Understanding and using banks

Checking accounts

While the information in this debt free article may seem basic to many of you, the intention is to completely explain the many aspects of a checking account to those of you who may be new to the idea of opening a checking account.

Many people use a checking account as their primary banking relationship. If you do not have a checking account, you really need to consider opening one. Using a checking account in the correct manner permits you to leave money on deposit with the bank without worrying that it will be stolen from you. You will be able to access your money at any given time by either writing a check or making a cash withdrawal.

In the simplest of form, you give money to the bank and the bank puts in into your checking account. You get deposit receipt showing the amount you deposited and which account it went into. To get access your money when you want it, you go back to the bank and ask to take cash out. The bank will make you fill out a withdrawal form with your signature on it and they will also ask you to identify yourself with proper documentation (ID card or driver’s license).

The most beneficial aspect of a checking account is that you can use the money in the account by writing checks. A check is basically an authorized order telling the bank to pay a certain amount of money in your account to a payee. When your bank receives the check it triggers the transfer of funds from your account to the person or company to whom you wrote the check.

A checking account is best used to hold the money that you will spend within a 30 day period. It is most commonly used to pay monthly bills and other typical monthly expenditures that may occur. Checking accounts usually earn a low rate of interest paid or none at all, so it is not wise fro you to keep your savings in a checking account where it will not earn very much if anything at all.

Interesting fact: Credit unions sometimes call their checking accounts share drafts accounts and call checks drafts. This difference in wording does not change the basic function at all. It is just a common wording among credit unions. This is not a terminology that is used by all credit unions, but it exists in many.

Direct deposit

Many employers offer direct deposit to their employees. These companies have set up a service that pays an employee’s wages right into their checking account for each pay period. This convenient service saves you from having to get your pay check from your employer in order to take it to the bank on your own. It also saves the company the trouble of issuing paper checks. Direct deposit happens automatically on the scheduled pay period. The funds are in your account and available to you sooner than they would be from having a paper check administered to you as well. Direct deposit is extremely popular with permanent employees at most companies that provide it. It is easy to set up and takes about 2 pay periods to go into effect. Meaning, once you sign up at your company for direct deposits, you may still receive one (sometimes 2) paper checks before the process is set up completely between your bank and your employer.

Managing your checking account

It is vital that you understand the workings of your checking account o operate it properly. When you first open your new checking account, it is important that you ask as many questions as you possibly can before you start writing checks and use your funds. All banks are not the same. Although most operate similarly, some have different requirements and fees involved with their checking accounts. Be certain that you completely understand how long all forms of deposits take to clear and what your account’s fees are for each month including all types to transactions. A checking account can help you stick to your budget as long as you use it in a disciplined manner. Most checking accounts these days come with free monthly statements that detail your transactions fro the prior month. Depending on the provisions your bank provides to you, you may even have access to all of your cleared checks (or at least copies of them). Many banks now offer free access to the details of your checking account at a secure online website location too. As long as you make a conscious effort to maintain you account properly, checking accounts are easy and convenient to use.

Checking account types

Most banks offer a selection of different checking accounts to customers based on their specific needs. These accounts may allow you to write a certain amount of checks free each month or charge a flat rate each month. Basic checking accounts usually do not provide interest paid to customers. But, basic checking accounts typically do not have a minimum balance required to be in them at all times either. In fact, you should be able to find a bank that offers free unlimited checking with no minimum balance required. Again, this type of checking account will not carry interest paid.

Other types of checking accounts will pay you interest on the money you have in them, but they require you to have a certain amount of money in the account at all times. Sometimes these accounts are free too as long as the minimum in there at al times.

Is a checking account a good idea for you?

If you do not have a checking account, consider whether it would simplify your financial life if you did have one. Call your area banks and get all the information you need for figuring out which one offers the best services that fit your specific banking needs.

If you already have a checking account, consider whether it provides you with the current services you do need in banking. Are the fees your bank provides you with competitive?

Some people have more than one checking account. One for typical monthly expenditures such as bills and other expenditures that take place every month, and another account fro extra money fro leisure spending.

If you have a business, be certain that you have a separate account for the business. Never mix the two – ever. If you do have to withdraw business money for personal reasons, be sure to write a check from the business account to yourself then deposit that check into your personal checking account.

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