YOUR FIRST CHECKING ACCOUNT
What Is The Difference Between A Bank And A Credit Union?
Although at first glance they seem pretty much the same, there are several differences between the two. Both offer similar services: checking, credit cards, and loans, but this is where the similarity ends.
Banks are “for-profit organizations,” which means they are in business to make money for their stockholders. Stockholders are people who buy stocks, which means they actually own a share of the business, or in this case, they own a share of the bank. Banks serve customers from the general public. Anyone can use a bank. Decisions in a bank are generally made based on what is best for the stockholders. Each person’s deposit in a bank is federally insured up to $100,000 by the Federal Deposit Insurance Corporation (FDIC), a government agency.
Credit unions are “not-for-profit organizations,” which means they exist solely to serve their members. For some types of credit unions, a person must be within the credit union’s “field of membership,” or target group, in order to join. When a credit union is starting up, they decide what group of people they want to serve, and they write up something called a charter, which explains more about how they will operate.
A charter is much like a constitution or a set of by-laws. Credit unions may exist to serve people in law enforcement, or railroad workers, or teachers, just to name a few. Some credit unions that initially started to serve teachers, for example, have extended their membership base to include anyone related to education: students, parents or relatives of students or teachers, school administrators, and any staff person of an educational facility.
Many credit unions now have what is known as a “community charter,” which means they are open to anyone who wishes to join. Deposits in a credit union are federally insured up to $100,000 by the National Credit Union Administration (NCUA). To find a credit union near you, go to: www.ncua.gov.
What Happens To My Money?
Banks and other financial institutions are an important link in our economy. One of their primary functions is to put the money deposited by their customers or members to use by lending it to others who can use it to buy homes, businesses, cars, etc.
When you set up an account and deposit your money in a bank, it goes into a big pool of money along with the money of all their other account holders. Your account is credited with the amount of your deposit. If you write a check, that amount is deducted from your account balance.
When a bank makes a loan, they are releasing money into the economy. How much can they loan out? The Federal Reserve Bank, which is the central bank of the United States, sets a “reserve requirement” of 3 to 10 percent of a bank’s total deposits. That reserve can be held either in cash or in the bank’s reserve account with the “Fed.” If you deposited $1,000, the bank can loan out about $900 (10% of $1,000= $100 in reserve, leaving $900 to be loaned out). That money could end up in another bank, and it could loan out $810 on that (10% of $900 = $90, leaving $810 to be loaned out).
Banks and other financial institutions are considered safe places to keep your money. They are much safer than your piggy bank or mattress and, as you establish a relationship with your bank, you will have access to all the other services it offers, like loans and investments.
What Are My Choices?
There are two basic types of accounts: savings and checking. There is a purpose and reason for each of them, and most people have both types. Let’s look at how each of them operates.
Everyone should have a savings account, and eventually you might find a need for more than one. The idea of using a savings account is to keep your money in a safe place, where you can have access to it if you need it. Of course, you could always hide your money in your sock drawer or in a piggy bank, but you would be missing out on the greatest reason for putting your money in a bank: interest. Interest is money the bank pays you for letting them use your money.
It is calculated as a percentage of your balance. It works something like this: you deposit $200 in your savings account, with a financial institution that advertised a 12% Annual Percentage Yield, or APY. (You probably won’t find 12% anywhere, but using this rate as an example makes it much easier to show you how this works.) This means that the interest they pay is calculated over a period of one year. So at the end of one year, would you have earned $24 ($200 x 12%)? Actually, the answer is no, and we’ll explain why.
There are two types of interest: simple and compound. Simple interest is calculated only on the principal; in this case, your $200 deposit. Instead, financial institutions pay compound interest, which means they pay interest on both the principal, and the interest they have already paid you. Since they pay you the 12% annually, that means they are paying you 1/12th of that each month, or 1%. So at the end of the first month, they pay you $2 in interest. Look at the chart on the right to see how that would add up by the end of one year.
