Managing a Checking Account
What is a Checking Account?
Having a checking account at a bank or other financial institution allows you to write checks to pay for goods and services or to get cash. A check is a written order instructing your bank to pay money to someone or an entity. In this day and age, most banks offer on-line banking services which allow you to give an electronic order to pay for something rather than writing a paper check.
To use checks or on-line banking and bill pay services, you need to open a checking account and make regular deposits into that account. Banks offer several different types of checking accounts. Here are some of the most common checking options:
A basic checking account is for someone who primarily wants to use checks to pay bills or everyday expenses. To avoid fees, some banks require a low minimum balance.
An interest bearing account requires a higher balance and interest is usually paid monthly. A minimum deposit is usually required to open this type of account.
A joint checking account is for two or more people who are usually in the same household.
Visit banks to learn more about the types of checking accounts they offer and decide which one best fits your needs or the needs of your household. Compare services at different banks before opening a checking account and decide which account best meets your needs. Many local banks offer special checking accounts for college students.
Automated Teller Machine and ATM Card
An ATM card looks like a credit card. Because it is linked to your bank account(s), you can use it to get cash, deposit funds, and check account balances at an ATM (Automated Teller Machine.) ATMs are convenient because they are available 24 hours a day at different locations.
A debit card combines the functions of an ATM card and a check. It can be used like a check. Most banks issue a combination ATM/debit card. Often your ATM/debit card may also be used like a credit card at stores and restaurants but the money comes immediately out of your checking account.
To use an ATM or a debit card, you need a PIN (Personal Identification Number). A bank or financial institution issues this four-digit number to you to protect against anyone else using your card. However, when you use the card as a credit card, you will not need to use a PIN. Many banks recommend that you use your card as a credit card whenever you can; as such transactions are protected by federal law. You will then have limited liability if your credit card number is stolen or lost and someone else charges things with your card.
You must have a login and password to access online banking services. There may be other security measures like special questions to answer. Always safeguard information like a PIN or a password. Thieves are always on the lookout for ways to steal your personal information so that they can get access to your accounts.
What are the Advantages of On-line Banking?
On-line banking has many advantages, the most obvious one being that you have access to information about your accounts 24 hours a day. You don't have to wait for a monthly statement to balance your account, see if there are errors in your account, or check if deposits have been made. Your on-line account may also give you access to information about other accounts you have at that bank, like a car loan, a home loan, or a credit card.
On-line banking services usually also include bill paying services. You enter information into a bill payee screen like XYZ Water Company, Account # 1234, 5678 Water Drive, Hammond, LA. Then each month when you have to pay your water bill, you simply type in the amount to be paid and the date it is to be paid. The bank electronically transfers the money instead of your having to write a check. It saves time, effort and money (you don't have to pay for stamps and envelopes), and at most banks it's a free service.
Another big advantage of on-line banking is the control it gives you over your money. You can make sure that your bills are always paid on time, thus you will not incur late fees. You can also transfer money between accounts. So if you need to put $200 into your checking account from your savings account, you can do it from your computer and never have to go to the bank. Many employers will now electronically deposit your pay into a checking or savings account and you can access that money right away through on-line banking. Some banks will also provide you with overdraft protection for your checking account through an existing savings account or a small line of credit for which you pay a small fee. That kind of protection can prevent you from accidentally overdrawing your account and then having to pay returned check fees.
Keeping Track of Your Account
As you write checks, use your ATM/debit/credit card, or make deposits, keep track of the amount of money remaining in your account. Your bank or financial institution will send you a monthly statement or list of the various withdrawals and deposits made on your account. If you have an ATM card, you can also access this type of information at an ATM. You can also access your account status at any time if you bank on-line.
To keep a current record of your checking account, use your check register. This tool usually comes with your checkbook.
Compare the paper statement or your on-line statement with your check register. Balance or reconcile your account by figuring out the amount of money you deposited, the amount you spent, and the amount you have left. Basic accounting software such as Microsoft Money or Quicken can also help you balance your checkbook.
Avoid Writing Bad Checks
Don't write checks if you don't have enough money in your account because the consequences can be damaging:
Your bank and the business you wrote the check to may each charge you a fee of about $25 or more.
You may be placed on a bad check list and businesses may refuse to accept your checks.
Your bank may close your account and other banks may be alerted.
You could face criminal charges if authorities can prove criminal intent.