THIS IS MY 35TH POST ON UNDERSTANDING MONEY TOOLS
Recently, a friend said that many younger people know so
little about banking that they don’t even understand how to get a checking
account, what the numbers are all about and how to fill a check out properly.
So, upon this comment I thought I would walk people through the fundamentals of
a checking account. Here goes…..
The first thing we need to do is select a bank that you want
to work with, and they want your business. I would choose one with a location not far from your home or
work. As mentioned prior to in
other blogs, with the government favoring the large banks in the 2007-2008
banking debacle, many of the good small banks were forced to close their doors. The big banks, of which there are perhaps
6 or so now, all look about the same, have the same services and charge the
same rates. It’s too bad that
“anti-trust laws” have gone to the wayside with the final spade-fulls of dirt
going on top of the coffin in 2000-2001.
Take a look at what a bank gives you in service, and what
the fees are. Typically, today you
want a bank that offers free checking.
See if there are any annual fees, hidden fees, minimum balances,
etc. Does this bank have a
personal service representative so when you have questions, or need assistance
someone will be there to assist you?
Now, you’ve selected a bank and want to set up a checking
account. I recommend that you immediately ask for “overdraft protection”. This is for the situation where you
have insufficient funds in your checking account and returned checks today can
run $35-50. for each returned check.
So, if you wrote 5 checks and they were returned it could cost you $175
to 250. in penalties. Banks are
making a ton of money on fees, and you must know where these fees come from so
it doesn’t cost you money.
Once that is done.
They will ask for information from you, like rough income statement,
your earnings, balance sheet, etc.
You will be asked if you want your checks to be duplicate, so there is a
carbon copy. Many pens today when
you write a check don’t press down hard enough to show on the carbon copy, so I
don’t spend the extra money. You
will be given a few free initial checks until your printed ones are mailed to
you at an address you want them mailed to. There normally is a charge for your
checks as well as when you reorder new checks; same goes for extra deposit
slips. You can get free deposit and withdrawal slips at the bank, of course
they do not have your name on them.
Next, you will be given a signature card so that your
signature the way you want it is on file.
Your name will be on each check so normally to protect myself from
fraud, (if your check book is stolen) is sign differently than how your name
appears on the check. For instance, if my name were John S. Smith, on the
signature card I might go with only J. Smith. Most people who steal checks will sign exactly as the name
appears on the front of the check.
Therefore, when you sign your checks you will sign exactly as you sign
the banks copy of the signature card, and lesson your liability in case of
fraud.
The next thing is the number you want to start with. Don’t start with 1, but perhaps 950 or
1001, so that it appears that you have had a checking account for sometime.
Let’s walk through what is on a check. In the upper left
hand corner you will have your name as desired. I have my full name as it appears on my drivers license so
there is a match for identification.
This is followed below the name with your address of street, city, state
and zip code. Some people like to put their phone number under this. I do not. The less, the better, for privacy in my eyes.
If you move to the far right you will find the number of the
check. In your checkbook the
numbers, of course, will be in ascending order. Under the check number is a
place for the date. If you write a
date in that is in the future, the check can’t be cashed until that date.
Under this and starting on the left is “PAY TO THE ORDER
OF”. On this line you need to put who the check is made out to; who you are
paying. Following this there is a box with a $ sign on the left. Here you write the numbers in for the
amount of the check, including the cents.
Below this there is a line with the words DOLLARS on the right. Here you need to actually write the
amount of the check and it has to correspond exactly to what you placed in the
$ box. I normally draw a brief line before writing so that no one can add to
the left of this, or increase the value.
If the amount is very small, I put in as an example “Only” and then
write the amount. After the
written words for dollars you add the cents, if any, in numbers. For example
“Only two and 14/100, (which is $2.14.)
At the bottom left of your check you will have MEMO. Place in this area what the check was
written for so you have a record, which will also help at tax time if it is an
IRS tax deductible expense.
Following MEMO is a
straight line, and this is for your signature. Again, sign as your
signature appears on the signature
card, not as your name appears on the check.
Below this on the left side are a bunch of numbers. Starting
form the left is the routing numbers for bank purposes as your check goes
through the banking system. It
identifies the bank where the money is drawn from. The next set of numbers is your account number for this
checking account, and the last set of numbers is your check number that will
correspond to the number at the upper right hand corner.
In your check book the bank has given you is a record account
so you can keep track of whom you wrote a check to, the date, transaction
description, payment amount, deposit column for your deposits and lastly a
balance column.
One more area to cover. Let’s say you want to cash a check to receive hard money,
and don’t want to use an ATM machine.
First of all, not everyone or every bank will cash your check. When you do find a person, business or
bank that will accept your check make the check payable to yourself, cash or
the person/business willing to give you cash back. If the check is made payable to yourself or cash you need to
turn the check over and endorse it with your signature at the top where most
checks today say, “ENDORSE HERE”. If it is at the bank where you have an
account, the bank will want you to write your account number below your
endorsement.
Assume someone gives you a check. When you cash it or deposit it into a bank account you will
need to turn the check over and sign your name where it says, “ENDORSE
HERE”. You must endorse the check
exactly how your name appears on the front. For instance if the check says made out to, John “Spikeman”
Smith, you need to sign it the same way as it appears. Once you sign a check it becomes legal
tender and could be cashed by most anyone, although with all the fraud today it
is harder to do so. Wait until you
are ready for the deposit or cashing it before you sign the endorsement.
The bank personnel will tell you how to go about “on line
banking” to simplify transfers, auto payments, etc.
If you discard checks I recommend that you shred them or at
least rip off all numbers at the bottom of your checks so that others don’t steal
your information easily.
Anyway, I hope this helps someone out there. Don’t forget the objective here is to
put more money in the bank than you take out!
No comments:
Post a Comment