Basic Banking Principles

Participant Manual
B Basic Banking Principles

Chase Financial Education Workshops:

This workshop is one of four different consumer-related
financial education workshops developed and sponsored
by Chase. Workshops being offered as part of Chase’s
financial education curriculum include:

• Basic Banking Principles

• Personal Financial Management
• Credit and Debt Management
• Understanding the Mortgage Process

For more information on any of these workshops, call

1-888-CHASE11 (option #4) to speak to the Chase
Community Development Group Community Relations
representative in your market.

We would also like to acknowledge that portions of the material covered in this
workbook were replicated with permission from “Money Smart”, an adult education
program developed and published by the FDIC.
 Basic Banking Principles 1

Table of Contents
1. Why Use a Bank........................................3
2. How to Use a Bank ................................11
3. Additional Information ..........................31

Note that certain terms that are used in this workbook are highlighted
the first time they appear and can be looked up in the glossary for
easy reference.
2 Basic Banking Principles
 Basic Banking Principles 3

1
Why Use a Bank?
4 Why Use a Bank?

Why Use a Bank?

What are some reasons people may have for
NOT using a bank?

1.

2.

3.

4.

5.

Notes/Comments:
 Why Use a Bank? 5

Banks take in your deposits and provide you with:

• Safety
• Convenience

Notes/Comments:
6 Why Use a Bank?

Why Use a Bank? - cont.

Banks protect your deposits with Federal Deposit
Insurance Corporation (FDIC) Insurance:

• The basic insured amount of a depositor is $100,000.

• Deposits maintained in different categories of legal
ownership are separately insured. So, you can have more
than $100,000 deposit insurance coverage in a single
institution.

(Source: Official FDIC web site, 2001)

Notes/Comments:
 Why Use a Bank? 7

Banks allow you to transfer money from one place

to another through:

• Checks
• Telephone
• Automated Teller Machine (ATM)
• Computer

Notes/Comments:
8 Why Use a Bank?

Why Use a Bank? - cont.

Banks provide a safe and convenient way of
receiving your paycheck through Direct Deposit.

Benefits :
• Safety
• Speed
• Ease
• Reliability

Notes/Comments:
 Why Use a Bank? 9

Banks also provide you with:

• Interest (depending upon the type of account)

• Regular Statements
• Banking History

Notes/Comments:
10 Why Use a Bank?

Why Use a Bank? - cont.

Banks Provide You With Credit.

• Credit or loans help people pay for cars, houses,

furniture, education, business needs, etc.
• Borrowers (those that need money) pay interest to
borrow money.

Notes/Comments:
 Basic Banking Principles 11

2
How to Use a Bank
12 How to Use a Bank

Demand Deposit Accounts

(Checking Accounts)
Checking accounts established with a financial
institution, such as a bank, credit union or
brokerage firm, give you the ability to:

• Write checks to pay bills or obtain cash.

• Withdraw money by check or Automated Teller Machine
(ATM) or in person at the financial institution where you
have your account.
• Have your government or payroll check deposited
sooner by way of “direct deposit.”
• Maintain a record of payments with your check register,
monthly statement and cancelled checks.
• Bank by telephone or computer, day or night.
• Earn interest, depending on the type of checking account.
 How to Use a Bank 13

Basic Banking Account

Banks often offer some type of “Basic Banking” or
“Lifeline” checking account for customers with
limited funds or limited transaction needs.

• Terms will vary slightly from bank to bank.

• Make sure you SHOP AROUND.

Notes/Comments:
14 How to Use a Bank

Finding the Right

Checking Account
You might want to ask yourself the following questions
when shopping around for a checking account:

• Is there a minimum balance required to open the account?

• Do I have to maintain a minimum balance to avoid
paying a service charge?
• Is there a monthly service fee?
• Is there a per check fee?
• Is there a per transaction fee?
• What are the ATM fees?
• Does the account pay interest?
• Does the bank charge for overdraft protection?
• Is this account protected by Federal Deposit Insurance
Corporation (FDIC) insurance?
 How to Use a Bank 15

Savings Accounts
Savings accounts are usually accounts that pay
a certain amount of interest and allow you to:

• Save money for a specific financial goal (e.g. car, house,

education).
• Earn interest on the money in your account.
• Withdraw money at ATM machines.
• Receive your government or payroll checks through
“direct deposit.”
• Transfer funds (“Funds Transfer”) to or from your
checking account.
• Bank by telephone day or night.
• Track your funds via passbook or statement.

