A checking account is a deposit account that allows you to make regular deposits and withdrawals. It is a highly useful bank account to have if you make regular payments. There are different types of checking accounts available, each with their own features and associated fees.
Choosing the right account
Most banks offer several options for checking accounts and you should pick the right one depending on your needs. The following 3 features are the most important for you to consider when choosing an account.
- Number of cheques/debit transactions allowed per month
Many banks set limits for these each month and also limit the number of bills you can pay each month from the account. Depending on your spending patterns, you should pick an account that allows you enough leeway. - Minimum balance requirements
This is another important factor you need to consider based on your spending pattern as you could end up owing your bank money if your balance dips below the minimum. - Monthly service/overdraft charges
Many banks charge for the transaction or deposit services while overdraft charges can easily escalate unless you are careful. Some banks also charge for any automatic monthly payments that you set up. Keep all of these in mind when choosing a checking account and opt for a fee-free account if you are not comfortable with paying much in fees.
Opening your checking account
Once you have chosen the right checking account, you can open it at the bank’s branch office or online. You will need to submit your social security number and a valid ID. The bank will also run a check on your credit history to establish your credit-worthiness before allowing you to open an account. In addition, if you are a minor (below 18 years of age), you will need a co-signer in order to be given a checking account.
How to use your account wisely
Once your checking account has been set up, maintaining a running balance will help you keep track of how much money is there in the account. It is important to personally track your expenses through budgeting tools as the amount reflected in your ATM-generated bank statement may not be the most recent one. By balancing your account at the end of each month, you can spot any unauthorized transactions or faulty deposits and get them rectified.
It is critical to understand the kind of overdraft protection your bank offers even if you are not in the habit of overdrawing. Some banks draw a line of credit that will transfer money into your account if you are overdrawn, while others will allow you to link your checking account to a second account that will transfer funds to you. It is important to choose the best option after assessing your spending habits. Bear in mind that each overdraft option will come with its own fees, so pick the option that you can afford.
