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Introduction

PodcastWhether you have a history of overdraft or non-sufficient funds charges or you just want to know how to best manage your first checking account, this module will give you the tools and information needed to become and remain a successful checking account holder. You will learn key components of wise checking account management, including:

  • Checking Account Fundamentals
  • Deposits
  • Withdrawals
  • Keeping Your Account in Good Standing
  • Protecting Your Account

 

Chapter 1: Checking Account Fundamentals

A checking account is a service provided by financial institutions that allows you to deposit money with them and withdraw it at a later date. Checking accounts typically come with a low or no interest rate, but you can access your money almost anywhere, and there is usually no limit to how many withdrawals you can make in a month. In contrast, savings accounts and certificates of deposit (CDs) come with a higher interest rate but restrict or penalize withdrawals. Most people use a checking account for day to day money management, such as paying for groceries and clothing, and a savings account and/or certificate of deposit for saving.

You may be wondering if having a checking account is truly safe. Some people avoid opening one because they fear that they will lose all of their money if their financial institution goes out of business. Instead, they use check-cashing stores and carry around large amounts of cash. This is not a good idea. Check-cashing places charge exorbitant fees, much higher than the fees charged by traditional financial institutions (if they charge any at all). Furthermore, while you can cancel a lost or stolen debit card or check, if you lose cash or are robbed, the money is gone forever. The safest place to keep your money is in a financial institution – banks and credit unions are insured, so within limits, even if your financial institution were to go out of business, you would not lose your money.

Types of accounts
There are several different types of checking accounts:

  • Individual: As the name implies, an individual account only has one owner. Some financial institutions offer one basic checking account, while others offer a few. If you have a choice, look at the features of each account, such as the fees, minimum required balance, and services provided, and decide which one best meets your needs.

  • Joint: A joint account is similar to an individual account, only there is more than one account holder. Because any account holder can withdraw all of the money from the account, you should only get a joint account with someone you trust.

  • Senior/student/teen: Some financial institutions, particularly credit unions, offer special checking accounts for seniors, college students, and/or teens. These accounts typically come with a low or no minimum required balance and minimal or no fees.

  • Business: A business checking account is intended for people who own their own business and want a separate account to handle its finances.

Opening a checking account
Although some institutions let you apply for a checking account on-line, most people apply in person at their local branch. Since opening an account can take several minutes, only go when you have plenty of time, and remember to bring identification and funds to deposit with you. (The minimum required deposit varies, but generally, you cannot open a checking account with a zero balance.) An employee will fill out an application for you by collecting your personal information, including your name, address, phone number, and Social Security number. If your application is approved, you will receive your new account number. You may also be given a limited number of checks, but the full checkbook and debit card will likely be mailed to you. Along with receiving everything you need to use your account, you should also be given a fee schedule. Be sure to read this carefully to understand what fees you are being and could be charged.

Getting a checking account is an easy process for most people. However, if you have a ChexSystems report, it could be a challenge. ChexSystems collects information on negative checking and savings account activity and provides the information to financial institutions. Negative activity includes writing fraudulent checks or committing other acts of fraud, bouncing checks, and overdrawing your account. There is no standard for reporting to ChexSystems – some financial institutions will report a check that bounced due to a miscalculation, where others may only report cases of fraud. If you have a ChexSystems report, you can get a free copy of it once a year by visiting www.consumerdebit.com or calling (800) 428-9623.

Some financial institutions also check your credit report when you apply for a checking account. Unlike with ChexSystems, your credit report monitors both positive and negative credit activity. Having a history of late payments or a bankruptcy, judgment, repossession, or foreclosure on your credit report can make it difficult to get a checking account. You can get a free copy of your credit report from all three credit bureaus yearly through the Annual Credit Report Request Service www.annualcreditreport.com or (877) 322-8228.

Are you doomed to keeping your money in a shoebox if you have a ChexSystems report or negative information in your credit report? Not necessarily. If you are initially denied, talk to your financial institution about what you can do. If you have an outstanding debt, you may be able to get a checking account if you pay it. Your financial institution may also be willing to let you open an account if you complete a course on checking account management.
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