and spend the funds that you had originally allowed. In both cases, the check will bounce (see section 8)
-
Never issue a blank check – pretty obvious why you shouldn’t – anybody can fill information on the check.
-
Always record transactions in your checkbook log/register
O.K., so lets look at what information we need to put onto the check:
-
Date – Put the date that you are writing the check – 03/17/2005
-
Pay to the order of – Put in the name of the person/company that you are paying – Ford Motors
-
Amount in words – Write the amount of the payment in words – Two hundred dollars and fifty cents
-
Amount in numbers – Write the amount of the payment in numbers - $200.50
-
What it is for – Put on the check what the payment is for – Car payment
-
Signature – Don’t forget to re check the information and then sign your name
5. How do I keep track of what I spend?
|
Whether you write a check or use your ATM Card you MUST record it in your check register. In addition, when you use your ATM Card keep your receipts, put the receipts with your check register, that way when you come to reconcile (balance) your checkbook, you have everything together. |
 |
Your checkbook should come with a check register, and this register allows you to track your money,
what you spent and how much money you have in your checking account.
Lets look at a typical check register:
-
Check number – Record here the check number that you issued - 1017
-
Date – Write the date you wrote the check – 03/17/2005
-
Description – Write what you wrote the check for – Car payment
-
Debit – How much was the check for - $200.50
-
Credit – How much did you pay into the checking account – for example your salary was paid in for $500.00
-
Balance – How much money is left in your checking account – (see section 6)
6. When I get my bank statement
Every month you will receive a copy of your checking account bank statement. If you don’t receive a bank statement you must contact your bank – this may be an indication of Identity Theft. Refer to February’s Federated Financial Debt End.
Question:
What should you do when you receive your bank statement?
-
Put it to the side and forget about it till next month?
-
Open it and verify that the figures match with your check register?
Answer:
Open it and verify that the figures match with your check register
Bank statements can look complicated, all those different box’s with numbers in them…Arrrgh, but they only reflect what account activity has occurred for that month and should match your records. After a few months they won’t look half as bad JJ
Ready to have a look at one?
The first bits of information are the banks contact information, and also your personal information including your checking account number, so you don’t want to put this information in the trash do you? Remember February’s Federated Financial Debt End!!!!
-
Date of statement – Details what period of time the statement covers – 1/1/2005 through 1/31/2005
-
Description of transactions – Describes what the transaction was for – Deposit, debit, check #1017, ATM withdrawal, Monthly service fee etc
-
Date of transactions – Details the date of the transaction – note this may be different from your record, as this details the date the bank made the transaction
-
Amount of transaction – How much the transaction was for - $200.50
-
Beginning (or opening) balance – Shows the beginning balance for that period – For example $2250.50 and this will reduce or increase with each transaction until the Ending balance
-
Ending balance – After all the transactions have been processed this is the ending balance for the account.
-
Summary of statement – Gives a summary of the account – beginning balance, ending balance, total debits, total credits, etc.
-
Checks paid – Details all the checks that have been processed for the period – check # 1017 $200.50
So, how was that? Not too complicated was it?
7. How to reconcile (balance) your check book
Now that we understand the checking account statement a little bit better, we have to verify that the information it contains matches our check register and receipts.
It would be foolish for us just to accept that the bank statement is accurate, it may not be, everyone can make a mistake, checks may not have been processed within the time period, so we need to verify that all of our hard earned money is accounted for….right?
So how do we do that?
Well, it’s called reconciling your checkbook, or in other terms we “balance” the checkbook against the statement, and if you do this every month it’s really quick and easy to do, trust me JJJ
With your bank statement ready, get out all your receipts, ATM receipt, check book register and cancelled checks (if your banks sends them).
Put all your receipts in date order, this makes it easier to go through against your bank statement.
Look at your bank statement and locate the first debit:
Examples:
Winn Dixie $73.50, match this with the receipt for Winn Dixie, does it match?
If YES - place a check mark next to the amount on the bank statement and place a further check mark on the receipt, put the receipt to one side as completed.
Check #1017, match this with your check register (and/or cancelled check), does it match?
If YES – place a check mark next to the amount on the bank statement and place a further check mark on the check register (and/or cancelled check).
Repeat this step for every debit and/or credit.
If the amount on your check register or receipts does not match what is on your bank statement, even if it is only $1, you MUST investigate the reason why.
Look for bank services fees, NSF fees, charges, ATM withdrawal fees and automatic deductions (auto payment etc) on your statement, make sure to write these in your check register and deduct them from your balance.
When you subtract all the debits and add all the credits from your starting balance, then your checkbook register ending balance should match your bank statement ending balance. If it doesn’t then re check all your figures again.
 |
8. Bounced Checks & the District Attorney’s Office
“Bounced Checks” and “Bad Checks” are the same thing; they both mean that you don’t have enough money in your bank account to cover the amount of the check.
The banks refer to this as NSF – Non Sufficient Funds, and the majority of banks will charge you, usually $30 each time this happens. In addition, the establishment that issued the check will also charge you an NSF fee.
If you write too many, the bank will close your checking account and place you in the ChexSystems, the information in the ChexSystems stays on record for a minimum of 5 years. This can prevent you from opening a bank account until the information is removed.
ChexSystems can also turn you over to the District Attorneys Office for prosecution, the punishment for issuing bad checks is:
-
Under $200 is a misdemeanor and you could be fined up to $1000 and sentenced up to 1 year in the county jail.
-
Over $200, or any bad check written with a previous conviction, it is a felony and you could be sentenced to 1 year or more in state prison, and ordered to pay a fine.
Several District Attorney Offices offer a system which is for first-time bad check writers, which involves repaying the merchant, attending intervention classes and paying all the program fees, they can repay the amount to the merchant and avoid obtaining a criminal record, however, the merchant may still pursue a claim against you through small claim court.