How To Manage Your Checking Account
Knowing how to manage your checking account is an important lifelong skill to have. Since most of your money probably flows in and out of this kind of account, it is critical to keep an eye on the activity to avoid any problems.
Checking accounts typically come with checks and a debit or check card. A debit card can be thought of as an electronic check. If you use your debit card at a store, the cashier will run the card through a scanner that will allow your financial institution to verify that the funds are available. Debit cards can also be used to withdraw cash from an ATM.
Balancing Your Account
Probably the most important concept to know when managing a checking account is how to balance your checkbook. This entails recording the dates and amounts of your withdrawals (writing checks, using debit cards, paying a bill online) and deposits (direct deposit from your employer, checks written to you, cash deposits) so you know how much you have in these accounts at all times.
This is also important because by the time the check you wrote clears or the ATM withdrawal you made posts, you may have forgotten, and then an overdraft will occur if you spend more the amount available in the account. This can cause some hefty and unnecessary fees to be charged.
Balancing your checkbook has definitely changed over the years. Most people don't just use paper checks anymore. Most employers now offer direct deposit for paychecks, many people pay their bills via online fund transfers, and you can use debit cards to make purchases or withdraw cash from an ATM almost anywhere in the world. All of these actions affect your checking account balance, and it is a good idea to keep a record of each transaction the day you make it. Don't just rely on the bank to keep this record for you. Banks can make errors that will become your responsibility to fix. At the end of the month when you receive your checking account statement, be sure that these numbers match your records. When you see that everything matches for the month, you know your account is free of errors.
One of the ramifications of not balancing your checking account can be a bounced check. This means the check you used to purchase goods from a business will not go through. You will still need to pay for the goods or services you purchased and most likely the fee that the merchant's bank will charge for the bad check. That fee is usually $25. Your bank will most likely charge you a fee as well called an NSF or non-sufficient funds fee (roughly $35). You can also overdraw by using a debit card, depending on how you have the account set up. You will typically see overdraft fees for this as well.
One way to help protect yourself from these issues is to get overdraft protection. Be sure to understand the terms of your overdraft protection, since you will still typically see some type of fee if you overdraw, even with the protection. Banks will often link a line of credit or your savings account to the checking account to cover any overdrafts.
Online Banking
You may have heard someone talking about canceled checks. It used to be common to receive the checks you wrote after the businesses deposited them with their banks. Today, it is more typical to get digital images or copies of checks with your monthly statement or through online banking.
Online banking allows you to access your accounts through the Internet. This is usually a free service that will let you view account balances, see statements, move money between accounts, and pay bills electronically. Be sure to have a secure computer when using online banking.
Transaction Speed
It is important to understand how quickly a transaction can post to your accounts. Some common examples are listed here
- ATM withdrawals post immediately.
- Debit card purchases usually post within 24 hours.
- Written paper checks can post almost immediately if done with a business. If a check is written to a friend or family member, it can sometimes take a number of days until it posts.
- Transferring money electronically through different financial institutions can sometimes take several days.
- Larger deposits can take longer to be released by a financial institution.
Bank Errors
You may be wondering what to do if a bank makes an error. If more money is taken out of your account than should be, contact your bank as quickly as possible to discuss the issue. It is always a good idea to take notes of any conversations you have and be prepared to escalate to management if the first representative cannot help. If the bank still does not fix the error, contact the Office of the Comptroller of the Currency. For information, visit the agency's Web site at http://helpwithmybank.gov/.
Sometimes a bank can make an error that is in your favor. This could be an extra deposit in your account that shouldn't exist. Don't think this is free money. If you spend it, the bank can charge you with theft. Be sure to tell someone at the bank about the error. It is also a good idea to tell the bank in writing.
Workplace Options. (Reviewed 2017). How to manage your checking account (A. Moyer, Ed.). Raleigh, NC: Author.