A checking account is a sort of bank account that allows you to put money in the bank and withdraw money for daily bits of business by using your chequebook and debit card.
How do they work?
Money is deposited in the account with the help of a deposit slip. You can pay for the transaction by writing a cheque, using an ATM or a debit card.
Checking accounts are one of the most liquid bank accounts, which means you have easy access to your money. The main purpose of checking accounts is to hold your money for a time so you can use it when you need to pay for your expenses.
Banks offer multiple types of checking accounts. A checking account can be a commercial or business account, a students account, a joint account with many other types with similar features. (1)
Types of Checking account:
- Basic checking account: For a person who uses a cheque only to clear utility or daily payment and to keep away from extra charges, it is suitable for everyday banking.
- Interest-bearing account: For someone who wants to earn interest on money in their account. Interest in your account is generally paid on monthly basis. A small amount of money is generally needed for opening an interest-bearing account. It also enables unlimited cheque writing and usually offers a lower interest rate.
- Joint checking account: This account is for 2 or more persons from the same family. All owners have equal access to money. Most couples use this type of banking for paying bills and managing their household expenses.
- No-fee checking account: No-fee checking account does not charge any fees. It also allows you to check your money without any fees, which is good if you are starting with a small balance to make a large-sized take-out at the end.
A no-fee checking account also gives you other benefits, some of which are given below.
- More money for your goals: No-fee checking accounts help you achieve your financial goals.
- Flexibility: A no-fee checking account allows you to do banking on your conditions. If you are just starting, a no-fee checking account without any opening fee means you can make adjustments to your money.
- Regular checking account: In a regular checking account, there are no monthly charges but only if the amount of money is maintained at a certain level. No interests are offered on such accounts or money put in such accounts.
- Special checking account: A special checking account is like a basic account that offers no interest. A special checking account charges a certain fee monthly and also charges a fee on each transaction, however, allows only a limited number of transactions in a month. (1,2)
Opening a checking account:
Most of the applications are completed on a computer. Customers also have to give brief details with the handwritten application so it can be entered into the computer for a new account.
Customers must have identification like a picture, address, contact number, email, and social security code. If the customer is ready to open their account they have to accept all the terms and conditions of the bank by signing the application.
To prevent fraud, the banks use signatures for each transaction made via the account. Customers also have to choose an ATM card or debit card once their accounts are ready to be processed. New customers might have to wait 5 to 10 days for their chequebook.
Promotions on a new checking account
Different banks give many bonuses and promotions on opening a new account with them.
Online services for checking accounts:
Customers can use an online checking account on a computer or a smartphone, they can check their balance, pay bills and also transfer money without physical appearance.
You can also deposit a cheque or cash online without going to the bank. Smartphone apps help to deposit a cheque by clicking the pictures of both sides of a cheque.
Checking account interest rate:
Different banks offer different amounts of interest rates on their checking account. The average bank interest rate for a checking account in the U.S is 0.03%, and the average money market interest rate is 0.09%.
However, checking accounts are not interest-bearing accounts because they are for short-term cash that you will spend soon. Therefore, don’t get your hopes too high.
Checking account pros and cons:
Pros:
- Easy access to your money via cheque or ATM/debit card.
- Limited withdrawals of your account balance.
- Also available for students.
Cons:
- No interest applied.
- Charge more fees than saving accounts, though some accounts let you reduce or eliminate bank fees by meeting account activity requirements.
- Less secure since cheques and cards can be subjected to compromise.
- Easy to overdraw money from your account if you lose track of your purchase.
Why do people use checking accounts:
- Reduces the need to carry a large amount of cash. Money in your bank account is safe from any type of theft and loss.
- It is much easier to pay bills such as student loans, car loans, credit cards, auto insurances, and mortgages.
- Direct deposit in your account. Having direct deposit access allows your money to be safely deposited in your checking account.
- Using a checking account gives you a record of any purchases you made. You can review your spendings.
- A checking account gives easy access to your money.
- If you have access to a smartphone, computer, or tablet, you can manage all your financial tasks by using online banking.
- Many checking accounts now also offer money rewards when you open a new account. (3)
Checking account safety:
Regularly check your account, so it will help you know if anything is wrong. Use a strong pin code and never give your pin code to anyone. Check your credit card records. Do not access your account from a sharing computer.
If you want to buy online then only use secure sites. Never save your debit card info on any website.
