Chapter 3 Banking Services 3 1 Checking Accounts

Chapter 3 Banking Services

3. 1 Checking Accounts

Deposit Slip • A deposit slip is used to deposit their paychecks and other monies. A. Cash Including Coins: Check: Subtotal Less Cash: Total Deposited: 285. 85 322. 94 1. 45 610. 24 0 610. 24

B. Cash Including Coins: 615. 45 Check: 39. 86 Check: 3. 83 Subtotal 659. 14 Less Cash: 0 Total Deposited: 659. 14

Check Register • When you write a check you are telling the bank to take money from your account. • Check register is where deposits and checks are written. • Calculate a running balance or new balance • Deposits + • Checks (-) • Balance is the amount of money in account

C. 2, 583. 45 +1, 220 -825 -96. 40 -12. 78 = D. 129. 74+500+1, 236 -196 -950 -87. 83=

3. 2 Electronic Banking

Electronic Banking • Use telephone, computer, other technology • Banks use computers to transfer deposits and checks, or “funds” from person to person and bank to bank called EFT • Bank Identification Number

• Automatic Teller Machine-ATM – What can you do with an ATM? • Personal Identification Number – PIN • Direct Deposit-Have paychecks automatically transferred from work to employee bank account • Debit Card- Allows you to pay for purchases without using cash or checkautomatically withdrawn from checking account

A. 782. 88 -85 -86. 54 -50= B. 1, 248. 40+890. 50 -200 -12. 87 -118. 94=

3. 3 Online Banking

Online Account Access • Online banking allows you to do your banking online. • Available balance is the amount available to spend A. 100+690 -35 -312. 40 -150 -280 = 100 -12. 60 = B. 67+728 -36. 90 -112. 85 -270 -15 -128 -89. 2345. 50 =

3. 4 Check Register Reconciliation

Reconcile the Bank Statement • Banks keep track of checking accounts and send the monthly report or bank statement to customers. • Interest earned is $ paid to customers for the use of their $ • Service charge is a deduction made by the bank for handling the checking account.

• A canceled check is one that the bank has paid and then marked so it can’t be used again • Outstanding checks means that the checks have been written but not yet received or paid by the bank • Outstanding deposit is deposit made after the closing date of the bank statement. – not on the statement but in your register

• Bank Statement Balance + Outstanding deposi - Outstanding checks New Bank Balance A. 1, 383. 53 29. 45 -87. 39 +312. 09 -- B. 793. 57 +312. 09 -174. 85 -32. 78

Reconcile the Check Register • Check Register Balance + Interest Earned - Service Charge - + Any Errors New Check Register Balance *CHECK REGISTER AND BANK STATEMENT MUST BALANCE TO RECONCILE

C. 727. 92 -18. 90 +1. 60 D. 457. 38 -7. 68

3. 5 Other Reconciliation Problems

Reconcile the Checking Account • Sometimes there are errors when calculating your checking account • Compare checkbook register to bank statement item by item

S 1: Compare the bank statement to the check register and note any differences between them. S 2: Prepare a reconciliation form to reconcile the bank statement. S 3: Reconcile the check register.

A. 107. 87 +0. 43 -56. 00 +32. 95 -35. 29 B. 812. 45 -200 -80. 17 624. 77 -92. 49

3. 6 Savings Accounts

Simple Interest • Interest-$ paid to an individual or institution for the privilege of using their $ • Same as checking – Deposit $ – Withdrawal $ – Record transactions

• Interest can be added to your savings account – Quarterly – 4 x a year every three months • 0. 25 = ¼ = 3/12 – Semiannually – 2 x every six months • 0. 5 = ½ = 6/12 – Annually – 1 x a year • 1 = 1/1 = 12/12 – Monthly – 12 a year every month • 0. 083 = 1/12

Principal x Rate x Time = Interest Px. Rx. T=I Time must be calculated out of one year Ex quarterly = ¼ or 0. 25 semiannually = ½ or 0. 5 annually = 1 monthly = 1/12 or 0. 083 Change percent to decimal

A. 2 ¼% = 2. 25% = 0. 0225 860 x 0. 0225 x 0. 25= P R T B. 3. 1% = 0. 031 350 x 0. 031 x 0. 5 = P R T

Compound Interest • Interest is added into balance. – Becomes new principal Px. Rx. T=I (Principal x Rate x Time = Interest) I + P = NP (Interest + Principal = New Principal) NP x R x T = I (New Principal x Rate x Time = Interest)

C. 700 x 0. 03 x 0. 25 = 5. 25 + 700 = 705. 25 x 0. 03 x 0. 25= 5. 29 + 705. 25 = 710. 54 D. 400 x 0. 025 x 0. 5 = 5 + 400 = 405 x. 025 x 0. 5 =5. 06 405 + 5. 06 = 410. 06 – 400 = 10. 06

Compound Interest Tables • • Instead of formula can use a table Pg. 113 E. Annual 3 1 ¼% 1. 037971 x 1, 100 = 1, 141. 77 – 1, 100 = 41. 77

F. Annual 7 1% 1. 072135 x 720 =771. 94 – 720 = 51. 94

What if not for full year? Interest x ¼ for quarterly Interest x ½ for semiannually Periods x 4 for quarterly Periods x 2 for semiannually

G. 5% x 0. 25 = 1. 25% 2 years x 4 periods a year = 8 1. 104486 x 850 = 938. 81 -850 = 88. 81 H. 2. 5% x. 5 = 1. 25% 2 years x 2 periods a year = 4 1. 050945 x 1, 600 = 1, 681. 51 – 1, 600 = 81. 51

3. 7 Money Market and CD Accounts • Some special savings paid higher rate than regular savings

Certificate of Deposit • CD – A time deposit or savings certificate • • Deposit a minimum amount Leave the money for minimum time or term End of term is maturity date Pay a penalty if withdrawal before term

Money Market Accounts • Higher interest rates but more like a checking – Minimum balance requirements – Interest rate is fixed – A small # of checks may be written

• Px. Rx. T=I • A. 10, 000 x 0. 054 x 3 = 1, 620 • B. March 2, 000 x 0. 014 x 0. 083 = 2. 32 April 2, 000 x 0. 0132 x 0. 083 = 2. 19 2. 32 + 2. 19 = 4. 51

Penalties on Certificates of Deposit • By law charged a penalty for early withdrawal • Penalty calculated on amount of $ withdrawn from CD • Amount Withdrawn x Rate x Time = Penalty

C. 500 x 0. 02 x 0. 25 = 2. 5 D. 1, 000 x 0. 047 x 1 = 47 1, 000 – 47 = 953

Compare Savings Accounts E. Time Deposit 1, 400 x 0. 0235 x 0. 5 = 16. 45 – 15. 13 = 1. 32 F. 1, 500 x 0. 0326 x 0. 25 = 12. 23 x 3 = 36. 68 - 31. 37 = 5. 31

Effective Rate of Interest • Rate you actually earn by keeping money on deposit • Also called Annual Percentage Yield (APY) Amount of Interest Earned for One Year = Amount of Money on Deposit

G. 4% x 0. 25 = 1% 1 x 4 = 4 Periods 1. 040604 x 2, 000 = 2081. 21 2, 081. 21 – 2, 000 = 81. 21 / 2, 000 = 0. 0406 4. 06%

H. 5% x 0. 5 = 2. 5% 1 x 2 = 2 Periods 1. 050625 x 6, 000 = 6303. 75 – 6, 000 = 303. 75 / 6, 000 = 0. 0506 5. 06%