What Is a Checking Account?

It might seem like an unimportant question to some similar to asking what is the term “bank. But a checking account could be a different thing to different people. The details can differ significantly between banks.

Continue reading to learn the specifics about how everything works, so that you can get the most out of your account.

What’s the difference between checking and savings accounts?

In essence it is a kind of deposit account that is associated with the help of a credit union or bank that lets you easily transfer money from one location to another. You can deposit funds from a variety of sources and then use the funds to pay bills or purchase items efficiently.

Savings and checking accounts differ because the funds are designed to be flexible. A savings account is essentially an account that allows you to keep money. Although you are able to make deposits and withdraw money in the same manner as the checking account however, a savings account is designed to increase your the amount of money you have over time.

Savings accounts typically come with beneficial features like interest rates, but they also have fees associated with certain actions such as frequent withdrawals or minimal balances. Checking accounts are also subject to fees, however they’re different and usually are the result of overdrafting or insufficient funds.

How does a checking account work?

You can manage your money through a variety of ways with a checking account. The most popular method is to use checks. Although not as popular as they were in the past however, you can still make use of checks to pay rent or to pay one particular bill each and at times.

Checks are a standard document that directs a financial institution to transfer money from your account to the individual or entity who’s name appears on it. It is then cashed or deposited by the individual or entity who’s name appears on the check.

In the past, physical checks was the only method to withdraw money from the checking account. Making a payroll check with your employer would mean receiving a check in the mail that they would send you on the day of your payday. Then, you’d visit your bank, wait in the line, and deposit your check with an ATM.

Writing Checks

Your credit union or bank will issue you an account with a checkbook that contained many checks that you could pay to anyone were owed money. The routing number of the bank as well as the number of your checking account and the check’s number are encoded on the left-hand side of the bottom of the check.

You write in the name of the recipient and the sum of the check, and sign it with your signature. Then, you must deliver the check physically or by mail. This is still a practice. However credit unions and banks offer a variety of other options to transfer funds from your bank account to the receiver. The newer methods are easier, quicker and more secure.

When opening a checking or savings account, it’s crucial to think about the way you’ll use it and assess whether the method of transfer and the associated fees are suitable for you.

How can you make deposits into your checking account?

Nowadays, taking the check from your employer and putting it in a bank account is an inefficient and unneeded method to transfer money. Banks are now offering direct deposit that electronically deposits your pay into your checking account. Instead of receiving an employee check you receive a receipt for deposit.

Many credit unions and banks require direct deposit in order to reduce monthly costs, so ensure you inquire with your employer to find out whether they provide it.

If your employer offers it, you should sign up as soon as you can. It will ensure that your payroll check is deposited swiftly and efficiently, as well as helping you avoid fees that your bank might charge.

Debit Cards

Debit cards are also known as ATM cards, have revolutionized banking. They have solved a variety of issues with traditional banking like the ability to withdraw or deposit cash even when the bank was shut. The use of debit cards helps reduce wait times and the number people needed to make physical transactions.

With a debit card, you can withdraw cash at any time from almost any location. On the other hand there are charges for ATM use to withdraw cash from ATMs outside of network. However when the ATM you’re using is from the bank with which you have an account in the bank generally, there are no charges for the process of withdrawing money.

Out-of-Network ATM Fees

If you’re making use of an ATM that isn’t affiliated to your bank, you could expect to pay between $2 and $3 or more to withdraw a few dollars. These charges can quickly mount up when you use your card often at ATMs that aren’t in your network.

Be sure to consider ATM and bank locations when you choose the account the best for you. Also, be aware that you are not able to transfer money to an ATM that is not affiliated with your bank.

If you travel frequently or regularly visit another state or region such as for college or work, it is advisable to consider an institution that serves several regions. This is particularly true in the event that you are prone to withdraw cash from your accounts frequently.

Can you use a debit card as a credit card?

They are mainly used as credit cards, in partnership with companies like Mastercard as well as Visa. These cards can be used to purchase products and services as you would with a regular credit card. The amount you spend is automatically taken out of the balance of your checking account.

Cash is not used as much in transactions these days, and banks are making it simpler and simpler for you to make purchases. Utilizing your debit card as a credit or debit card could remove the need to look for and use an ATM.

Since there are generally no charges for using debit cards It’s usually more convenient than locating an ATM to withdraw money through your bank account. Be aware that many banks have monthly and daily withdrawal limits. It’s crucial to know the limits since your debit card could be rejected in the event that you exceed the limit.

How can you use your checking account online?

Banks are making it easier for you to deposit or transfer your funds from your savings and checking account. Banking online through the bank’s website or mobile app will give you immediate access to your bank account, as well as bank statements.

When your accounts at banks are established it is easy to check the source of your funds from and where it’s going. A lot of banks let you transfer funds directly from one account to another using the email address of the recipient. In addition, you can automate payments for bills that are recurring such as phone, electric, or Internet.

Many banking apps now permit you to deposit checks by taking a photo of the reverse and front sides of the check. There is no need to physically deposit checks to transfer the money to your account. The requirement for a banking branch close to your home is becoming less less essential as these technology are becoming more widespread.