Notes/Comments:
16 How to Use a Bank

Individual Development
Accounts
What is an Individual Development Account (IDA)?
• A special savings account that matches the funds saved in
the account in order to encourage families with incomes
below a certain amount to save money on a regular basis.

Who provides the matching funds?

• Organizations such as foundations, corporations or
government entities agree to provide matching funds.

What can I use IDAs for?

• Job training, college education, small business start-up, or
down payment for a home.

How do I find out more about IDAs?

• Contact your local community action agencies, other
community groups, community development financial
institutions (CDFIs), credit unions, or bankers to see if they
know of any programs in the area.
 How to Use a Bank 17

Opening Accounts
To open a bank account requires:

• Photo ID with signature.

• Secondary ID with signature.
• Social Security (or taxpayer ID) number.
• Proof of address.
• Signature card and application.

Notes/Comments:
18 How to Use a Bank

How to Make a Deposit

Fill out a Deposit Slip:

A. In this section, check whether this is a checking or savings account

deposit. If you are using pre-encoded deposit slips, you do not
need to fill this information in.
B. Indicate the date you will be making the deposit.
C. Print your name as it appears on your account in this section.
D. If you are depositing cash, indicate the amount of cash you will
be depositing in this section.
E. If you are depositing checks, indicate the amount of each check
you will be depositing in this section.
F. Add the total of all deposits and place the amount in this section.
This is the amount that will be deposited into your account.
G. If you are not using pre-encoded deposit slips, fill in your
account number in this section. Otherwise, you do not need
to fill in this information.

D
E
A B
C

G F
 How to Use a Bank 19

If depositing checks to your account, on the back of

each check:

• Endorse the check by signing your name in ink on the back.

• Write “for deposit only” plus the account number on the back.

Tip: Use the pre-encoded or pre-printed deposit slips that you

received when you opened your account to help minimize
any possible errors.

Notes/Comments:
20 How to Use a Bank

How to Write a Check

Every time you write a check, fill in this information:

1. Calendar date when issuing the check.

2. Name of the person or business to whom the check is to be
given. This is known as the “payee.”
3. Check amount in numbers.
4. Check amount in words.
5. Indicate what the check payment is for.
6. Your signature.

Check
Number
1

2 3
4

5 6
 How to Use a Bank 21

With a checking account (also called a demand

deposit account), the bank will pay money out of the
account to anyone the depositor chooses. Usually
this occurs when the depositor writes a check.

The information you will need to write the check is:

• The date.
• The person, company, or store that is being paid.
• The amount of the money to be paid.

Notes/Comments:
22 How to Use a Bank

How to Write a Check - cont.

Check Writing Tips:

• Write your checks clearly and always in ink, never in pencil.

• Never sign blank checks.
• If you make a mistake on a check, do not try to erase it. Just
write “void” in the check register and tear up the check.
• When making payments by check, include the account number
of the company whose bill you are paying in the memo section
to help insure proper processing.

Notes/Comments:
 How to Use a Bank 23

Check Writing Exercise

Directions: This check belongs to you. Write a
check to Marty Simmons for $545.50 for this month’s
rent check.

1. Date: Write the month, date and year

(example: March 5, 2005).
2. Pay to the order of: Write “Marty Simmons.”
3. Amount: Write “$545.50.”
4. Dollars: Write “Five hundred forty five and 50/100.”
5. Memo: Write “March rent.”
6. Signature: Sign your full name (example: John Smith).

2 3
4

5 6
24 How to Use a Bank

How to Manage Your

Checking Account
When you open your checking account, the bank gives
you an organizer or check register to help you track
the activity in your account.

Write down in your register whenever you:

• Deposit money into the checking account.

• Write a check.
• Use your ATM/debit card.
• Receive interest from the bank on the money in your account.
• Deduct a fee that the bank charges.
• Withdraw money from your account (“withdrawal
transaction”).
• Request a wire transfer from your account to another account
(including any applicable fees).
 How to Use a Bank 25

Check Register Sample

The Check Register will help you to track how
much money is going in and out of your account.

