Banking in today’s world usually means opening up a checking account, savings account, or both. Checking accounts, also called transaction accounts, are set up to allow for the frequent receipt (deposit) and payment (withdrawal) of the funds in the account.
Meanwhile, the savings variety are designed for people to use for the purpose of building up a savings over longer periods of time. Savings accounts usually allow interest to be earned on the deposited amount, although some checking products now also offer an interest option as well.
If you do not have a bank account of your own, you are missing out on many of the most important innovations in banking made over the past decade, including online banking, tens of thousands of places to use your debit card, and innovative products such as checking accounts that do not charge overdraft fees.
Here are 5 facts about checking accounts:
1. You can open one with only a small initial deposit – in most cases around $50.
2. Most checking products offered by banks today tout themselves as being free accounts. However, for anyone who has been an account holder for more than a few months, you know that “free” accounts are usually far from being free. For example, some require that you maintain a minimum balance in order to avoid a monthly fee. Others charge various usage fees (see #4 below).
3. Many checking accounts offer automatic enrollment in an overdraft protection program. While this service does indeed protect the consumer in the sense that it helps avoid bounced checks and/or unpaid merchants, it comes with an important catch: there is a $20, $30, or higher fee assessed every time the account becomes overdrawn. These accounts actually get very expensive for the account holder very fast. Luckily, some banks now offer checking accounts that will never charge you an overdraft fee – even if you overdraw the account multiple times.
4. You can open a new account online often in a matter of 15 minutes or less.
5. Some checking accounts pay interest on the amount deposited. Still, restrictions usually apply, and in most cases the interest rate paid is not as high as it is for a savings account at the same bank. Look into getting both types of accounts.
If you are considering opening a checking account, be sure to get all of the facts before choosing a bank that suits your needs.