Choosing where to store your money is a critical aspect of money management. While you may keep your cash beneath your mattress, an FDIC-insured bank checking account is a far better option. It’s normal to have concerns about opening a checking account if you’ve never done it before. However, when it comes to making purchases and paying payments, checking accounts are a great option and there are always best checking account offers that help you choose the right one for you.
What is a Checking Account?
Any brick-and-mortar bank, any internet bank, or any credit union may offer you a checking account as a deposit account. Depositing money into a checking account
gives you access to it when you need it to make purchases or pay bills. Transactional accounts are another name for these accounts.
Savings accounts are intended to store money for the long term, while checking accounts are meant to be used on a daily basis. Keep just what you need to meet your short-term expenditures in your bank account.
How Do Checking Accounts Work?
Checking accounts are so named because they typically allow you to create paper checks. It is a kind of financial instrument that allows you to send money from one person or organization to another.
If you have borrowed money from your friend, you may pay it back by writing a check to your buddy. Alternatively, if you owe money on your energy account, you may send a check to the provider. Whenever you make a check payable to someone or some company, it is deposited into their checking account. As a result, the money from your account is deducted and sent to their bank account.
However, using a checking account to make purchases isn’t limited to writing checks. Moving money into or out of your checking account may be accomplished in a number of ways, including the following:
- Debit cards: To make purchases in shops or online, you may use a debit card with a Visa or MasterCard logo. You can also make deposits and withdrawals at ATMs with this card.
- ATM cards: When using ATM cards, you may deposit money or take money from an ATM, but you cannot use them for purchases.
- Wire transfers: Large amounts of money may be deposited or withdrawn from other bank accounts in the United States and abroad via wire transfers.
- ACH transfers: Allows you to plan deposits and withdrawals from and into your checking account, including payments for bills.
Direct deposit and mobile deposit are both options available with certain checking accounts. You may have money deposited into your account on a regular basis by setting up direct deposit. You might, for example, choose to have your government benefits and wages transferred directly into your account, eliminating the need for a physical check.
Mobile check deposit lets you deposit a paper check by snapping a picture of it and sending it to your bank. By eliminating the need to go to a branch or ATM, this service saves you time. Cash deposits into your bank account would still need a trip to a branch or an ATM.
Different Types of Checking Accounts
There are many kinds of checking accounts to select from, depending on where you want to bank. Whether you decide on a free checking account New York, or a rewards checking account somewhere else, it’s important to do research before making any final decisions. Some of the most popular checking account types and how they operate are described here.
Standard or Traditional Checking
With a standard or traditional checking account, you can pay your bills, write checks, and use your debit card to buy things. You may be required to have a specific amount in this account on a daily or monthly basis to avoid incurring a maintenance charge. To establish a standard checking account, you may also have to make a small deposit.
In most cases, standard checking doesn’t include any extraneous features. When it comes to money management, the most important features are the ability to write limitless checks, use a debit card, and have online and mobile banking available.
Interest Checking
Standard checking accounts and interest-bearing checking accounts are essentially identical. The only difference is that with an interest checking account you earn interest on your balance.
Interest-bearing checking accounts do not have a higher opening balance requirement. The interest rate you receive at certain institutions may change based on the account amount you maintain. Checking accounts at many credit unions provide attractive interest rates.
With this kind of account, the interest rate you’ll receive will be lower than a traditional savings account or certificate of deposit. You may still make checks and pay your expenses as your money grows in one of these accounts.
Please take note of the terms “high yield” and “rewards” checking accounts, which have a second connotation, when referring to interest-bearing checking accounts.
Rewards Checking
You may receive rewards when you spend money from a rewards checking account even if it does not pay interest. When you make purchases, pay bills, or schedule automatic transfers into your account, you may receive points or a certain amount of cash back, similar to a rewards credit card.
Compared to regular checking accounts and those that pay interest, they are less popular. It will pay you to shop around, however, rewards rates will vary.
In most cases, the method through which you redeem your incentives is dictated by your bank. If you use your debit card to make purchases and get cash back, your cash rewards may be transferred directly into your checking or a linked savings account without you having to do anything. You may be able to exchange your earned points for goods, gift cards, cash back, or vacation if you’re collecting them.
Student and Teen Checking
As the name implies, student checking accounts cater to students who have never used a checking account before. Minimum and maximum age restrictions are common with these accounts. Examples of teen checking accounts are for 13 to 17-year-olds and student accounts are for 17 to 24-year-olds.
With student or teen checking accounts, the greatest benefit is that there are usually free or very low fees. Alternatively, if a monthly fee is charged, there are easy methods to prevent it, such as setting up a monthly direct transfer or keeping a low minimum balance.
Senior Checking
In the same way that student or teen checking accounts have age restrictions, senior checking accounts are tailored to elder banking customers. To open one of these accounts, you may be required to be 55 years old or older.
Individualized debit cards, fee exemptions and better interest rates on savings accounts are just a few of the advantages that come with senior checking. Additional benefits may include interest or quarterly dividends, which are paid by a few senior checking accounts.
Second Chance Checking
Checking accounts for individuals who have previously struggled with maintaining a checking account are known as “second chance” accounts. This kind of account is ideal for those who have a check smudge on their ChexSystems credit report. Bank activity data, such as unpaid fees or bounced checks, is collected by ChexSystems.
If you aren’t accepted for a regular bank account, these checking accounts may help you get back into the habit of using checks. They usually have higher fees than standard checking accounts, but you’ll have access to all the same services, including the ability to write checks and use a debit card. A second chance account, if used properly, may help you become eligible for a regular account in the future.
Checkless Checking
This is another alternative in the list of the checking accounts. You can’t write checks with these accounts, as the name implies. Instead, you use a debit card, mobile banking, or the internet to make purchases.
If you seldom write checks or have a large amount in your checking account, this may be a good option for you.
Choosing a Checking Account
If you’re on the lookout for a checking account for the first time, or just your next one, you need to pay heed to a few things.
To begin, choose between a credit union or brick-and-mortar bank and an internet bank for your new checking account. Banks with brick-and-mortar locations are convenient for customers who have to visit the branch, while internet banks may offer lower fees for checking accounts. As a result, you must choose between convenience and expense.
Check out a bank’s fee schedule to see precisely how much you’ll be charged for a checking account, because fees may add up quickly! This involves doing research to find the following charges:
- Account inactivity fees
- Minimum balance fees
- ATM fees and surcharges
- Monthly maintenance fees
- Overdraft protection fees
- Non-sufficient funds fees
- Overdraft fees
- Wire transfer fees
There are ways to avoid paying these fees if they are charged by your bank or credit union. Maintaining a specific balance in your account at all times, for example, may help you avoid such charges.
Think about the best checking account offers, the features and advantages you value most when choosing a checking account. Things like mobile and online banking, earning points for purchases, a large ATM network, or the opportunity to earn some interest on your balance are examples of the possible features.
Finally, choosing the optimum combination of features, access, and pricing for your specific banking requirements is key when selecting a checking account.
Also Read: Key Tips to Keep Your Finances in Check