You can see that each month, you are paid on the entire balance in your account: the principal and the interest. This is a phenomenal way to let your money work for you! Another good reason to keep some of your money in a savings account is to keep it safe from your worst financial enemy: you! If you are like most people, money may burn a hole in your pocket. It’s hard not to spend money once you have it, especially when you see commercials or ads for really cool stuff.
What should you start saving for?
You will probably start saving for something you will want to buy in the near future, like a new iPod, snowboard, prom dress, or senior pictures. If you really want to get a good start on life, start saving for your first car, college, or even your first house. Maybe you will need to help pay for your own wedding, or perhaps the idea of traveling after graduation appeals to you. If so, the sooner you start stashing money in your savings account, the sooner your money can start going to work for you!
Checking accounts are perfect for people who want to be able to take money out of their account on a fairly frequent basis. People use a checking account nearly everyday: to pay for groceries, rent, clothing, gas, and almost anything else.
Money can be taken out, or withdrawn (also known as a withdrawal), from the account in a variety of ways: by writing a check, using an ATM card, or using a debit card. We will learn more about those later.
Think of a check as a kind of paper “I.O.U.” In other words, when you write a check at your favorite store for a $17 purchase, you are promising that you will pay them. Although you did not hand them cash, they gave you the merchandise because you paid with a check.
So how do retailers get their money? They take your check and deposit it into their bank account. The information on your check identifies the bank you have an account with, and what your account number is. The store’s bank communicates with your bank, and requests that the money be transferred from your account to theirs. Within a day or so of your shopping trip, the $17 is subtracted from your account, and added to the store’s bank account. Due to a law passed in 2004, commonly known as “Check 21,” checks can be processed electronically, so the money can leave your account on the same day it is deposited by the store. In other words, it is critical that you have the money available when you write a check, and not plan on depositing money later to cover a check you have already issued.
How Do I Get Started?
Once you have decided where you want to open your first account, you will need to take a few things with you: a form of identification, like a driver’s license, Social Security card, or a certified copy of your birth certificate. Very few financial institutions accept a student identification card. Most financial institutions will need at least two items from this list, but probably not all of the items. Naturally, the cash or check that will become your first deposit would be helpful to have as well! The financial institution will have you fill out some new account paperwork, which may include an Account Agreement, which spells out your rights and responsibilities as an account holder, and a Signature Card, which gives them an original form of your signature, and confirms that you have received all of the necessary documents. Be sure when you fill out the paperwork that you read all the fine print, and ask questions if there is anything you do not understand.
You will also choose the form of ownership your account will take. Depending on your age and circumstance, you may open a minor account, together with an adult over age 18. If you are over 18, you may open a single account by yourself, or a joint account with one or more other people. Opening a joint account is very typical for a married couple, but not usually recommended for friends or roommates. Unfortunately, people can be your best friend one day, and not want to have anything to do with you the next day. And if that happens, you don’t want them taking your money with them.
What’s In A Card: Is It An ATM, Debit Or Credit Card?
Besides a check, the other way to pay for things with money in your checking account is with an ATM or debit card. Sometimes, the card you get from your financial institution is both an ATM and a debit card, but other times, your card may say either ATM or debit on it. A debit card is an upgraded ATM card branded with the Mastercard, VISA, or other major credit card company logo, and is often called a “check card.”
So how do you use these cards? A debit card can be used anywhere that accepts credit cards. In one sense, using a debit card is like using a credit card: the merchant processes it like any other credit card transaction, and they may have you sign the receipt. The big difference between a debit card transaction and a “regular” credit card transaction is that the money is taken directly out of your checking account when you use a debit card. When you use a “regular” credit card, you do not pay for the purchase until your statement arrives, usually days or weeks later.
The ATM card was designed to help you get access to your account at an Automated Teller Machine (ATM). These machines are usually on the outside wall of the financial institution, though sometimes they are freestanding, such as in a store or mall. When you put your card into the machine, the screen on the machine will show you different questions. First, it will ask if you want the questions in English or Spanish, and do you want a receipt? Then, it will ask for your Personal Identification Number (PIN). This number is like a secret code that only you should know; it lets you have access to your account, while keeping everyone else out.
