Negotiable Instruments

6.1 Types of Negotiable Instruments 6.2 Presenting Checks for Payment 6.3 Processing Checks 6.4 Changing Forms of Payments Negotiable instrument is a written order or promise to pay a sum of money, either to a specified party or to the person who holds it. What Is Negotiable? What Is an Instrument? Bills of exchange are negotiable and unconditional written orders—such as a check, draft, or trade agreement—addressed by one party to another. Promissory notes are written promises to pay at a fixed or determinable future time a sum of money to a specified individual.

6 6.1 6.2 6.3 6.4 Negotiable Instruments Types of Negotiable Instruments Presenting Checks for Payment Processing Checks Changing Forms of Payments The U.S Banking System, 3e â 2017 Cengage Learningđ All rights reserved 6.1 Types of Negotiable Instruments Learning Objectives 6.1.1 Define the term negotiable instrument 6.1.2 Identify different types of negotiable instruments Slide The U.S Banking System, 3e â 2017 Cengage Learningđ All rights reserved Key Terms negotiable instrument bearer instrument draft bill of exchange promissory note Slide The U.S Banking System, 3e © 2017 Cengage Learning® All rights reserved Negotiable Instruments Negotiable instrument is a written order or promise to pay a sum of money, either to a specified party or to the person who holds it What Is Negotiable? What Is an Instrument? Slide The U.S Banking System, 3e © 2017 Cengage Learning® All rights reserved  checkpoint What is a negotiable instrument? A written order or promise to pay a sum of money to a specified party or to the person who holds it What is the most common form of negotiable instrument? A check Slide The U.S Banking System, 3e â 2017 Cengage Learningđ All rights reserved Forms of Negotiable Instruments Bearer instrument is an instrument which is payable to whomever holds it Checks Drafts Draft is an order signed by one party (the drawer, or drafter) that is addressed to another party (the drawee) directing the drawee to pay to someone (the payee) the amount indicated on the draft Slide The U.S Banking System, 3e â 2017 Cengage Learningđ All rights reserved Standard Features of a Check Slide The U.S Banking System, 3e â 2017 Cengage Learningđ All rights reserved Forms of Negotiable Instruments (continued) Bills of exchange are negotiable and unconditional written orders—such as a check, draft, or trade agreement—addressed by one party to another Promissory notes are written promises to pay at a fixed or determinable future time a sum of money to a specified individual Slide The U.S Banking System, 3e â 2017 Cengage Learningđ All rights reserved  checkpoint List the standard features of a personal check Check number Date Payee Amount(s) Signature Slide Memo Identification numbers Drawee Drawer The U.S Banking System, 3e © 2017 Cengage Learning® All rights reserved 6.2 Presenting Checks for Payment Learning Objectives 6.2.1 Identify bank requirements for honoring checks 6.2.2 List common forms of check endorsements Slide 10 The U.S Banking System, 3e â 2017 Cengage Learningđ All rights reserved A National System of Payment The Legal Structure of the Check Payment System Federal Reserve Act of 1913 Uniform Commercial Code of 1958 Expedited Funds Availability Act of 1987 Check 21 Electronic Check Conversion Slide 21 The U.S Banking System, 3e â 2017 Cengage Learningđ All rights reserved  checkpoint Why does the check processing and collection system depend on the Federal Reserve? The Federal Reserve directs and controls the banking system at large, facilitating communication, enforcing regulations, and encouraging standardization Slide 22 The U.S Banking System, 3e â 2017 Cengage Learningđ All rights reserved Check Payment and Processing Float refers to funds that are on deposit at two institutions at the same time due to inefficiencies in the collection system; allows a person or firm to earn extra income because the two institutions are paying interest on the same funds Transit number is a nine-digit number that identifies the bank that holds the checking account and is responsible for payment Slide 23 The U.S Banking System, 3e â 2017 Cengage Learningđ All rights reserved Check Payment and Processing Slide 24 The U.S Banking System, 3e â 2017 Cengage Learningđ All rights reserved Check Payment and Processing (continued) Other Types of Check Processing Returned check is a check written on an account that does not have adequate funds to cover it and which is returned unpaid to the person who deposited it Slide 25 The U.S Banking System, 3e © 2017 Cengage Learning® All rights reserved  checkpoint What is float? The same funds being counted in two depository banks What causes it? The intermediary bank has credited one institution for a check but has not yet collected from another Slide 26 The U.S Banking System, 3e â 2017 Cengage Learningđ All rights reserved 6.4 Changing Forms of Payments Learning Objectives 6.4.1 List modern forms of payment systems 6.4.2 Explain how banks and other financial institutions use automated forms of payment Slide 27 The U.S Banking System, 3e © 2017 Cengage Learning® All rights reserved Key Terms charge cards credit cards cash cards debit cards smart cards person-to-person payments (P2P) radio frequency identification (RFID) Slide 28 The U.S Banking System, 3e â 2017 Cengage Learningđ All rights reserved Consumer Payments Charge card specifies that consumers must pay the account in full at the end of the month Credit card allows consumers to pay all or part of their bills each month and finance the unpaid balance Slide 29 The U.S Banking System, 3e â 2017 Cengage Learningđ All rights reserved Consumer Payments (continued) Cash card is commonly used at an automated teller machine (ATM) to withdraw cash, make transfers and deposits, or perform almost any other banking function at the machine by inserting the card and entering a personal identification number (PIN) Debit card transfers money from a person’s designated account to the account of the retailer Slide 30 The U.S Banking System, 3e © 2017 Cengage Learning® All rights reserved Consumer Payments (continued) Smart cards are credit, debit, or other types of cards that have an embedded microchip Bill Payment Services Person-to-Person Payments Person-to-person (P2P) refers to online payments from consumers to other consumers; facilitated by business platforms that generate revenue by charging a fee for serving as the payment intermediary Slide 31 The U.S Banking System, 3e â 2017 Cengage Learningđ All rights reserved Consumer Payments (continued) Contactless Payments Radio frequency identification (RFID) uses a transponder to convey identifying information including the account holder’s account or balance information and the fees being assessed to the account by the business for products or services Deferred Payments Processed by an Intermediary Biometrics The Need for Caution Slide 32 The U.S Banking System, 3e © 2017 Cengage Learning® All rights reserved  checkpoint Name ten payment systems other than cash or check Charge cards Credit cards Cash cards Debit cards Smart cards Slide 33 Bill payment services P2P payments Contactless payments Deferred payments Biometrics The U.S Banking System, 3e â 2017 Cengage Learningđ All rights reserved Bank Payments EFT Direct Deposit GoDirect Automated Clearing Houses Online Transfers Check 21 Slide 34 The U.S Banking System, 3e â 2017 Cengage Learningđ All rights reserved  checkpoint Name three systems banks use for funds transfers Automated clearing houses Fedwire Clearing House Interbank Payment System Slide 35 The U.S Banking System, 3e â 2017 Cengage Learningđ All rights reserved ...6.1 Types of Negotiable Instruments Learning Objectives 6.1.1 Define the term negotiable instrument 6.1.2 Identify different types of negotiable instruments Slide The U.S Banking... Terms ? ?negotiable instrument bearer instrument draft bill of exchange promissory note Slide The U.S Banking System, 3e â 2017 Cengage Learningđ All rights reserved Negotiable Instruments ? ?Negotiable. .. What is the most common form of negotiable instrument? A check Slide The U.S Banking System, 3e â 2017 Cengage Learningđ All rights reserved Forms of Negotiable Instruments Bearer instrument