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A checking account is one of the most important and useful tools you will use to manage your money. If you think about it, over the course of a year, you will earn and spend thousands of dollars—and you need a way to keep an accurate account of each transaction. A checking account can help you manage your daily finances and make sure you’re staying on track.
Benefits of a checking account
- Writing checks or using a debit card is generally safer than carrying cash.
- Making payments through a checking account is much less expensive than paying for money orders and cashier’s checks.
- Direct deposit from your employer into your checking account is the easiest way to manage your paycheck.
- Paper and/or online account statements help you track your income and expenses.
- You can make purchases easily and access cash when you need it.
- Most local businesses will take your check (with a valid ID).
- Most checking accounts come with ATM cards that allow you to get cash from ATMs.
- Debit cards linked to your account can be used to make purchases nearly everywhere.
There are many options to consider. Nearly all banks offer checking accounts that vary from the most basic checking to premium accounts and every option in between. Picking an account that matches your financial habits will help you get the most from your account and help you avoid paying unnecessary fees.
Types of checking accounts
There are multiple variations of checking accounts and it’s important to compare the fees, services and restrictions at each bank you’re considering, but most banks offer similar types of checking accounts, including:
Basic Checking—This type of account is designed for customers who only use their checking account to pay bills and daily expenses and who don’t keep a high balance in their account. Some basic checking accounts limit you to a certain number of checks per month, and if you go over that number, you could be charged for each additional check you write.
Interest-Bearing Checking—Your deposits earn interest, and you have the same services as a basic checking account. Interest-bearing checking accounts usually require a minimum balance to open and you’ll need to keep a minimum amount of money in the account each month to avoid fees. The interest rates are not generally very high, but it’s always good to be making money on your money whenever you can.
Rewards Checking—Some banks are now offering rewards checking accounts that allow customers to earn “miles” or points for certain basic banking transactions—like PIN-based debit card transactions, online bill payments—and bonus points for transactions like using direct deposit.
Money Market Checking—Money market accounts earn interest and the rate is generally higher than most interest-bearing checking accounts. You’re generally required to maintain a minimum balance and Money Market accounts only allow you to write a limited number of checks each month.
Student and Senior Checking—Some banks have special checking account offers designed for students or senior citizens. Benefits may include free checks, free ATM use, better rates on loans and credit cards, or discounts on travel or prescriptions.
The account you chose needs to match your financial habits. If it doesn’t, you could end up paying unnecessary fees and being frustrated with your choice. Here are a few questions to ask yourself as you try to figure out what’s important to you:
- Do you write a lot of checks? Look for an account with unlimited checking.
- Will you maintain a high balance in your account or just keep enough in the account to pay your bills? Some checking accounts only pay interest if you maintain a certain minimum balance.
- Do you use ATM’s frequently? Make sure that your bank has plenty of ATM’s in convenient locations. Using another bank’s ATM (a “foreign ATM”) can cost you extra fees from both your bank and from the bank that owns the machine.
- Does your employer offer direct deposit for your paycheck? There are checking accounts that offer certain benefits if you have a direct deposit set up.
- Do you occasionally bounce checks? You might want to look for an account that allows you to opt-in to overdraft protection. (Be aware that there are still fees associated with overdrafts—while your bank will cover your check, you’re agreeing to pay a fee for the privilege.)
- Do you plan to do some of your banking online? Look for an account with unlimited online transfers and bill payments.
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This site is for education purposes. The material provided on this site is not intended to provide legal, investment, or financial advice or to indicate the availability or suitability of any Capital One product or service to your unique circumstances. For specific advice about your unique circumstances, you may wish to consult a qualified professional.