When you open the account, you will decide on a PIN number that is easy for you to remember. You usually pick a number that is four to six digits long. It is best not to pick a number that is easy for a thief to guess, like your birthday, just in case someone steals your wallet. If you have a driver’s license, the thief will see your birth date and your address, so choose a number that would be hard to figure out. Maybe it’s the date you got your braces off, like 101104, or your most recent graduation date.
Once you have entered your PIN, the ATM screen will ask you if you want to make a deposit or a withdrawal. Most automatic teller machines only give out $20 bills, so you usually can’t ask for $10 or $15. If you ask for more than $20, that’s okay, as long as the amount you want can be given to you in $20 bills, like two-$20s or five-$20s. It’s usually
a good idea to take the receipt, in case you can’t remember how much you deposited or withdrew and to keep good financial records.
Generally speaking, your own bank or credit union will not charge you a fee to use their ATM machine. But there are universal ATM machines in locations such as gas stations, food places, and many others that you can use if there is a logo on the ATM machine and on the back of your ATM card that says something like, “STAR,” “Cirrus,” “CO-OP,” or “NYCE,” just to name a few. The important thing to remember, however, is that these ATM machines may charge you a fee, sometimes as high as $1.50 or more per transaction. Whenever possible, try to use the ATM machine at your own financial institution, which will save you money.
You can usually complete more than one transaction when you are at the ATM: you can put money in, take money out, and even transfer money from one account to the other, like from your checking account into your savings account. So, on payday, you might deposit your paycheck, take out $60 for gas and dinner, and then transfer $20 into your savings account. But beware: ATM deposits do not always credit your account immediately. Although the receipt will show the new balance with the deposit added, the funds may not actually be available until the next business day. This is especially true for deposits made after 5 p.m. or on weekends. Check with your financial institution to determine its policies.
Of course, you can do all these same things inside the bank at the teller window. A teller is the person behind the counter, or window, who helps you with your banking. Sometimes there may be a line inside the bank to speak with a teller, and they are only open certain hours, so the ATM may be faster and more convenient. However, it is nice to talk to a friendly, smiling person instead of a machine!
Writing Checks
Now that you have money in your checking account, you will probably be itching to write a check. The temporary ones you get the day you open the account are not accepted at too many places, so you will want to order permanent checks as soon as possible.
You can order them through your financial institution, or through a less-expensive check ordering company. These companies are often advertised in the coupon section of the Sunday newspaper, and can also be found on the Internet using the term, “order checks” to search. When you order checks, consider having just your first initial and last name printed on your checks. So in place of printing Alison Conner, use A. Conner instead. Why? To make it more difficult for a thief to use your checks if they are stolen, since they may not know your actual name.
Let’s take a look at a typical check, and make sure you know how to fill it out.
TABLE 1 – SAMPLE CHECK
First Initial, Last Name
Address
City, State, Zip
Pay to the order of: ______________________________________________________
_______________________________________________________________________ Dollars
______________ 20____ 1001
$
Bank of My City
Anytown, USA
For: ___________________________________________________ _____________________________________________________
123456789 00001234567890 1001
Signature
In the upper left hand corner will be your name and address. They are printed on the checks when you order them, which is usually done when you first open the account. NEVER have your Social Security number printed on your checks, and printing your driver’s license number is now considered to be a bad idea as well. Why? Because when a store asks to see your identification, it is to prove that you are the person whose name is printed on the check, and who is signing the check. When the store personnel look at your signature on the check, and compare that with the signature on your driver’s license, they should match. The photo on your license will also prove that you are you! So, if you have your driver’s license number printed on your checks, you could make it easier for a thief to steal your checks and not have to show identification.
Do not have your phone number printed on the checks, either. If a store asks for your phone number, you can give it to them, but having it printed on the checks makes it that much easier for a thief to pretend to be you.
In the upper right corner of the checks is the check number, which is also pre-printed on the checks. Next to that is the date, which you will fill out each time you write a check.
