A checking account is one of the most important tools an individual needs to have to managing his or her finances. This form of money management tool allows you to place money into a protected account. You can then draw on that money when you need to, such as to pay a bill or to make a purchase. Checking accounts have changed considerably over the last few years, with new features and changes occurring. Each of the financial institutions, including credit unions and banks that offer checking accounts can set their own rules for using these accounts.
How Checking Accounts Work
There are several types of checking accounts. A basic account allows you to place money into the account and withdraw it by writing checks, using an ATM or teller to withdraw funds or by using a debit card to make a purchase. These are not credit lines but rather draw from the funds within the account. There are other types of accounts as well, including those meant for use by seniors or students. Consider the following features that some of these accounts have and what this can provide to you.
- Some accounts charge a monthly or per transaction fee. Others are free. Free checking accounts, as they are often called, give you use of the service without charging excessive fees.
- Many of these companies offer debit cards. Debit cards create a simple way for you to make a purchase when you would otherwise use a paper check. They are faster and more secure to use, too.
- Some accounts require minimum balances. Others do not. Generally, those that do require a minimum balance will also pay interest because the funds in the account are being used as an investment by the bank itself.
- You do have protection through the FDIC if you use a checking account from this particular type of lender. Each account then, is insured up to a specific amount even if the bank goes under.
Checking accounts may offer benefits, including rewards or discount promotions depending on the financial institution. It is always a good idea for you to choose a company that can provide you with the features you need.
The use of a checking account is, beyond a doubt, one of the most important tools you will have in managing your bottom line. It is an easy and affordable way to make secure payments to those you need to. Since the funds transfer electronically, there is less risk that you will lose those funds as you may with cash. In addition, you can pay people anywhere, as long as you know their name and address to send a check to. Some accounts even allow you to manage your entire checking account and bill payments online. This makes it even more efficient to manage your money.
Each financial institution will charge you a fee based on the promotions it is running as well as the type of account. In many cases, you will qualify for a free checking account. Otherwise, you may be charged a fee for the following:
- Making a withdrawal from an ATM
- A monthly maintenance fee on the account
- A fee for any transaction made in which you purchase something using a debit card
It is important to compare options carefully before you choose which financial institution you will work with for your checking account needs. In nearly all situations, you can save money by shopping around for the right company. It is the responsibility of the bank to inform you of any fees in advance of charging them or signing up for the account. You should receive a disclaimer that outlines all fees.
There is no reason not to have a checking account. With features like direct deposit from employers and the ease of making payments in a secured fashion, these accounts make sense for most people. There is no limit to how long you can hold an account and, if you currently have an account that is not working for you, there is no risk to moving to another one. The only limitations are on you and your ability to obtain an account with features you want.