• Check Number
• Date
• Description of Transaction/Payee
• Payment/Debit Amount
• Deposit/Credit
• Balance

Payment
Check # Date Payee Amount Deposit/Credit Balance
#2135 1/1/2005 ABC Utility Company $35.75 $650.00
#2136 1/15/2005 123 Phone Company $53.50 $596.50
1/17/2005 Salary Check Deposit $1,000.00 $1,596.50
1/20/2005 ATM Withdrawal $50.00 $1,546.50
#2137 1/25/2005 John Smith - plumber $224.90 $1,321.60
1/30/2005 Gristedes (Grocery Store) $46.88 $1,274.72
2/5/2005 Visa Card - Phone Payment $134.40 $1,140.32
26 How to Use a Bank

Checkbook Register
Exercise
Directions: Enter the check to Marty Simmons for
$545.50 in the Checkbook Register and calculate the
new balance.

• Date: Write the month, day and year the check was written.
• Description: Write “Rent check to Marty Simmons.”
• Payment: Write “$545.50.”
• Balance: Calculate the balance: $1,140.32 - $545.50 = $594.82.

Payment
Check # Date Payee Amount Deposit/Credit Balance
#2135 1/1/2005 ABC Utility Company $35.75 $650.00
#2136 1/15/2005 123 Phone Company $53.50 $596.50
1/17/2005 Salary Check Deposit $1,000.00 $1,596.50
1/20/2005 ATM Withdrawal $50.00 $1,546.50
#2137 1/25/2005 John Smith - plumber $224.90 $1,321.60
1/30/2005 Gristedes (Grocery Store) $46.88 $1,274.72
2/5/2005 Visa Card - Phone Payment $134.40 $1,140.32
#2138
 How to Use a Bank 27

Automated Teller
Machine (ATM)
ATMs offer a convenient way to perform bank
transactions such as withdrawals, deposits,
transfers, payments or balance inquiries.

• You will need a bank-issued ATM or debit card and a

Personal Identification Number (PIN) to use the ATM
machines.
• Your accounts can be accessed from an ATM anywhere
in the world, provided that the ATM and your bank are
members of the same worldwide networks.

Notes/Comments:
28 How to Use a Bank

ATM/Debit Cards
An ATM card provides access to depositor’s
money. It is another way to withdraw money
from an account.

• Many ATM cards also function as debit cards.

ATM/Debit card features:

• Widely accepted at ATMs, grocery and department stores.

• Requires a confidential Personal Identification
Number (“PIN”).
• Can provide “cash back” when making purchases with
a debit card.

Notes/Comments:
 How to Use a Bank 29

More on ATMs
ATM Usage TIPS:

• Limit ATM use to those machines that are in enclosed

locations with adequate lighting.
• If possible, visit ATMs with a group of friends or use the
machine at a popular time.
• Sign the back of your ATM card as soon as you receive it.
• Memorize your PIN number and do not give it to
anyone. Do not write your PIN number on your card
or keep the number in your wallet.
• Be aware of people around the ATM area. Do not let
anyone watch you enter your PIN number.
• Put your money away safely before exiting the ATM area.
Notes/Comments:
30 Basic Banking Principles
 Basic Banking Principles 31

3
Additional
Information
Resources & Glossary of Terms
Evaluation Form
32 Additional Information

Resources
General Contact Information:

For more information regarding the opening of bank

accounts or type of bank accounts available, visit your
nearest bank branch and speak with a customer service
manager or branch manager. To locate the nearest Chase
branch or to find out more specific information regarding
Chase products and services, call: 1-800-Chase24.

Notes/Comments:
 Additional Information 33

Additional Resources:

General Basic Banking Information:

• Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, DC 20551
Phone: (202) 872-7565
www.FederalReserveEducation.org

• New York State Banking Department

www.banking.state.ny.us

Individual Development Accounts (IDAs):

• www.idanetwork.org
Direct Deposit Information:
• Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20220
Phone: (202) 622-1260
Fax: (202) 622-6415
On-Line Banking Information for Youth:
• www.jumpstart.org
34 Additional Information