Next comes the “Pay to the order of” line. Here you will write in the name of the person or company you are giving the check to, such as the “Video and Music Galore” store when you are buying a CD. Or, if you are paying the woman who does your nails, you would write in her name, such as “Angela Gray.”
Now you need to fill in the amount of the check. You will notice that there are two separate places for the amount: one is a number, such as $200, and the other will be the same amount, written out in word form, like Two hundred dollars and no cents.
Why is it necessary to write it twice? It’s a way to make sure the check is legitimate. If you wrote a $20 check to Angela for your nails, and she was sneaky, she could add a zero at the end, and try to cash it for $200. But, since you already wrote out Twenty dollars and no cents, now it’s not so easy for her to change your check. For the same reason, after you have spelled out the dollar amount, draw a line from your writing to the end of the line. If there is a difference between the dollar figure you wrote and the amount you spelled out, your financial institution will assume that the written amount is the correct amount.
On the bottom right corner of your check is the line for your signature. When you opened your account, and filled out the paperwork, one of the things you signed was a signature card. This becomes the official signature for your account, and anything else that is signed, like a check, can be compared to that to make sure it is authentic. If your checks are ever lost or stolen, and used by someone else, chances are their attempt to sign your name will not match the signature on file.
This is all that you are required to write on each check. You will also notice in the bottom left corner a line that says, “Memo,” or “For,” with a line following it. This is an optional line where you can put what the check was for, such as “rent,” or “February car payment.” Sometimes you may use it to write your account number, like when you are mailing a loan payment, so the person processing your check will know whose account the check belongs to. For security purposes, however, it is best to only put the last four digits of your account number. That way, if your check is stolen, the thief will not see the entire account number.
At the very bottom of the check are three sets of numbers that look something like this:
123456789 00001234567890 1001
ROUTING # ACCOUNT #
CHECK #
Reading from left to right, the first set of nine numbers is called the routing number. This number identifi es your specifi c financial institution. The second set of 14 numbers is your unique account number. Combined with the bank routing number, you are the only person in the world who can have this specific set of account and routing numbers. The last set of four numbers is the check number, repeated from the top right corner of the check.
Deposit Slips
Making a deposit means putting money or checks into your account. Using a deposit slip ensures that the correct amount is credited to your account. You will find deposit slips at the back of your checkbook, which are pre-printed, just like your checks. They have the same information as your checks, such as your name, address, and phone number, and the three sets of numbers on the bottom will be the same. Unlike your checks, the deposit slips are usually double-sided, which means if you have a lot of cash or checks to deposit, you will be able to use both sides. This is a good problem to have!
There is a place on the front to write the date of the deposit, and to sign if you are receiving cash back from your deposit. Let’s say you took your paycheck to the bank, you may deposit the check, and keep out $20. In that case, you will need to sign the slip when you receive the cash.
There is also a section on the right side of the deposit slip to record the cash and checks that you deposit. If you have cash and/or up to three checks, you can just fill out the box on the front of the slip. If you have more than three checks, you will need to use the back of the deposit slip. When your birthday rolls around, and 10 of your favorite family members give you checks, you will list each check on the back of the deposit slip, then total them up. Next, write the total on the front of the slip in the appropriate box. Add any cash you deposit, or subtract any cash you take out, and you will have the grand total of the deposit.
Banking Fees
Banks and credit unions charge fees for various services. Some will charge you a monthly fee just to have an account with them, but others offer free checking accounts. Often, they will offer free checking when you participate in what is called direct deposit. Direct deposit means that when you get paid, your employer automatically deposits your pay into your account, and on payday, they just give you a statement of earnings, or a pay stub. The advantage of direct deposit is that you get paid on payday, even if you are on vacation or have the day off! It is also a safer and more convenient method to deposit your money. Direct deposit often makes you eligible for free checking, but ask the financial institution if they offer other options as well.
