NEGOTIABLE INSTRUMENTS

Presented To: Presented By: Slide 1

NEGOTIABLE INSTRUMENTS

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Types of Negotiable Instruments Presenting Checks for Payment Processing Checks Changing Forms of Payments

NEGOTIABLE INSTRUMENTS
What is negotiable?
Negotiable means transferable. The negotiation that goes on refers to the transfer of the instrument between two people, or from one bank to another, or even from one country to another.

What is an instrument?
In the broadest sense, almost any agreed-upon medium of exchange could be considered a negotiable instrument. In day-to-day banking, a negotiable instrument usually refers to checks, drafts, bills of exchange, and some types of promissory notes. Slide 3

FORMS OF NEGOTIABLE INSTRUMENTS

A negotiable instrument is a written order promising to pay a sum of money. It may be a bearer instrument, which is payable to the bearer, or it may be an instrument with highly specified terms.

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CHECKS
Most common form of negotiable instrument Preferred method of payment for many debts Offer convenience, safety, and a record of transactions

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STANDARD FEATURES OF PERSONAL CHECKS

Maria Mills 12 River Street Pettisville, OH 43553-0177

Check Number
Date Date

801
56-25 412

Pay to the order of

Payee Amount

$ Amount
Dollars

Pettisville Bank
Pettisville, Ohio

For simulation use only

Signature
041200257 103 7943

For Memo 000801

Identification Numbers Account Number Slide 6

DRAFTS
A draft is a three-party instrument similar to a check. A 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. The payment may be at sight or at some defined time. Most drafts are used for the purchase of goods and services when the transaction goes beyond the bounds of U.S. banking law.
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BILLS OF EXCHANGE
A bill of exchange is a negotiable and unconditional written order, such as a check, draft, or trade agreement, addressed by one party to another. The receiver of the bill must pay the specified sum or deliver specified goods on demand or at a specified time. Bills of exchange are a common form of internationally negotiable instruments.
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PROMISSORY NOTES
A promissory note is a written promise to pay at a fixed or determinable future time a sum of money to a specified individual. These two-party instruments are legally binding documents with many specified terms that vary widely. Commercial paper, a short-term (270 days or fewer) note or daft issued by a corporation or government, is a common investment instrument.
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PRESENTING CHECKS FOR PAYMENT

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ELEMENTS OF NEGOTIABILITY
Written Signature Unconditional promise or order Sum certain Payable on demand or at a defined time Words of negotiation

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IDENTIFICATION AND CHECK ACCEPTANCE

Banks may require as much or as little identification to cash or deposit a check at they wish. Banks may have different rules for customers and noncustomers.

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PROCESSING CHECKS

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CHECK PAYMENT AND PROCESSING

Drawer Payee

A National Bank Federal Reserve (or other intermediary)

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B National Bank

CHANGING FORMS OF PAYMENTS

Slide 15 Charge cards Credit cards Cash cards Debit cards Smart cards

CHARGE CARDS
With a charge card, a consumer makes purchases but must pay the account in full at the end of the month. Charge cards, in effect, lend the amount of purchases for a month. Originally charge cards were store cards, but eventually third-party companies formed networks of participating businesses to expand the market. American Express is the most prominent national charge card.
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CREDIT CARDS
Credit cards allow consumers to pay all or part of their bills each month and finance the unpaid balance. Using a credit card involves two banksthe bank that issued the card and the retailers bank.

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CASH CARDS
Cash cards are commonly used at an automated teller machine (ATM). Consumers can get cash, make transfers and deposits, or perform other banking functions by inserting the card and entering a personal identification number (PIN).

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DEBIT CARDS
Debit cards transfer money from a persons designated account to the account of the retailer. A debit card allows an immediate point-of-sale (POS) transaction.

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SMART CARDS
Smart cards are credit, debit, or other types of cards with embedded microchips. The microchips store values and use the embedded logic to change values and record transactions.

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FUTURE PAYMENT SYSTEMS

E-checks Electronic tokens

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Thank You