Glossary of Terms
• Annual Percentage Yield (APY) – The amount of interest the customer will
earn on a yearly basis expressed as a percentage. The APY includes the effects
of compounding. The more the customer’s money compounds, the higher the
APY, and the more interest the customer will receive.
• ATM – Automated Teller Machine. An electronic terminal that allows the
customer to conduct financial transactions such as withdrawing cash, depositing
checks or cash, or paying bills.
• Balance – Amount of money remaining in the customer’s account after taking
into account all transactions.
• Bank – A federally regulated financial institution that engages in the business
of taking deposits, lending and providing other financial services.
• Basic Banking Account – See “Lifeline Accounts.”
• Certificate of Deposit (CD) – Type of interest bearing deposit that requires
a minimum dollar amount to open the account and requires that the deposit
remain with the bank for a fixed time period.
• Check – A written authorization to transfer funds from one party to another.
• Check Register – An organizer where the customer records the activity in his
or her checking account (transactions, withdrawals, automatic payments, direct
deposit, balance inquiries, etc).
• Checking Account – Also known as “Demand Deposit” Account. A type of
deposit account that allows the customer to write checks to make payments
or obtain cash.
• Compound Interest – When interest is compounded, the customer earns
money on the interest that he or she earns and leaves in the account. Interest
can be compounded daily, monthly, or annually.
 Additional Information 35

• Credit – An arrangement to receive cash, goods, or services now

and pay for them later. Usually referred to as a loan. Also refers to
the amount of money that gets “added” to or deposited into the customer’s
account.
• Credit Card – A revolving line of credit that allows the customer to make an
unlimited number of purchases, up to a pre-approved dollar limit. The customer
continues to “revolve” that line of credit or draw down on it repeatedly as long
as he or she continues to make minimum payments on that bill each month and
as long as he or she does not exceed his or her credit limit.
• Credit Rating – A rating created by consumer credit agencies that evaluates a
person’s credit history and gives it a score. The higher the score, the better the
credit history.
• Credit Union – A co-operative financial institution that is owned by its
members and operates for their benefit.
• Debit – Payment from the customer’s account to another party. Amount taken
out of the customer’s account.
• Debit Card – A plastic card that allows the customer to electronically access his
or her bank accounts from ATMs or retailers that offer debit payment services.
• Debt – Money owed; also known as a liability.
• Demand Deposit Account – See “Checking Account.”
• Deposit – Money in the form of cash, a check or an electronic transaction that is
put into an account at a financial institution, such as a bank.
• Deposit Account – An account in which money is deposited, including checking
and savings accounts.
36 Additional Information

Glossary of Terms - cont.

• Deposit Insurance – Insurance that is provided up to a certain amount to
protect a customer’s deposits if the financial institution fails.
• Direct Deposit – An automatic deposit of wages or benefits (such as payroll
payments) into a consumer's bank account.
• Electronic Funds Transfer (EFT) – The movement of funds without paper
through a payment system.
• Electronic Transfer Account (ETA) – A low-cost account which is made
available by participating federally insured financial institutions to individuals
who receive federal benefit, wage, salary, or retirement payments.
• Federal Deposit Insurance Corporation – Agency of the federal government
that insures accounts at most commercial banks and mutual savings banks.
• Funds Transfer – The internal movement of funds between accounts. Also
called wire transfer.
• Individual Development Account (IDA) – A special savings account that
matches the funds saved in the account in order to encourage families with
incomes below a certain amount to save money on a regular basis.
• Interest – The cost of borrowing money, or the price the lender charges the
borrower for the use of the lender’s money. Interest is also paid on deposits
because they are, in effect, loans to the bank.
• Interest Rate – Rate charged or paid for the use of money (usually expressed as
a percentage).
• Lifeline Accounts – (also known as Basic or Low-Cost Bank Accounts) Low-cost
deposit accounts available to customers with minimal transaction needs.
Offering this type of account is required by law in some states.
 Additional Information 37

• Loan – A sum of money lent to someone and paid back with interest.
• Overdraft – Overdrafts occur when customers write checks for more than the
balance that exists in their checking accounts. The bank may refuse to pay and
the check “bounces.”
• Personal Identification Number (PIN) – Confidential number that
the customer uses to access his or her deposits when using the ATM
or Debit card.
• Retail Branch – A location where banking services are provided to consumers.
• Savings Account – Type of deposit account that pays interest on the customer’s
deposits.
• Statement – A record by the bank for a customer that lists all transactions for a
defined period.
• Transaction – Activity in the customer’s account, including withdrawals,
deposits, payments, and funds transfers.
• Wire Transfer – See “Funds Transfer.”
• Withdrawal Transaction – Any activity that involves taking money out of the
customer’s account, resulting in a lower balance in the account. Writing a check
and taking money from an ATM are both considered withdrawal transactions.
©2005 JPMorgan Chase & Co. All rights reserved.