Banking in today’s world generally means opening a checking account, a savings account, or both. Checking accounts, also called transaction accounts, are set up to allow frequent receipt (deposit) and payment (withdrawal) of funds in the account.
Meanwhile, the savings variety is designed for people to use to accumulate savings over longer periods of time. Savings accounts generally allow you to earn interest on the amount deposited, although some checking products now offer an interest option as well.
If you don’t have a bank account of your own, you’re missing out on many of the biggest banking innovations made over the past decade, including online banking, tens of thousands of places to use your debit card, and innovative products like checking accounts. They don’t charge overdraft fees.
Here are 5 facts about checking accounts:
1. You can open one with just a small initial deposit, in most cases around $ 50.
2. Most of the checking products offered by banks today are free accounts. However, for anyone who has been an account holder for more than a few months, you will know that “free” accounts are often far from free. For example, some require you to maintain a minimum balance to avoid a monthly fee. Others charge various usage fees (see # 4 below).
3. Many checking accounts offer automatic enrollment in an overdraft protection program. While this service actually protects the consumer in the sense that it helps avoid bad checks and / or unpaid merchants, it does have a significant drawback: a fee of $ 20, $ 30 or more is applied each time the account becomes overdrawn. . These accounts actually become very expensive for the account holder very quickly. Fortunately, some banks now offer checking accounts that will never charge you an overdraft fee, even if you overdraw the account multiple times.
4. You can open a new account online often in a matter of 15 minutes or less.
5. Some checking accounts pay interest on the amount deposited. Still, restrictions generally apply, and in most cases the interest rate paid is not as high as a savings account at the same bank. Look to get both types of accounts.
If you are considering opening a checking account, make sure you know all the facts before choosing a bank that suits your needs.