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Types of Checking Accounts
A better way to build a future is by saving well today. But this won’t happen if you keep your hard cash lying idle in your lockers instead of somewhere else, say, a bank, where you can earn some additional money in the form of interest. To harness this situation, banks came up with checking accounts - one stop solution for your money parking problems.
Although you have a salary or a personal savings account, you can still open a checking account and manage your finances. As the tutorial narrates about the checking account, what exactly is it? And if one wants to open such an account, how can they go with the process? Fret not, before moving forward, let’s learn the meaning of a checking account?
Meaning of Checking Account
A checking account is a standard bank account like every other account created or opened with any financial entity. The account holder can deposit or withdraw funds from this account whenever they want. Whether you are a college-going student or entrepreneur or anyone with a thought of saving money, this account is something you need to have.
Unlike traditional banking services that involve a lot of paperwork and time consuming steps, something like a checking account has eliminated all that onus. However, one thing you should know about this account is that it’s not a savings account though it has some attributes tied to it. You can use it as a common account for daily purposes like paying for your errands, utility bills, shopping bills, and other short-term outlays.
The interest on these accounts are very less compared to other accounts. Some banks don’t pay any interest on these accounts, but others may levy some charges for managing the accounts. But they’ll be written off if you maintain a desired balance and deposit every now and then to keep it active. You can integrate your debit card or credit card to the account and use it accordingly at your convenience.
Types of Checking Accounts
The idea of the checking account not only fosters people to save more but also wheedles them to lucrative financial products like credit cards, loans, mortgages, etc. People can use this account as a cover for overdraft protection; in case, if they go beyond the cash limit. One can access the checking account funds via writing checks, debit and credit cards, etc. There are multiple types of checking accounts, below are some of the most common ones.
Traditional checking account −It’s just a simple and standard checking account with basic banking features. If you are thinking of categorizing your finances in a proper way, this account can be as good as any to begin with.
Business checking account −Generally, business people have a lot of transactions to deal with on a daily basis. Instead of transacting everything from the main account, the organization can opt for a checking account to manage their business finances right. Some of the services offered by this account include payroll, supporting all debit and credit payments from customers, and much more.
Student checking account −If you are a student, then you can enjoy a free checking account offered by the banks. You can use it to meet your daily college expenses. This account can typically be used jointly with a parent or guardian to avoid future troubles. The best part is the student won’t be charged with any monthly fees till he or she finishes their college or graduate.
Second chance checking account −This kind of account is particularly for people who are under the debt radar or in some financial turbulence in their past. Yet, this account carries a monthly fee for utilizing the services.
Choosing the right checking account
There are myriad things one needs to keep in mind when they go for opening a checking account. Below are some of the pointers you need to note.
Minimum balance − This is the foremost thing you need to check when you open a checking account. Some banks are open to zero accounts initially but would ask you to load money frequently to keep the account operating. Upon failing to do so can levy some additional charges, which will be deducted from your account. The fees depend on the type of checking account you opted in the beginning.
Different types of fees − Since financial institutions manage checking accounts, they charge a basic service fee from the customers. So, check multiple banks and see how much charges they are levying on these accounts. The most common types of fees for checking accounts include maintenance fees, overdraft fees, ATM fees, minimum fees, and account fees.
Customer service − If you are a first time checking account user, do learn about the customer services offered by the respective financial institution. As the majority of the banking tasks are performed online, there can be some glitches in the way that obstruct the transactions. Scenarios like these require proper customer assistance. So, customers have to look out for financial institutions that offer a mix of quality service and good benefits.
Sign-up bonus − Some financial institutions offer a good sign-up monetary reward to the customers to encourage them in continuing using their banking services.
Conclusion
Checking account is simply a deposit account, where one can add and withdraw funds. This account is for meeting short-term business or individual needs. This account is not ideal for people planning to park funds for a long duration. There are numerous types of checking accounts, some of the major ones are already discussed above. Keep the above pointers in mind before opening a checking account.
FAQs
Q1)What’s the purpose of a checking account?
Ans)Checking account acts as a bridge between spending and saving. It creates a financial discipline and keeps your transaction information organized. So, whether you are paying to someone or transferring funds to another party, checking account reflects that information. You can facilitate any transaction via this account. The interest rate is minimal compared to other accounts. Withdrawals are unlimited, giving the flexibility to use at your convenience.
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