A checking account is a type of bank account which allows you to write checks using the money you deposit. Most people with checking accounts use debit cards far more often than they write checks. Checking accounts are also commonly used to receive direct deposits. As a result, checking accounts play a larger role in daily life than any other financial product. For most consumers, checking accounts are the first point of engagement with the world of personal finance.
Using a Checking Account
A checking account has several uses. You can access the money in it by writing a check, scheduling a transfer and using a debit card either to pay for a purchase or to withdraw cash from an Automatic Teller Machine (ATM). Transactions like these, that remove money from your checking account, are debit transactions.
Money can also be deposited into your checking account. You can deposit a check or cash and receive direct deposits from entities like your place of employment or the IRS in the form of your tax refund. These transactions are known as credit transactions.
Choosing the Right Bank for Your Checking Account
You are no longer limited to the banks local to you. If you can’t find a nearby bank with a checking account that fits your needs, you can shop around for an online bank.
Local banks can offer more customer service options since you can walk into a branch and speak to a teller or accounts manager. But local banks often charge more fees to cover the costs of having a physical location and paying for enough employees to staff the bank.
Online banks often have better interest rates on checking accounts and fewer fees as they have no branch locations and fewer employees. While customer service is available 24/7, all support is handled via phone and sometimes live chats. It can also be a hassle to make deposits, especially cash deposits with an online bank.
Do you plan to use your debit card to withdraw cash a lot? Often, if you don’t use one of your bank’s ATMs, you’ll be charged a fee. Either find a local bank that has a lot of locations or choose an online bank that doesn’t charge an ATM fee since they may not have ATM machines of their own.
Choosing the Right Checking Account
Once you choose your bank, you will need to choose a checking account since most banks offer at least a few different choices. To make the best choice for you, think about how you’ll be using your checking account.
Do you plan to keep a minimum amount of money in your checking account? Some banks require customers to keep a minimum amount of money in their account at all times in order to avoid the minimum balance fee.
Do you write a lot of checks? Some banks charge for checks and some checking accounts only allow a set number of checks to be written against the account per month. Some accounts limit the amount of bill payment transactions per month. Go over the limit, and you’ll be charged a fee. Checking accounts often come with a monthly service fee and overdraft fees if you overdraw your account.
We know it seems like banks nickel and dime you for every little thing but there are many totally free checking accounts available and if there are fees, you can often avoid them by doing things like having your paycheck direct deposited into your account or paying at least one bill from your checking account each month.
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How to Open a Checking Account
You will either open your checking account in person or online. Even if you choose a traditional bank, you may have the option to open your account online. If you’re opening your account in person, tell a bank employee you’d like to open a checking account and they’ll give you the proper forms.
If you’re opening your account online, you’ll see a link that reads “Open an Account” or “Apply Now.” Either way, you’ll provide the details of your government-issued identification such as a driver’s license, state ID, or Passport and Social Security Number. You might need to provide proof of address which you can do with a utility bill.
The bank may run a credit check before approving your account. If you’re turned down, you can try with a second chance bank.
Once approved, you’ll receive your debit card and create a PIN (personal identification number used to make ATM withdraws and other debit card transactions). If you applied online, your debit card will arrive in the mail within a few business days. You can either call or go to an ATM to create and activate a PIN.
You can fund your new account by making a transfer from an existing bank account. If you don’t have one, you can use cash if you’re opening the account in person or you may be able to mail a money order to fund the account.
The Best Bank For You
The amount of choice you have among banks and their different checking accounts can seem overwhelming but if you know what your banking needs are, you can easily find the best bank for you.
And it’s worth it. The right checking account with the right bank can make your financial life much easier.