Banking and Checking Accounts

Checking Accounts

• A checking account is often a person's first interaction with the financial world.

Banking: Important Financial Services

• Understanding available financial services is crucial.
• Cash needs depend on daily requirements and savings goals.
• Methods for everyday cash needs include cash, credit cards, ATM withdrawals, and debit cards.

Evaluating Checking Accounts

• Restrictions:
  • Minimum balance requirements.
• Fees & Charges:
  • Check printing.
  • Overdrafts.
  • Stop-payment orders.
• Interest:
  • Interest-bearing accounts.
• Special Services:
  • ATMs.
  • Online banking.
  • Overdraft protection: An automatic loan is made to cover checks exceeding the account balance.

Using a Checking Account

• Account Types:
  • Joint vs. individual accounts.
• Signature Card:
  • Used to verify signatures.
• Writing Checks:
  • The written amount is crucial.
  • Mistakes: VOID the check and write a new one.
  • Memo line: Use it to your advantage to note what the payment is for.
• Stop Payment Order:
  • Request to the bank not to cash a specific check.
  • Use if a check is lost or stolen.
  • Fees are involved.

Depositing Money

The deposit slip need these information:

• Date
• Your name
• Account number
• List of checks (amount of each check)
• Total amount of all items deposited
• Less cash (amount of cash you want back)
• Total deposit

Check Endorsement

• Endorsement: Signature of the payee (the party to whom the check is written).
  • Blank Endorsement: Most common; sign the back of the check. Do this ONLY when actually depositing the check.
  • Restrictive Endorsement: "For Deposit Only"; specifies how the paper may be used by the bank.
  • Special Endorsement: Transfer a check to another party; "Pay to the order of…"
• Check Clearing: The system that ensures deposited money is available for withdrawal, typically within 2-5 business days.

Check Details

The main parts of the check are:

• Bank Name
• Pay to the order of (Name of person or company receiving the check)
• Date
• Dollar amount written in numbers
• Dollar amount written in letters
• Memo (Note of what the check is for)
• Signature
• Check Number
• Routing Number
• Account Number

ABA Numbers

• ABA Number: A nine-digit number in the bottom left-hand corner of a check.
• routing number facilitate electronic and wire transfers
• Checksum: the balance

Reasons to Open a Checking Account

• Reasons for opening a checking account.

Banking Fees

• Be aware of banking fees.
• ATM fees are an example. Consider whether the convenience is worth the cost.

Bank Statement

• A periodic report from the bank detailing all transactions in your account.
• Important items include:
  • Statement period
  • Account number
  • Date
  • Description
  • Reference number
  • Withdrawals
  • Deposits
  • Balance

Bank Statements Tips

• Check your bank statements regularly.

Unbanked America

• Understanding charges and fees.

Mobile Banking Alerts

• Utilize mobile banking alerts.

Overdraft Protection & Fees

• Overdraft protection allows transactions exceeding the account balance to be approved, avoiding steep overdraft fees (average $35$ per transaction).
• Misleading term: "protection."
• Once signed up for overdraft protection, you can opt out.

Overdraft Scenario

A person has $116$ in their account. They buy bus fare for $4$, gas for $43$, a yearbook check clears for $75$, Netflix debits $10$, coffee costs $3$, a friend is payed $15$, and soccer gear costs $35$. This example is used to understand how overdraft fees can accumulate.

Checking Account Agreement

• Understanding the checking account agreement is important.

Online Banking

• Discussion about experiences with online or mobile banking.

The Evolution of Personal Banking

• Reg-Tech.
• Digital-only banks.
• FinTech trends.
• Biometric security systems.
• Acceleration in financial inclusion.
• RPA (Robotic Process Automation).
• Blockchain.
• Artificial Intelligence & Machine Learning.

Checking Account Tips

• Tips for getting the most out of your checking account.

Direct Deposit

• Pay Day 101: Direct Deposit.

Online Bill Pay

• Advantages of using online bill pay.

Apple Pay

• Using Apple Pay in the real world.

Online & Mobile Security Tips

• Security tips to keep in mind when banking online and on your phone.

Mobile Banking & Payments

• Trends in mobile banking and payment methods.

Gen Z and Payment Apps

• What percentage of Gen Z (14-21 year olds) have a payment app on their phone?

Peer to Peer (P2P) Payments

• Summarize how the P2P payment process typically works.
• NerdWallet's safety recommendations for protecting money when using P2P apps.
• Ways to lose money using person-to-person apps.

Venmo

• Apple Pay is different than Venmo

Mobile Pay Options

• Different mobile pay options are available.

P2P Payment Amounts

• Acceptable P2P Payment Amounts: Most users find requesting payments of $5$ or under socially acceptable, and nearly half are comfortable sending $1,000$ or more.

P2P Usage

• P2P is most used for shared bills, gifts, and travel expenses; younger millennials are the most active users.

