Why Do You Need a Checking Account?
Most people loathe the idea of inconvenient bank hours, ATM fees, and overdraft charges to name a few. Sometimes it seems like opening a bank account is not worth the trouble. However, we know that having a checking account is sort of a necessity that any adult needs to have. Why?
For most people, having a bank account means it is easier to manage finances. Checking bank statements regularly is one of the best ways to budget funds and be wise about making financial decisions. For employees, a bank account is the easiest way to get paid. Arranging for your employer to deposit your pay check to your account is way easier than collecting cash from your company’s treasurer.
Aside from these, we are living in a generation where technology makes having a bank account easier for everybody. Although they are not mandatory and not the only way to keep your money, there are definitely a lot of reasons why you should open a bank account.
Here, we will zone in on checking accounts, one of the major types of banking accounts available today.
What is a checking account?
A checking account serves a variety of useful purposes. Of course, it is a requirement for getting and maintaining a personal installment loan at King of Kash (and almost any other loan company), but it also provides an invaluable set of opportunities and protections for your money.
It is considered as a transactional deposit account of which you can use to deposit and withdraw funds. Your money in a checking account is very liquid. You can withdraw it using electronic debits, automated cash machines, or checks among other methods.
A checking account allows unlimited deposits and numerous withdrawals. It can include joint accounts, student accounts, and business accounts among others with the same features. A savings account, on the other hand, limits both withdrawals and deposits.
Since it is considered ‘liquid’, checking accounts do not have high interest rate. Most banking institutions offer little to no fee for these accounts as well. With the advent of electronic banking, account holders can also set up routine payments for monthly bills.
Reasons to Have a Checking Account
Aside from these benefits, setting up checking account has specific benefits that cater to different people with different needs.
Carrying Cash Can be Tricky
A checking account is a safe and secure way to pay for things. Certainly, we all know carrying a big roll of cash with you to pay for rent, utilities, gas, groceries, etc. is not a safe or smart way to manage money. Beyond the obvious of it possibly being stolen there’s the chance you could lose some or all of it, or lose track of how much you are spending and wind up short at the end of the month. A checking account lets you pay bills and manage your money using paper checks, debit card or online transfers and bill payment.
Checking accounts help you manage your money
Checking accounts allow fluidity of funds so you stay up-to-date with your bills. Knowing the regular payments that come out of your account helps you budget your funds more effectively. At the same time, you can review your monthly expenses through your statements.
Most businesses accept checks
Although a driver’s license or a state ID is needed, checks are as good as cash in most business transactions. Just as mentioned earlier, checking accounts give you the freedom and the option to not carry cash with you.
Aside from being safer, this allows better monitoring of how you used your cash since it reflects on your monthly statement. Knowing where your money went is one of the first steps to better manage your finances.
You have the option to acquire a debit card
With a checking account, you can usually acquire a debit card that functions like a credit card. You can use this to pay for regular transactions as well as online purchases.
Cancelled checks can be used to prove you paid a bill
Cancelled checks are transactions that appear as cleared on your account, but marked as cancelled by the bank. This can be used as proof of payment.
Money deposited in a bank is safe from unfortunate disasters like fire, flood, theft, or loss
This is related to the earlier point about checking accounts being a safe option compared to carrying cash around with you. This particular advantage, however, applies to opening a bank account in general.
Keeping your money in a safe at home makes it easy to get funds when you need it. It is hassle free – no need to go to banks or withdraw from the ATM. However, in the event of fire or robbery, your money is completely gone.
With banks, on the other hand, part of the agreement that you signed is the assurance that your money will be given back to you. In case of bankruptcy, there are institutions that provide insurance to banks so they can give your money back.
Most banks are insured by the Federal Government (FDIC)
Up to specified amounts, your checking accounts are insured. You can be rest assured that your money will be given back to you no matter what.
Checking Accounts are Available Everywhere!
Almost any bank or credit union will offer consumer checking accounts and you usually have a choice of several types of checking accounts from the simplest type that allow you to draw money out of the account with paper drafts (checks) to more elaborate types of accounts that require maintaining minimum monthly balances, pay interest, offer overdraft protection, etc. For the majority of people, a simple free checking account is the way to go. Although each financial institution is different, a free checking account should offer the following:
- No Low Balance Fees
- Free ATM and/or Debit Card
- No charge for ACH and Direct Deposit transactions
- Free online access to your account
- Unlimited monthly check writing
- No minimum check writing amount
- Free or low cost initial paper check supply
Managing Your Checking Account Responsibly
It’s important to note here that having a checking account is an important responsibility. If managed correctly, it can be one of the most valuable tools available to any of us to manage our money and keep up with obligations. If it’s not managed correctly, the financial costs can be devastating.
If you don’t keep track of your money and you wind up bouncing checks you could be paying as much as $37 to the bank for each bounced check and it can turn into literally hundreds of dollars in fees in no time at all.
By not managing a checking account responsibly, you can be subject to a bad impact on your credit score, bills that you have to pay with money orders or expensive cashier’s checks, the closing of your account and even the possibility of arrest for passing bad checks. To make it all much easier, Financial Planning has a great guide that will help you balance your checking account properly each month.
Aside from these financial rewards, a well-maintained checking account is also an asset to help you establish and maintain credit which is important if you are planning on making big purchases like a house or a car. However, a poorly maintained account will also be detrimental to your credit rating. Learn how to manage your account and reap the benefits.
Keep Tabs on Your Spending
Your checking account records or statements allow you to reflect on your spending patterns. It helps you reconcile your income from your monthly expenses. It is a good way to set a budget so you can have peace of mind knowing that you are not spending more than you are earning.
You can use the features in checking accounts to manage your funds. Among these features include:
- Opting to avail a debit card to maximize access to your account
- Linking your savings and checking accounts in case you need one to fill the other with funds
- Managing overdraft fees by using online banking to monitor funds
- Taking advantage of mobile and online banking to track spending patterns
- Using alerts to remind you of payment dues
- Utilizing automatic payment features to make sure bills are paid on time
- Setting up direct deposits for convenience and easy flow of cash
These are some of the common ways to manage your money using checking accounts. As much as there are advantages, it will always boil down to how disciplined you are in maintaining your account. Take note of the overdraft charges and clear your account from it as best as you can. Many people have lost a lot of money from these charges that can easily be avoided if you stay on top of your account.
Overdraft fees and bounced check charges are way more than the interest charged by King of Kash for a personal loan so don’t hesitate to call us or stop by one of our loan store locations to discuss your needs. In the long run taking a little time and effort to manage your money properly by working with the banking system can save you money, save headaches and keep your checking account open!