Other fees depend on how you handle your account. If you write a check, and don’t have enough money in the account to cover the check, that check is considered to be NSF, or non-suffi cient funds. That term just means: not enough money! Sometimes people call it “bouncing a check,” and you want to be very careful not to do that, for several reasons.
When you write an NSF check, the bank may or may not pay the check for you, but either way, they will charge you a fee, usually around $25. If your account is new, the bank probably won’t pay the NSF check, so it will be returned to the place you gave it to. If you wrote the check to a store, for example, they may try to deposit it again, hoping that you have added more money to your account. The store may also charge you a fee, so it could very easily cost you $30-$50 in total fees when you bounce a check.
Besides the fees, there are other good reasons not to write checks when you don’t have the money to cover them: banks and credit unions get pretty cranky when you write bad checks. They may close your account and you might not be able to open one anywhere else for up to five years. This could happen if your financial institution uses ChexSystems® a clearinghouse that collects information about people who have had their accounts closed due to mishandling. And finally, since writing bad checks is illegal, you could be reported to the District Attorney to have legal action taken against you. All good reasons to remember this important rule: Never write a check if you don’t have enough money in your account to cover it!
Funds Availability Policy
Now that we have discussed why you do not want to write checks without the money to cover them, let’s look at one of the other reasons people bounce checks: they thought they had enough money in the account to cover the check because they had just made a deposit.
So how can your $25 check bounce even though you just deposited $100? The answer lies in what is known as the Funds Availability Policy. Financial institutions hold onto your check for one or more days before they release all of the money for your use. Why
do they do that? Because they need to be sure there are funds available to cover the check that was deposited by you. Each financial institution has its own policy, which may vary based on whether the deposit was cash or a personal or company check, and the amount of the check. Be sure to understand your financial institution’s policy before you start writing checks.
What Are Automatic Deposits and Withdrawals?
At some point, you may start to have a bill every month, like for a car, or a cell phone. In order to ensure that the payment is received on time, you have several options. You could mail a check early enough to be received by the due date, or you could take the payment to the lender in person. Or, if you have Internet access, you can pay your bill on the web each month. If you choose that option, you have another choice: log on a website every month and choose how much and when to make your payment, or schedule an automatic payment that will be deducted from your checking account every month.
Automatic payments work best when your payment is fixed, or the same, every month, like a car payment. Let’s say you are going to have a $200 a month car payment, due on the 5th of the month. Your car loan will be through the Friendly Financial Company. You can probably make the arrangements to have the payment automatically deducted when you first fill out the loan papers, or if you already have the loan, you can still request to have the automatic deduction later.
Most companies now have a website, so you get on the Friendly Financial Company’s website, and set up a user name and password. This will allow you to log on to your account. Friendly Financial wants to make it easy for you to make your payment every month, so they give you the option of setting up an automatic withdrawal for your payments. You may like this idea, because once it is set up, you won’t have to worry about forgetting to make your payment. Friendly Financial will need all your banking information and, usually starting within a month, the payment will be automatically deducted on an agreed-upon date every month. Remember each month to make sure you have enough money in your account to pay these automatic withdrawals when the payment is due.
This same idea can also work for bills that change every month, like a cell phone or the electric company. The difference is, since the amount changes from month-to-month, you may need to have a larger cushion in your account to cover the payment each month.
Is there a downside to using automatic withdrawals? There can be. It means you are giving someone access to take money out of your account, and that could be a problem. Once you are set up on this system, and decide to cancel it, you may have to fill out a form to stop the automatic withdrawal and the processing of the form will take some time. Be sure to read the fine print of any agreement you sign to make sure you know what you are agreeing to.
Since we’re talking about using automatic withdrawals to make a payment every month, why not consider using this approach to make your most important payment: To yourself! That might sound funny, but paying yourself, by putting money in your savings account, is the most important payment you will ever make.
Balancing A Checkbook
A checking account can be a very useful tool to make your life easier, but it does come with a price: it takes time to keep it up-to-date. The best way to handle your checking account is to make it a practice to record every deposit, credit, or withdrawal to your account as they happen. This is called keeping good records.
