Checking Accounts

6° PERIOD – SHUMATE

What is a Checking Account?A transactional deposit account held at a financial institution that allows for withdrawals and deposits. Money held in a checking account is very liquid, and can be withdrawn using checks, automated cash machines and electronic debits, among other methods.

It differs from other bank accounts in that it often allows for numerous withdrawals and unlimited deposits, whereas some accounts limit both.

Checking accounts can include business accounts, student accounts and joint accounts along with many other types of accounts which offer similar features.

In exchange for the liquidity, checking accounts typically do not offer a high interest rate.

A checking account may also be called a "demand account" or "transactional account".

What does a Checking Account Do?• A checking account doesn’t typically offer interest like a

savings account and it doesn’t extend you credit like a credit card, but it’s still a key part of your financial situation.

• It is a good way to keep track of your money, the advantage of checking is the ease of access. A checking account is money you can access immediately, to buy groceries or pay bills.

• making payments or depositing checks, it’s important to understand that most types of transactions have a delay in adding or removing money from your account

• Remember to keep a close watch on transactions you make, and be mindful that none of these particular transactions happen immediately.

What happens when you write a check?

When you hand a check to a business, the expectation is that your financial institution is going to exchange it for cash taken out of your account. Before the business can get paid, they have to take the check to their financial institution. Once they’ve handed the check over, some or all of the check’s value may be available in the business’s account, but the check’s journey is not done.

The financial institution submits the check to a clearinghouse; oftentimes the Federal Reserve Bank, which identifies your financial institution and passes the check along to be paid. When your bank or credit union receives the check, they match it to your account and withdraw the specified amount from your account to transfer back to the business’s financial institution. Now that the payment has been made, the check is said to have cleared and the full balance should be available to the business you paid (if it was not already).

• This may sound like your check has taken a long trip, but because the checks are scanned and their data is transmitted digitally, everything happens pretty quickly. Usually a check will clear within a day of being cashed or deposited. If you’re writing a check to a business or individual who banks at the same financial institution you do, it will clear even faster.

Common Problems with Checking Accounts

On checking account issues, 78% of the problems related to opening, closing and managing the accounts. A problem could also be a discrepancy with the amount you should have in the bank, a lost deposit, or a stolen checkbook.

• Your accounts and books might not always balance

• Missing invoices or entering an invoice more than once

• Getting charged twice

• Nearly 15% of applicants are denied for a checking account

• Checks don’t always go through on time

What other options are there if you don’t want to use a checking account?

• SAVING ACCOUNTS• MONEY MARKET ACCOUNTS• CERTIFICATE OF DEPOSIT• CASH MANAGEMENT ACCOUNTS

(CMAS)• CASH MANAGEMENT TRUSTS

(CMTS)• PERSONAL TRANSACTION

ACCOUNTS

How do you open a checking account?

A checking account allows you a way to deposit income and pay expenses. You can open an account at a bank, credit union and even attach one to a discount brokerage account. Each financial institution offers different types of checking accounts, including electronic checking. Learn what your options are in addition to how to open a checking account for a bright financial future.

Steps to opening a checking account.1. Evaluate your bank account needs.

2. Compare financial institutions and the type of available checking accounts.

3. Check out electronic checking options with online banks.

4. Determine what types of fees are associated with a bank account. They may include: Monthly service or maintenance fees, Low minimum balance fees, Balance inquiries or help in balancing an account, ATM fees, Insufficient fund fees, Online banking fees, Fees for printing checks, Fees per check written.

5. Open an account with personal information, including: A driver's license or state ID card, Social Security number, Proof of address, Date of birth, Phone number and often an email address.

6. Complete a signature card. The card should show the same signature you will use when writing or depositing checks.

7. Deposit money into your bank account with a deposit slip.

8. Wait for your supply of personalized checks and deposit slips.

9. Apply for a debit or ATM card on your checking account if you plan to use one.

Designing your checking account and features

Where do you get a checking account?

You can get a checking account from any bank or credit union and you can apply online.

• Wells Fargo

• Bank of America

• Regions

• Citibank

• SunTrust

• Capstone

• Tuscaloosa Credit Union