Here’s What You Should Know About Checking Accounts And How They Work

A checking account is a kind of bank account, which will let you write checks using the money that you deposited. Nowadays, people with this account use debit cards and ATMs instead of writing checks. Checking accounts are used for frequent yet small expenses and receive direct deposits if needed. Typically, this is one of the first accounts that a person opens when entering the world of finances.

What Is A Checking Account

Checking account is somewhat similar to other types of accounts, but the difference is that you will be able to write checks using this account. The modern ones can also add debit cards which you can use to swipe or withdraw money. There are still banks that will give you printed checks, but the use of this is declining steadily.

Why Choose A Checking Account

Choosing a checking account is better than a savings account because of its accessibility. The reason behind this is because checking accounts are linked with your debit cards which you can easily and freely access. That is why a lot of people opt for a checking account when it comes to daily use.

When it comes to the rates, checking accounts can be as low as 0.01% or as high as 1.05% for online banking. You may want to check investment accounts and savings accounts for a higher interest rate.

Features Of A Checking Account

1.Send money with wire and ACH transfers
2.Direct deposits from benefit plan or your employer
3.One free personal check
4.Debit card so you can purchase from merchants and do ATM withdrawals

Having a checking account can help your finances everyday by automating payments and deposits. Your employer can even arrange a direct deposit in your checking account. In this way, you will be able to receive your paycheck as soon as possible. It will also be easier for you to transfer funds to other people if needed using your checking account.

There are also banks that may offer cash incentives or perks, including gift cards when you open a checking account. These things may be great features, but you need to make sure that there are no strings attached.

Earned Interest

There are checking accounts that can help you earn interest based on the balance that you maintain. Typically, the rate will start at 0.01%, which is definitely lower compared with financial products, like investment or savings accounts. But the rate can go up to 1.00% per year. So if you want to get higher interest, you also need to get a high maintaining balance.

Withdrawal And Spending Limits

All checking accounts have daily limits on the total amount that your debit card can be charged. Typically, the limit may be as low as $1,000 and as high as $3,000. But for withdrawal from the ATM, it can be $500 every 24 hours. When it comes to writing checks, there is usually no limit on this. If you plan on making a huge purchase, getting a credit card will be more ideal.

Monthly Fees

There are also checking accounts that will require monthly fees or also known as a maintenance fee. If your balance meets that monthly or the daily minimum average, then the fee may be waived. There are also some banks that waive the fee when an account received a certain amount from a direct deposit. If a checking account has higher interest fees and more service options, then there will be higher minimums and fees.

Types Of Checking Accounts

Standard Checking Account – Ideal for clients who want a reliable service. The client can withdraw from different ATMs and can also do some online banking.

Online Checking Account – Ideal for clients who don’t need bank services in person. Offers higher interest rates and lower fees.

Business Checking Account – Ideal for clients who own businesses. The account has tools for tracking expenses and has a higher withdrawal and spending limits.

Premium Checking Account – Ideal for clients who receive huge amount in deposits. Interest earned for every deposit and has bank services.

Student Checking Account – Ideal for college and high school students. There are no or low monthly fees and a good account to start with.

Senior Checking Account – Ideal for qualifying seniors. Monthly fees are waived and there are no fees for money orders.

Second-Chance Checking Account – Ideal for clients with bad banking histories. It is ideal for rebuilding credit and has low opening deposits.

Credit Unions And Checking Accounts

Credit unions are a great alternative to traditional banking, wherein you can get a share with the organization. Just like a typical bank, Credit unions also provide different bank services but provides lower and fewer fees compared to a standard bank.

You can open a checking account in Credit unions, but they are strict with their membership, as they base it on trade or region. So before going to that Credit union that you’re checking, it would be best to research about it to know the requirements and such.

Conclusion

These are the information that you need to know before you open a checking account. If you are looking for convenience and accessibility, checking accounts are great options for you.

Based on Materials from: Value Penguin
Photo Sources: Bankfirst, Pixabay, Flickr, Gobanking

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