What are the various types of checking accounts?

There are a variety of kinds of checking accounts that are available, each with distinct advantages and features. Below are a few of the most popular varieties of checking accounts:

• Basic checking accounts: A basic checking account is the minimum, usually needing a minimum deposit to open the account, with no additional charges. These accounts come with basic features, like checking and debit card access and are perfect for those looking for an easy method of managing their money.
• Premium checking accounts: Premium checking accounts include additional features like more interest, less fees and debit cards that have rewards programs. These accounts usually require a higher minimum balance, or an annual maintenance fee however, they offer more advantages to those who have these conditions.
• Student checking accounts: Student checking accounts are specifically designed to students and usually have lower fees and restrictions. These accounts can waive maintenance fees monthly and provide other benefits to students, including free checks or protection against overdrafts.
• Senior checking accounts: Senior checking accounts provide seniors with exclusive advantages, such as lower minimum deposit requirements and waived fees. These accounts can also provide additional benefits like checking for free or ATM fees reimbursement.
• Interest-bearing accounts for checking: An interest-bearing checking account lets you earn interest on the balance in your account and is an excellent method to help your money pay for itself. Checking accounts with high yields generally require a higher minimum balance and could have additional requirements in order to qualify for interest.
• Business checking accounts: Business checking accounts are specifically designed for commercial use and have features specifically designed to meet the requirements of businesses. These accounts can provide cash management features such as remote deposit capture and could have higher limits on transactions.
• Rewards checking accounts: Rewards checking accounts offer cash back as well as other rewards for using the account. Some accounts provide cashback on purchases reimbursement for ATM fees and other benefits for customers who satisfy a certain number of requirements.
• Second chance checking accounts: Second chance checking accounts are open to people with a history of bank issues, like the possibility of an overdraft or a bounced cheque. They may be subject to higher fees and restrictions compared to other types of accounts, however they are a viable alternative for those who have struggled to open an account with a traditional checkbook.
• Joint checking accounts: A joint checking account is simply a type of bank account that is jointly owned by two or more individuals. Typically people who are business partners or in a couple that want to share the responsibility of the management of their money create a joint bank account. Joint accounts provide the benefit of sharing expenses and make bill-paying easier for roommates or couples.

Common Checking Account Fees

Checking account charges can quickly add up If you don’t work or live near to your bank.

If you’re someone who makes use of ATMs to withdraw cash frequently you should start an account that is connected to a large network of ATMs in the areas you frequent.

Monthly Maintenance Fees

When you hear the phrase “free checking,” it typically means a checking account with no monthly maintenance fees. Maintenance fees are imposed by the bank every month to keep your account. In the average, these charges can amount to around $160 annually, which is why having a free checking account could save you lots of money.

But, free checking accounts generally come with conditions. The most common requirements are the minimum balance, or the requirement for direct deposit. If you are able to comply with the bank’s guidelines that you don’t need to pay the monthly service cost and it could save you lots of cash in the long run.

Minimum Opening Balances

Minimum balances for opening are something to be considered. Many banks require a minimum balance to open a certain kind of account however, the amount could differ.

Basic accounts can range between $25 and $100, or even more. If your account has the minimum balance requirement of between $100 and $500 or greater, it’s possible to be charged monthly fees in the event that your account’s balance drops below the minimum requirement frequently.

Overdraft Fees

Another common fee associated in checking accounts is an overdraft charge. This happens when you use more than what you can put on your account. If your account is in negative figures, your bank will charge you an overdraft charge that could be as high as $30.

Of course, the best method to avoid this charge is to not overdraw your account initially. It may seem simple until you realize that it can take a variety of times for checks to be cleared and you could have less funds on your account than you think.

You can choose to opt out of the protection against overdrafts to avoid accumulating any charges however, it could result in being declined your credit card at the cash counter. It’s up to you choose the best option for your needs.

What’s the purpose of balancing your checkbook?

Unfortunately, financial errors are not uncommon and a few of them are the result of human error. These errors should be enough reason to keep your checkbook in balance at least once in a while. However, this is only scratching the surface. There are many more motives to balance your bank account as you’ll learn below.

1. Avert Banking Errors

The consequences of a bank error can be expensive in the long in the long run. The most important thing you do not want to do is be stung by unanticipated fees or a lack of funds due to poor record keeping.

It is possible to stay clear of these mistakes by regularly balancing your bank account. The most frequent bank errors to be on the lookout for are errors in data entry, omissions or transposition, commission duplication, entry reverse.

2. Know Your Real Balance

To avoid overdrafts, you must know your balance. But, you can only determine your actual balance when you are able to regularly balance your checking account. Additionally, this assists in avoiding overdraft fees.

3. Recognize and Report Fraudulent Activities

Fraudulent actions can cost you thousands of dollars in losses. Cybersecurity threats are becoming more common nowadays, and you run the risk of losing your hard-earned funds to criminals. According to Attila Security, the cost of cyber-attacks on the banking industry has risen to $18.3 million per year for companies.

