Tips Checking Accounts
Investing and Financial Management.
Tips and Common Mistakes made with Checking Accounts:
Tip 1: Understand the Fees and Charges for Your Account.
If you read the small print on the paperwork that comes with your checking account statement, you’ll see that fees and service charges can make a big dent in your balance. Here are a few common ones:
- ATM transaction fees
- Charges to order more checks
- Bounced check fees
- Stop payment orders
- Maintenance fees for falling below the minimum balance requirement
Tip 2: Write Checks on Your Money Market Account
If you only write a few checks per month, you might be able to utilize a money market account or fund as a checking account. However, some accounts and funds require that the check be above a certain amount.See Money market account
Common Mistake 1: Keeping Large Amounts of Money in your Checking Account
You won’t be living large on your checking account interest. Many checking accounts pay little or no interest. That’s why it usually doesn’t make sense to keep a large amount of money in your checking account. It’s money you could be investing to make a higher rate of return.
Common Mistake 2: Not Waiting for Checks to Clear
One of the biggest mistakes you can make with a checking account is thinking that you have access to deposits immediately. If you deposit a check, especially one drawn on an out-of-town bank, it may be several days until your funds are available. You must wait for the deposited check to clear, which means that you don’t get access to your money until the bank gets its money. Also, sometimes your bank may put a “hold” on a deposited check. Until the hold is removed, you can’t write checks on the deposited amount.
Common Mistake 3: Relying on Overdraft Protection
Overdraft protection may sound like a great feature but it’s dangerous. Although you’re protected if you bounce a check, the financial institution charges you interest on the money it shells out on your behalf.
Overdraft protection encourages you to overspend. You are far better off staying on top of your finances by balancing your checkbook.
Question : What checking account features are the most important?
A feature that’s right for you may not be right for your roommate. Depending on your needs, the following features may be important to you:
- Low minimum balance requirement
- Free checks
- Debit card so you can buy items without writing a check
- ATM or bank card which allows you to withdraw cash at ATMs.
- A competitive interest rate
Remember that unlike a credit card, a debit card removes money from your checking account right away. You should faithfully record all debit card transactions and ATM withdrawals in your checkbook.
If you only expect to keep about $100 in your account most of the time, the interest rate isn’t going to matter much. You might be more concerned about whether the bank is open on a Saturday or where its ATM machines are located. Make sure your account is insured if the financial institution becomes insolvent. Checking accounts through your bank are insured by the FDIC.
Question : How do I find the best deal on a checking account?
As you’ll see with so many investments, the first step is shopping around for the best deal. Many financial institutions offer checking account promotions to get you in the door. Their goal is to entice you to start a relationship, so you’ll come to them later for other services like loans or a mortgage. You might be offered free checks or merchandise to induce you to bank with that institution.
Many banks offer free checking. You pay no monthly maintenance fee or penalties, unless your balance falls below a specific amount. Watch out, though, for other fees like an exorbitant charge for checks, even the drab ones.
Question : How do I balance my checkbook?
There are four simple steps to take to balance your checkbook:
- As you go through your statement, put a checkmark next to all deposits, ATM withdrawals, and debit card transactions in your checkbook register.
- Take the ending balance on your statement and add any deposits or credits that occurred after the statement was issued.
- Subtract any checks that haven’t cleared and debits that don’t appear on your statement.
- The balance should match the amount you have listed in your checkbook. If it doesn’t, look for math errors or transactions you may have overlooked.
Previous: What is a checking account?How do I start one?
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