Trends in Consumer Mobility Report

• Consumers most likely use P2P with friends, significant others, and extended family.

P2P Trends

• 45% of consumers use P2P for shared bills.
• 51% believe requesting payments of $5$ or less is socially acceptable.
• Most are annoyed by others paying via check in store (51%), or delays in cashing checks (38%).
• 71% believe children under 10 won’t know how to write a check; 42% believe they won’t use physical credit cards, and 36% think they will only shop on their smartphones.

Online Security Tips

• Use strong passwords, and be mindful of the numbers you use.
• Look out for strange emails and beware of email attachments.
• Watch how much you share online.
• Be careful of what (and where) you click.
• Secure your smartphone and don’t keep sensitive information on your phone.
• Think before you download apps and keep technology up to date.

Managing Cash

• How to effectively manage your cash.

Electronic Banking Security

• Security is the #1 issue for online customers; banking online continues to expand.
• Common services:
  • Direct deposit: Auto deposit of net pay.
  • Auto payments: Authorization (permission) for your bank to withdraw funds.
  • ATMs: Fees may apply.
  • Debit Cards: Allow you to withdraw money/pay for purchases; may have fees; connected to a checking account.

Safety and FDIC

• Safety measures in banking history.
• In 1933, the government created FDIC to protect deposits in banks.
• Insures $250,000$ per account.

Types of Checking Accounts

• Regular, activity, and interest-earning accounts.
• All accounts:
  • Allow easy access to your money by writing a check, setting up an automatic transfer, or using your debit card.

Interest

• Banks typically pay interest monthly, but the compounding interval can vary (e.g., daily, monthly).
• Check with your bank to determine how often interest is calculated.

Types of Savings

• Various types of savings accounts available.

Certificate of Deposit (CD)

• CD: Savings option where money is left on deposit for a fixed period to earn a specific rate of return.
  • Term: The period of time.
  • Maturity Date: The date when the money becomes available.
• Relatively low-risk investment.
• Offers higher interest rates than regular savings accounts.
• Trade-offs: Money is inaccessible for a period; early withdrawal penalties; requires a minimum deposit.

CD Strategies

• Find the best rate.
• Consider the maturity date.
• Never allow automatic "roll over."
• Consider when you will need the money.
• CD portfolios can be useful.

Money Market Account

• Savings account requiring a minimum balance and earning interest that varies monthly.
• Rates change as market rates change; typically higher than regular savings accounts.
• Minimum balance required (typically $1,000$).
• Access to funds is limited to a number of monthly withdrawals.
• Covered by FDIC insurance.
• Interest rate is tiered, compounded, and credited monthly; accrues more profit as the account balance increases.

Money Market Options

• Example: Regions Platinum Relationship Money Market offers 1.01% APY for customers who deposit $100,000$ or more and have a Regions personal checking account.

Savings Bonds

• Savings Bond: A bond issued by the government and sold to the general public.
  • Purchase Series EE from the Federal government from $25-5,000$.
  • Face values of $50 - 10,000$.
• Government limits the total annual purchases to $15,000$ per person.
• Maturity date depends on the purchase date and bond interest rate.
• Bond interest rates vary.

Evaluating Savings Plans

• Rate of Return: Percentage increase in the value of your savings (15% annually is considered a really good return for an active investor).
• Compounding: Earning interest on the principal and previously earned interest.
• APY (Annual Percentage Yield): Interest a deposit would earn after compounding for one year.
• Fees on deposit accounts.
• Interest rates.
• Terms and conditions.

More on Evaluating Savings Plans

• Inflation:
  • A significant issue is being locked into low-interest rates during periods of high inflation.
  • Interest rates usually increase along with inflation.
• Tax Considerations:
  • Taxes reduce interest earned on savings.
  • Income tax is paid on interest earned from CDs.
  • Tax-deferred options (Retirement Savings).
• Liquidity:
  • How quickly your money can be accessed.
• Safety:
  • Insured by FDIC | NCUA.
• Restrictions & Fees:
  • Time interest is earned and when it is actually paid into your account.

Types of Checking Accounts

• Overview of different types of checking accounts.

Bank Statement Details

A bank statement includes:

• Deposits
• Checks you have written
• ATM withdrawals
• Debit Card charges
• Interest earned and fees

Bank Reconciliation

• Bank Reconciliation: A report that accounts for differences between the bank statement and checkbook balance; the process is called “balancing your checkbook.” Involves:
  • Comparing written checks with a list of cleared checks.
  • Determining whether any recent deposits are not on the bank statement.
  • Subtracting fees and charges listed on your statement from your checkbook balance.
  • Adding interest earned to your checkbook balance.

Other Payment Methods

• Certified Check: Personal check guaranteed for payment.
• Money Orders: Pay the amount of the money order (check) plus a fee.
• Travelers Checks: Allow you to obtain cash in a country’s currency when away from home.