Checking Accounts

These accounts are designed for basic deposits and outflows of cash or basically the function of cash passing thru.  Deposits maybe actual cash, checks from third parties, direct deposit from your employer, wire transfers, etc.  Outflows may be processed via checks, debit cards, automatic transfers to other accounts, wire transfers, etc.  Some checking accounts earn interest, and some have no monthly fees—usually if you keep a minimum balance and/or have money directly deposited. Some accounts limit the number of checks you can write or number of withdrawals allowed each month.  The best reason for using a checking account is it’s a substitute for using physical cash.  There is a paper/electronic trail of your transactions so you may monitor deposits and outflows for any errors and to avoid unnecessary fees. 

Caution must be used with checking accounts, i.e., never write a check, make a debit card purchase, or ATM withdrawal without having the cash in the account to cover it.   Debit purchases and ATM transactions are immediate withdrawn from your account.  Merchants now have the ability to convert your check electronically and immediately withdraw from your account.   Not having money in your account to cover transactions may result in overdraft fees, which on average is $27* per occurrence, and there may be additional fees charged per day of insufficient funds until a deposit is made to cover the check.  

Here are some tips for managing your checking account.

1.  Pay attention to monthly service fees.
2.  Keep track of your balance and outstanding payments.
     a.  Check your balance by phone or online prior to withdrawing 
          cash at an ATM.
     b.  The balance on an ATM withdrawal slip may not reflect pending
          transactions including deposits and purchases, checks not cashed, or 
          automatic withdrawals or payments you may have set up.
3.  Sign up for transaction or low balance alerts.
4.  Avoid overdraft fees.  See #2.
5.  Open and review your monthly statements.

Prepaid Debit Cards
These cards also function as pass thru products.  Often called ‘stored value cards,’ money is loaded electronically onto the card and then can be used for purchases or to access cash through ATM’s.  Depending on the type of card, it may be reloaded or used to accept direct deposit of your wages.  You are only allowed to spend what is loaded onto it, which is a useful tool if you are trying to control spending and follow your money map. 

Next up:  Consequences of Mishandling a Checking Account