Overview of a Checking Account

Checking accounts are offered at most financial institutions and allow for consumers to deposit, withdraw, and transfer their funds. Most financial institutions will offer checking accounts to include paper checks, debit cards, online access, monthly statements, and more. Some institutions will offer checking accounts for free, while others will charge a monthly fee for holding the account open for you. In addition to either free or not, most institutions will have a fee schedule for their accounts that outlines all their services, and the cost you could be charged respectfully if needed. It’s important to understand all account fees prior to opening a checking account.

For example: Are there overdraft fees if the account becomes negative? Is there a monthly fee? Is it avoidable or can it be reduced? What services are free? What services have a fee? How can I access the account? What happens if I misplace the debit card? Setting up direct deposit?

Important Benefits

It’s near impossible for the world to operate financially without a checking account. That statement applies for you and for most businesses. Checking accounts serve the purpose of allowing individuals and businesses to house their funds electronically, and to then transfer those funds electronically to each other. Checking accounts allow you to deposit funds from an employer by either cash, check, or electronically, and then withdraw those funds by either cash, check, or electronically to pay a business for their goods or services. These accounts keep your funds in an account that are immediately accessible when you need them.

With cash, you need to be mindful of how much you have in your pocket as you spend it. It’s easy to lose track of how much you have remaining through the course of a day, week, month, or year. Checking accounts electronically keep track of all transactions deposited or withdrawn, as they happen. Furthermore, financial institutions are required to send you notices of account activity on a monthly or quarterly basis, which allows you to review your spending/saving periodically.

Our Take.. Good or Bad?

We strongly recommend checking accounts, and even advise for at least 1-3 for each person.

Let’s start with the first checking account. Everyone needs at least one checking account for reasons outlined above; deposit, withdraw, and transfer your funds. Direct deposit is typically a free service that allows your employer to electronically and automatically pay you, instead of a paper check. Debit cards, mobile access, and online access, allow you to view and use your funds as you need them; think of buying things online, checking your balance on your phone, and printing account history from your computer.

Additionally, there are benefits of having more than one checking account:

Budgeting – Spreading out your spending into different accounts: One account for household expenses. One account for the upcoming weekend. One account for gas, food, or hobbies. One account for the dog?

Self-Employed – For those self-employed, separate checking accounts are beneficial for quarterly taxes, federal taxes, state taxes, licensing fees, or other period expenses. Similar to budgeting, additional accounts can help with preparing and paying for those expenses.

Different Institutions – Having accounts at two or more institutions based on location, services, account types, fees, and more. For example: Bank ABC offers a completely free checking account but is online only without any physical locations. Bank XYZ is in your neighborhood, however charges you $5 per month to holding the account open.

Fraud Protection – One account to receive all your deposits, and one account with a debit card linked to it for purchases. If your debit card is ever lost or compromised, your deposits are not at risk of exposure.