Finance 101: The Basics Of Checking Accounts

One of the first steps in beginning your financial life is opening a bank account, and many people have had accounts since they were young. Banks frequently provide joint checking and savings accounts so you can keep your money in one location. Maybe you’ve heard of services such as Citi checking account or bonuses upon sign-up offers, but you don’t know what they do. Don’t worry because we will help you learn the basics of checking accounts and determine if it’s perfect for you.

What is a checking account?

An account with a financial institution called a checking account permits deposits and withdrawals. Checking accounts, also known as demand or transactional accounts, are relatively liquid and can be accessed in various ways. These include cheques, automated teller machines (ATMs), and electronic debits. A checking account varies from other bank accounts because it frequently permits unlimited withdrawals and deposits. In contrast, savings accounts may occasionally place restrictions on both.

Advantages of a checking account

• Easy Access. Checking accounts give you multiple options to access your money. Thanks to the numerous points of access, you can quickly and easily deposit or withdraw money whenever you need to. In most cases, you can withdraw or spend money by going to a bank, using your debit card at an ATM, writing a check, or transferring money online.
• Keeping Track. Cash payments are challenging to trace unless you have an official receipt confirming your payments. Checks include serial numbers, which makes it simpler to keep track of them. Your money is safe if you designate who is permitted to cash checks. You can track where it goes and to whom it should be sent. Additionally, suppose your debit card is ever lost or stolen. In that case, you can lock it with some checking accounts, preventing unauthorized use.
• Safety. Cash is easy to lose or steal, so having a checking account is an excellent way to keep your money safe. Bills and coins can be bulky, cumbersome, and hard to keep track of in your wallet. Also, if you lose your debit card or it gets stolen, it’s easy to close the account, stop payments, or open a new one. There are government funds that back up credit unions in case of a financial crisis. For example, bank deposits are covered by the Federal Deposit Insurance Corporation (FDIC). This means that it’s safer to keep your money in your checking account than in a piggy bank. So, unlike when you lose cash, you don’t lose any value immediately.

Disadvantages of a checking account

• Minimal to no interest. Some checking accounts offer interest, but the majority do not. This is because money in a checking account is often regarded like cash, used for regular transactions rather than kept there for extended periods. If increasing your money is essential, you might want to establish a savings account in addition to your checking account.
• Fees. The majority of checking accounts have possible prices. Some checking accounts charge monthly service fees and additional costs, such as overdraft fees or fees for using an ATM that is not part of the bank’s network.
• Maintaining balance. In the banking industry, the minimum sustaining balance is the least amount of cash a depositor must keep in a bank account to avoid paying particular costs. You may need to maintain a minimum amount in your checking account at all times, depending on the bank. If you don’t do so, you can be required to pay a fine. However, remember that not all checking accounts are made equally. So if you’re concerned about keeping a minimum balance, search for a checking account that either doesn’t have one or has the lowest amount.

Conclusion

Before you put your money into a bank account, you need to think about a few different things first. Your requirements and preferences should also guide your search for the ideal bank account. Consider both the advantages and disadvantages of having a checking account and the features you’d like to see in your new bank account. If you want easy access to the money you use on a daily basis, a checking account can be the ideal choice for you. After going over the fundamentals, all that is left to do is determine whether or not this is a good fit for your personality and your money.