How do you balance a checkbook? It’s really pretty easy. Start with your beginning balance, and record every transaction you’ve had since then. But what, you are wondering, is a transaction? It is a movement of money, either into or out of your account. So now you know that you must write EVERY SINGLE deposit, ATM/debit card/ check card transaction, check, automatic withdrawal, fee, or cash withdrawal in your checkbook register. The checkbook register is the small booklet that goes with a book of checks in the checkbook cover. In the register, you will find a place to record each transaction, along with the date, check number (if you wrote a check) and the balance.
There are usually two sets of lines in the checkbook register: one white, the other gray.
Look at the sample checkbook registers on the following page to see two different ways to use those gray and white lines.
In this first example, we use what is called, “single entry.” This means that every transaction takes just one single line and the balance is seen at the end of the row. Here we started with a balance of $100 and, after our four transactions, we have a balance of $250.45. This method uses less room in the register, but it doesn’t give you as much room if you want to write an explanation of what the payment or credit is for.
Pay yourself first. Each time you get paid, move some money into your savings account. If you don’t take care of your future, who will?
TABLE 3 – CHECKBOOK REGISTER – SINGLE ENTRY
Check # Date Description
Payment
Debit (-) T
Fee
(-)
Deposit
Credit (+)
Balance
$100.001011 1/11 Acme Auto Supply $ 14.55 $85.45
------1/12 ATM Withdrawal $ 20.00 $65.45
------1/13 Deposit - Payroll $ 210.00 $275.45
------1/15 Movies & More $ 25.00 $250.45
Reconcile: to come to an agreement (you will reconcile your bank statement with your checkbook register to make sure they match).
Below in Table 4, we use a double entry format, which means we are taking two lines for every transaction. Here you will see that we used the white line to record the transaction, and the gray line to record the explanation. We still arrive at the same ending balance, but this gives us more room to write.
When using the double entry format, it is helpful to remember that your balance should always be on the gray line.
TABLE 4 – CHECKBOOK REGISTER – DOUBLE ENTRY
Check #
1011
Date
1/11
Description
Acme Auto Supply
Car stereo parts
Payment
Debit (-)
$14.55
T
Fee
(-)
Deposit
Credit (+)
Balance
$100.00-$14.55
$85.45
------1/12 ATM Withdrawal
Cash for lunch / gas
$20.00 -$20.00
$65.45
------1/13 Deposit
My paycheck
$210.00 +$210.00
$275.45
------1/15 Movies & More
Gift for Sue’s b-day
$25.00 -$25.00
$250.45
What Is A Monthly Statement?
Each month, you will likely receive a statement from your financial institution, either in the mail or on-line. The question is, what do you do with it? Throw it away? No!
The purpose of your statement is to enable you to compare what you have recorded in your checkbook register to the bank record. This process is called “reconciling,” which means coming to agreement on something. When you reconcile the bank’s statement with your register, you come to agreement as to what your correct balance should be.
So why would there be a difference in what your register shows and what the bank shows? There could be several reasons for the difference: you may have written a check on Monday the 31st, the last day of the month. Each bank statement covers a month, and usually ends on the last day of the month. Although you wrote the check, and subtracted the amount from your balance in your register, the bank does not show it as having cleared your account yet. We will learn what to do about that in just a minute.
Another reason there could be a difference is a plain old math error: you might have made a mistake when you added or subtracted the amounts in your register. That is an easy mistake to make. You might have even recorded the amount wrong; for example, written $17.75 in the register, when the check was actually written for $17.57. Since the check was for $17.57, that’s how much the bank subtracted from your account, but until you see your statement, you thought it was $17.75.
Is it possible that the bank made an error? Absolutely! The amount on your check could have been read or entered incorrectly by the bank, which you will catch when you are reconciling your statement.
One other reason for the difference can be blamed on forgetfulness or maybe laziness. If you don’t routinely get in the habit of recording every check written or purchase made with your debit card at the time it happens, it’s easy to forget to record those in your register. This is a very dangerous problem because when you forget to subtract money from your balance, you might think you have more money than you really do. You might not remember those purchases or ATM withdrawals until you look at your statement.
