A checking account is a bank account that allows customers to deposit and withdraw money. Customers can make withdrawals or deposits using debit cards or paper checks.
Why Do I Need a Checking Account?
It’s as simple as having a place to put all the money you earn. Checking accounts, plainly speaking, are bank accounts for depositing and spending your money. They are used for daily cash deposits and withdrawals, both physical and digital transfers.
With checking accounts, you can do several things. You can get your employer to deposit directly into your checking account on payday—this is called direct deposit. Not only is this convenient, it cuts out a trip to your mailbox and saves some paper along the way, it’s also a very secure way to obtain your hard-earned money.
You can also link to various money transferring apps with a checking account, making things like splitting the bill and paying someone for a service much easier and more accessible. Essentially, checking accounts are a vital first step in managing your money and creating ease of use in many types of financial duties.
Is There a Difference Between a Checking Account and a Savings Account?
When you approach a bank teller to open an account, they’ll likely ask you, “checking or savings?” This is where you get a chance to ask questions about the differences between the two. Many people find it helpful to open both accounts at the same time. Others will start with one, then return to create another when their money has been managed appropriately. You may think that they’re, in a way, not only very similar but the same in principle. In essence, they have many differences, where their initial use (to hold your funds) remains the same.
One thing that sets a checking account apart is using the card that comes with it—a debit card. Usually, checking accounts are offered to the account holder in addition to personal checks when opening the account. The debit card will be used to obtain cash from ATMs and swipes for payment wherever the card is being used.
With your debit card, you can also access an ATM to check your account’s remaining usable balance. In a similar vein, the checks provided for you upon opening the account—though used much less frequently nowadays—can be used for payment. All payment that goes through both debit cards and personal checks originate from the checking account.
Are There Any Fees With a Checking Account?
Like many things in life, there is usually a price. There are specific fees involved in checking accounts, but usually, these are to keep the account open. A couple of fees to keep in mind when searching for an appropriate bank to open your checking account with are monthly maintenance fees and overdraft fees.
As previously stated, monthly maintenance fees are fees charged to the account holder for keeping the account open. Many large banks can have maintenance fees up to $15-$20 per month. It’s essential to look at the terms of your checking account when you are in the process of opening it to see what kind of monthly maintenance fees it has.
It may also be different with a smaller bank or credit union. There are situations where banks may waive your maintenance fee should you meet your account requirements of maintaining a minimum balance or getting a direct deposit set up with your employer.
An overdraft fee is a charge that is sent to an account holder when money is overdrawn. When you have a certain amount in your account, and a purchase is made that exceeds that amount, this fee is likely to be charged. Many banks can charge up to $35 for overdraft fees and are likely to continue charging you should you fail to restore funds into the account.
Things To Consider When Opening a Checking Account
In addition to fees, there are a few more things to consider when opening a checking account.
When speaking to your bank representative, be sure to ask about low fees or non-existent fees with low or no minimum balance policies. In addition, it is wise to inquire about the ATM network and how expansive it is—is cash easy to access? Similarly, how does the card travel? Is the bank able to provide you with security for abroad or cross-country travel, and are there any charges or fees for using your funds outside of the country?
Another item to consider is sign-up bonuses. Many banks have promotions upon sign-up that involve a certain amount of money going into your account upon opening or starting your direct deposit on the day of sign-up. This can be a factor in deciding between two or three banks. Lastly, keep an eye on interest rates for your account, and be sure to ask for details when you speak to a representative.