This is a staggering amount and could be unsustainable for many businesses and individuals. Therefore, the best way to ensure that you don’t lose money due to fraud activities is to keep an eye on your account on a regular basis and reporting any suspicious transactions.

4. Helps to Save Money

The balance of your checkbook can help you save you money that will have to pay in the event of bounced checks. It usually costs between $25 to $30 per bounced check. These costs can quickly add up in the event of multiple bounced checks.

5. Keep Up with Merchants

Merchants are also humans, and are susceptible to make errors. While some mistakes can be intentional, some aren’t. It’s essential to monitor the merchant’s activities to ensure that you’re not making any losses in any manner. This is only possible if you regularly balance your checkbook.

6. Budget Control and Cashflow Management

Keeping track of the activity of your account goes far in aiding you in planning your budget and control the flow of cash. It’s impossible to budget if you don’t know what’s going on in your account. It’s a good thing that balancing your checking account keeps you informed of your balance and spending, so that you’re not surprised.

How to open a checking Account

Opening checking accounts is a simple process. However, some find it a bit daunting. To open an account with a bank within the U.S., you need to be at minimum 18 years old, and be a U.S. citizen or legal resident. You can also create an account by going online or at a branch. If you’re looking for a way to do it, here’s an easy-to-follow guide.

Step 1: Collect Personal Information

Take all the relevant information in hand prior to beginning the process. Make sure you have a government-issued ID. This could be a photocopy of your driver’s licence or State ID passport. Certain banks might also require additional proof of identity such as an Social Security number, proof of address, contact details or birth certificate.

Step 2: Make the the First Deposit (If It’s applicable)

It is recommended to have your first deposit in place to activate the account after it’s been approved. But, be aware that this isn’t a requirement for all banks. However, the minimum deposit is usually approximately $25.

Step 3: Fill Out and Submit Application Form

Complete the application on the internet or in person. You can choose the one that is most suitable for you. Be sure to sign the form to authorize the checking account.

Step 4: Fund the Account to Activate (If the Account is applicable)

Finally, you must fund your checking account with your first deposit, if it is applicable. Be aware that some banks have flexibility and don’t require you to make a deposit of any amount to activate your new account. You can fund your account using wire transfer or electronic transfer. Cash or checks in cash can also be used.

How to Close a Checking Account

Closing a bank account is an easy task. But, you might make mistakes that will cost you, like unexpected charges for overdrafts and associated charges. It’s why it’s essential to follow the correct procedure from the beginning. Here are the steps that you need to take to close your account on your bank.

Step 1: Open a new checking account

It’s an excellent idea to start a new checking accounts before closing the one you have. This is because you’ll require a new account in order to transfer any funds from your previous checking account. Follow these steps to open a new bank account If you’re not sure how to open it.

Step 2: Stop Using the Current Checking Account

The next step is to stop using your current account and allow any charges to be paid. Based on the current bills you could keep this up for a month, or whatever length is needed. Remember to stop any automatic payments that are running on your current account.

Step 3. Transfer Balance to New Checking Account

Then, you must transfer money from your existing checking account to the new account prior to ending the account for good. However, before you do this, be aware of the transfer limit and any charges that are pending in order to stay clear of overdrafts. After that, you can end the account sending an email to the bank, or by visiting the bank in person.

Step 4: Get Rid of Old Checkbooks and Debit Cards

Also, take out old debit and checkbooks to ensure that they don’t end up in the wrong hands. If this happens they could be used to carry out fraudulent transactions.

Step 5: File Old Records for Future Reference

An accurate filing will help you avoid stress in the future. in the future. This is because you could discover fraudulent activity on your old account. So, you’ll need to keep a copy of the confirmation letter for closing your account to show that you no longer have the account.

How to Find Your Checking Account Number

The number on your checking account typically consists of 10-12 digits long. There are a variety of places where you can look for it:

1. Below the bottom of your check
2. Your monthly statements
3. Your bank’s website or mobile App
4. By contacting Your Bank

How to Select a Checking Account

The best checking account suitable for you typically boils down to convenience versus cost.

Before you make your decision, create an outline of your priorities. You’ll be able to select the right bank and the correct checking account if you know the process by which your money flows into and out.

If you are employed in a restaurant where the majority of your revenue comes from tips, you can consider an institution that has 24 hour ATMs that allow you to make cash deposits.

The majority of checking accounts are covered by the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA). The FDIC and NCUA both offer the standard amount of $250,000 in insurance per account for each institution or credit union. The insurance protects depositors at banks from losses if the credit union or bank fails.

If you’re a non-state college student, you might be able to start your search with banks that serve several states. Whatever your needs, there’s sure to be a bank account available to you. Do your research and find the one that is best suited to your needs.

How much can I overdraft my checking account?

The limit for overdrafts varies from one bank to the next. However, the standard limit is between $100 to $1,000. You can also overdraw your checking account with a check electronic transfer, cash withdrawals at ATM.

How old do you have to be to open a checking account?

Banks require anyone who opens accounts with a bank to show a valid photo ID issued by the government. This means you must be at minimum 18 years old to open an account with a bank. However, you may still co-owner one with an adult if you choose to open an account in conjunction with your legal guardian or parent.