Besides getting into the habit of recording your transactions immediately, another smart idea is to use duplicate checks. These checks have a second copy under the original, so you have a record of how much you wrote the check for. This can save you a lot of headaches! Although duplicate checks cost a little more, they are well worth the extra money.
So, to reconcile your account, you will need the checkbook register and bank statement side-by-side, along with a pencil and calculator. There is usually a reconciliation worksheet that comes with your statement that you will need as well. If possible, use a printing calculator with a paper roll. Start at the top of your statement, and work your way down. Compare every withdrawal or purchase shown on your statement, and make sure they are recorded in your checkbook register. If they show up in both places, cross them off the statement, and put a X next to the entry in your register. If you find something in the statement that you hadn’t recorded in your register, write it down. Do this with the whole statement, until every purchase, debit, or withdrawal has been recorded in your register, along with every deposit or credit.
You may also see bank fees on your statement. Record each fee as a separate transaction,
with an explanation of what the fee was for. These may be a monthly fee, or due to non-sufficient fund activity, or for some other reason. If you see a fee that you were not expecting, be sure to ask the financial institution why you were charged this fee.
As we mentioned earlier, you may have some entries in your register that did not show up on your statement. It is probably because they haven’t been subtracted from your account yet. Look at the amount the bank statement shows as your ending balance. Now, subtract all the purchases, debits, or withdrawals that you had recorded in your register that were not included in the statement from the ending balance shown on your statement. Then, add any deposits or credits that you made since the statement closed. You should now have your new, accurate balance.
But how do you know if it is right? You need to compare it to your checkbook register, after you have recorded anything that was missing from your statement. Use your calculator to do all the adding and subtracting in your checkbook register, until you arrive at your new balance. This balance should be the same as the new balance from the bank. If it’s not, look at the calculator tape, and make sure you entered all the numbers correctly.
The following pages have an example of how the process works.
WORKSHEET 1 – CHECKING ACCOUNT TRANSACTIONS
Use the checkbook register on the following page to record these transactions.
Enter all of the debits and credits in your check register, including any fees.
Your starting register balance on 04/01 is $211.90.
Date Check # To Amount Reason
04/05 EFT* Debit card at Gas-O-Rama $ 31.00
04/08 101 Visa $ 150.00
gas
monthly payment
04/13 102 Clothes Stop $ 84.17
04/14 FEE Overdraft Fee $ 25.00
clothes
overdrawn
04/15 DEP Deposit $ 199.45
04/25 ATM ATM cash withdrawal $ 20.00
paycheck
dinner & cash
(at Taco Shack)
04/25 FEE Non-system ATM fee $ 2.00 ATM at Taco Shack
05/01 DEP Deposit $ 195.89
05/01 103 City Wireless $ 55.59
paycheck
new phone bill
* EFT- Electronic Funds Transfer- An ATM or debit card transaction
Other items to consider when completing this worksheet:
• Your bank charges $2 when you use ATM machines that are not owned by your bank.
• There is no charge for debit card purchases.
• There is a $25 charge for overdraft fees.
WORKSHEET 2 – SAMPLE CHECK REGISTER
Check # Date Description
Payment
Debit (-) T Fee (-)
Deposit
Credit (+)
