A checking account is more than just a safe way to store your funds: It’s a gateway to efficient financial management. This guide offers a comprehensive look at checking accounts, what they can offer, the types available, and things to be cautious about – as well as how to choose and open one that’s right for you.
Why Should I Open a Checking Account?
Checking accounts offer a reliable and secure way to store, access, and manage your money. They also give you access to features that enhance your experience, like the ability to automate or schedule bill payments, send and receive money using your phone or other device, track your spending, and more.
While accounts may vary by financial institution, the below features are typically offered with checking accounts.
Convenience:
- Fast, easy access to your funds as needed
- Multiple branches and ATM locations throughout the community
- Electronic bill pay options that save time and help you avoid late payments
- Direct deposit that allows your salary to go straight into your account
- Automatic transfers between accounts to make functions like saving effortless
Security:
- Enhanced fraud and theft protection
- Alerts to notify you of suspicious account activity
- FDIC insurance of up to $250,000 per deposit and depositor
- Convenient account statements and transaction histories online or on a mobile device
Flexibility:
- In-person, online, and mobile banking options so you can bank your way
- Digital banking services so you aren’t limited by location or time
- Numerous payment options such as paper checks, debit cards, or a digital wallet or mobile payment application/platform
Are There Different Types of Checking Accounts?
Many types of checking accounts exist, and they vary by financial institution. Each type is designed to cater to different financial needs.
- Personal checking: This is a catch-all term for checking accounts designed for personal banking.
- Business checking: This term refers to checking accounts designed for business banking.
- Youth checking: This kind of checking account is exclusively for minors and can help impart financial literacy early on. A parent or legal guardian will need to co-sign for the account and might need to meet qualification requirements.
- Joint checking: This account type can be opened by two or more people. All account holders are equally responsible for the account, including the payment of overdraft or penalty fees.
- Senior checking: This type of checking account targets individuals aged 55 or older and typically offers unique benefits, such as free checks and reduced or waived fees.
- Other checking: Other personal checking account types include online, second chance, interest-bearing (typically for very high balances), and rewards accounts. Each type has its own stipulations and conditions, which may also vary by financial institution.
How Do I Open a Checking Account?
Checking accounts can typically be opened online or in person with a few simple steps:
- Gather essential information. Streamline your experience by having your ID, Social Security number, proof of address, employment information, and contact information ready before you begin the application.
- Complete the application. Fill out the form provided to you with the requested information.
- Make your first deposit. It’s not uncommon for checking accounts to require a minimum deposit at opening, which can range from $5 to $100 or more, depending on the institution and account type. If the checking account you want to open has this requirement, your first deposit must be above that threshold. Deposits can typically be made with cash, check, or electronic transfer.
What Should I Do to Set Up My New Checking Account?
Maximize the potential and convenience your checking account offers by setting up key features and customizing it to meet your needs.
- Sign up for eStatements. Opt for paperless banking to reduce waste, benefit the environment, and potentially save money if the financial institution charges a paper statement fee.
- Arrange direct deposits and transfers. Speak to your employer to have your pay automatically deposited into your checking account. You can also set up automatic transfers, such as moving a portion of your checking account balance to a savings account each month.
- Simplify bill payments. Use AutoPay and bill pay functions to have payments automatically withdrawn from your account each month, avoiding late payments and fees. You can also link your checking account to online and mobile payment platforms.
- Secure your funds. Help detect and prevent fraud and theft attempts by turning on email and text alerts about suspicious activity. Some checking accounts allow you to set purchase limits and get notified if a transaction exceeds that limit.
- Ensure a smooth transition. If you’re switching to a new checking account from another financial account, make sure your old account has enough funds in it to cover your expenses until you update all automatic bill payments and withdrawals with your new account information. Once your new account and bill pay are set up, you can close your old account.
What Are the Pros and Cons of Debit Cards?
Many checking accounts come with a free debit card, which allows you to make transactions from your bank account with just a swipe, insert, or tap.
Advantages:
- Make purchases whenever you need, without the risk of carrying cash.
- Enjoy enhanced security with advanced technology like chips and PINs.
- Earn rewards like cashback, points, or miles when you use your card, if offered by your checking account.
Disadvantages:
- A card makes it easy to lose track and overspend, and overdrafts may result in fees or penalties.
- Using a debit card for purchases won’t help you build credit unless you enroll in specific programs.
- Debit cards don’t offer the same purchase protections as credit cards, like refunds for damaged or faulty products purchased with the card.
What Alerts Can I Receive With a Checking Account?
Checking accounts typically have alerts for certain account activity. Alerts may be optional or automatic and may be sent by phone, email, text message, or a push notification on your mobile device.
- Low balance: Get notified when your account balance falls below a specified limit.
- High balance: Receive an optional alert to remind you to move funds to a savings or investment account when your balance goes above a specified limit.
- Single transaction: Set a monetary limit for transactions, such as $50, and get alerted if any transaction exceeds that limit.
- Large transaction: Stay on top of your finances with an alert triggered by a significant transaction, such as one over $500.
- Large ATM withdrawal: Similar to large transaction alerts, this alert helps detect fraudulent actions by notifying you of ATM withdrawals that exceed a specific limit.
- Others: Customize your protection by enabling alerts for each debit card transaction, foreign transactions, direct deposits, upcoming scheduled payments, and changes to your profile or contact information.
What Fees Should I Be Aware of?
Thoroughly review the terms of the checking account you want to open so you’re aware of any fees or charges that may occur, including:
- Monthly maintenance. Typically a small charge, this fee is charged to help cover operational costs associated with maintaining the account. This fee may be waived if you establish direct deposit, maintain a specified minimum balance, make a certain number of transactions each month, or enroll in eStatements.
- ATM withdrawals. These fees are commonly charged when you use an ATM that isn’t within your financial institution’s network. Some institutions will refund these fees.
- Overdrafts. If you spend more than the amount in your checking account, you may have to pay an overdraft fee.
- Insufficient funds. If you aren’t enrolled in overdraft protection, charges that exceed your balance may be declined or returned unpaid, which may lead to additional fees.
- Others. Some accounts or financial institutions may charge fees for services like ordering checks, conducting wire transfers, sending paper statements, account inactivity, and early account closure.
Check Into Convenient Banking A checking account, with its secure deposits and advanced features, is indispensable for modern financial management. Besides safeguarding your money, it simplifies transactions, offers numerous benefits, and links you with myriad services from the financial institution. When selecting a checking account, be sure you understand its terms, conditions, and potential fees to make the most of its offers.