Balance$211.90
4/5 Debit card at Gas-O-Rama $ $
gas $
101 4/8 Visa $ $
monthly payment $
102 4/13 Clothes Stop $ $
clothes $
4/14 Overdraft fee $ $
account overdrawn $
4/15 Deposit $ $
paycheck $
4/25 ATM @ Taco Shack $ $
dinner & cash $
4/25 Non-system ATM fee $ $
ATM @ Taco Shack $
5/1 Deposit $ $
paycheck $
103 5/1 City Wireless $ $
new phone bill $
WORKSHEET 3 – ACCOUNT STATEMENT
Favorite Bank, NA
123 E. Sepulveda Ave.
Anytown, CA 90909
Visit us on the Internet at: www.favoritebank.com
Alison Bartel
2134 N. Alamitos Ave.
Anytown, CA 90909
Account Number: 112456
Account Title: Basic Checking
Account Summary
This statement is for the period from 04/01 to 04/30
Beginning Balance on 04/01 $211.90
Deposits and Other Additions $199.45
Checks $234.17
Deductions, Fees, and Withdrawals $83.00
Ending Balance on 04/30 $94.18
Deposits and Other Additions
Date Transaction Description Amount
04/15 Deposit $199.45
Total Deposits and Other Additions $199.45
Checks
Date Check # Amount
04/08 101 $150.00
04/13 102 $ 84.17
Total Checks $234.17
Other Deductions, Fees, and Withdrawals
Date Transaction Description Amount
04/05 Debit card at Gas-O-Rama $ 31.00
04/14 Overdraft fee $ 25.00
04/30 Monthly service fee $ 5.00
04/28 ATM at Taco Shack $ 20.00
04/25 Non-system ATM Transaction $ 2.00
Total Deductions, Fees, and Withdrawals $ 83.00
WORKSHEET 4 – CHECKING ACCOUNT RECONCILIATION WORKSHEET
Depositlisted os and credits not on this statement
1 $
2
3
$
$
4
5
$
$
TOTAL $
Ending balance shown on the statement:
$ __________ (A)
ADD +
Deposits and credits not
listed on this statement $ __________ (B)
(B)
Subtotal = $ __________ (C)
1
Checks listed on and debits not this statement
$
3
$
$
4
5
$
$
6
7
$
$
8
TOTAL
$
$
SUBTRACT –
Checks and debits not listed on this statement: $ __________ (D)
NEW RECONCILED BALANCE
(D)
$ __________ (E)
To Bank Or Not To Bank
Opening an account at a bank or credit union makes sense for a variety of reasons: you have easy access to your money, it is a convenient way to pay your bills, it is safer than carrying cash, and it can be less expensive than some of your other options.
When people choose not to open an account with a financial institution, they must be creative to find ways to cash their checks. A few local markets may still cash your paycheck when you make a purchase, but that option is becoming harder to find.
Check cashing stores are on almost every street corner. Is there anything wrong with using this type of service to cash your checks? Technically, no, but we think you could find better ways to spend your money.
How does a check cashing store work? Let’s say you have not opened an account with a financial institution yet, and you get a $300 check from a temporary job. Naturally, you want to cash it, but none of the local stores offer that service, so you head to the corner check cashing store. As long as you have the proper identification, they will cash your check for a fee ranging anywhere from 1.75% to 3% of the amount of the check. Using an average of 2%, the fee for that $300 check would be what? ______Yes, it would be $6. Six dollars may not sound like much, but what if you had to do that every week? That would cost you $24 a month. Can you think of anything you would rather do with $24? If your checks were more than $300, obviously the fees would be higher.
Speaking of check cashing, there is a scheme that many people fall for, not realizing what it will cost them. A person approaches you outside a financial institution, and says they are really in a bind and could use your help. They are having trouble with their ATM card, for example, and need to cash their check. Would you mind depositing their check into your account, and giving them the cash from your account? They may even offer you some extra money for your trouble. You might feel sorry for them, and think it sounds like an easy way to make a few bucks, so you agree.
But what you don’t know is that they are scam artists, and you would be just another one of their victims. The check they give you is fake, and not worth the paper it is written on. If you hand them cash, you will never see that money again, because their check will bounce, and you will have little chance to recover the money. Even if the check they hand you appears to be a cashier’s check, don’t fall for this scheme. You will end up losing money and gaining a valuable life experience: if it sounds too good to be true, it probably is. Use your bank account to handle your financial transactions, not anyone else’s.
By now, we hope that you have discovered the benefits of joining the millions of other people who use a bank or credit union to serve their financial needs. That’s good, because once you get your first job, you will be glad you have an account so that you can manage your money!