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Lesson B: Checking Accounts

Comparing Checking Accounts

When deciding on checking accounts remember financial institutions offer different types of checking accounts. To determine what you need think about how you plan to use your checking account. The following questions will help you determine what you need in a checking account.

Convenience:
1. How many checks do you think you will write every month?
2. Do you want a bank that is close to your home or work?
3. What are the bank’s hours of operation?
4. Will you use the ATM often?
5. Does the bank have ATMs close to where you live or work?
6. How often do you plan to visit the bank to use teller services?
7. What other bank services are important to you?

Cost:
1. How much money will you keep in your account?
2. Will you be charged for writing extra checks?
3. Are you willing to pay a monthly fee?
4. If so, how much?
5. Will you be charged to use your bank’s ATM?
6. Will you be charged for using other banks’ ATMs?
7. Will you be charged for using teller services?
8. Are there ways to avoid paying fees?

Checking Account Fees
Ask the bank for the fee schedule for checking accounts. Compare the costs of the various accounts you are considering. Ask the bank whether fees can be waived and how to avoid fees. Some of the fees may include:

• Monthly Service (Maintenance) Fee
• Per Check Fee
• Check Printing Fee
• ATM-Use Fee
• Overdraft Fee
• Returned Check Fee
• Stop-Payment Fee
• Phone Inquiry Fee

Types of Checking Accounts
After you determine what you need in a checking account and understand the different fees involved, you might be ready to choose the type of account you should open. The main types of checking accounts include:

Low-cost checking
Many banks offer low-cost checking for people who don’t write a lot of checks. The charge is often less than $5 per month. There might be a limit to the number of checks you can write without an additional charge.

ATM-checking
Some banks offer an ATM-checking account for you at reduced-cost or a free checking account if you do all of your banking by phone and ATM. This type of account usually requires you to use direct deposit. The bank might charge you a fee if you use the services of a teller. This type of account usually offers unlimited check writing privileges, in other words, there are no additional charges based on the number of checks you write.

Regular checking
With a regular checking account, there is often a minimum balance required to waive the monthly service fee. This type of account usually offers unlimited check writing privileges.

Interest checking
There are different interest-bearing accounts, such as the Negotiable Order of Withdraw (NOW) account and the Money Market Deposit Account (MMDA). With these accounts, you usually need to maintain a high minimum balance in order to earn interest and avoid fees. The minimum balance is often at least $1,000.

Debit Cards
People are increasingly using debit cards. Depending on which debit brands are on the card you are using, you may have to either enter a personal identification number or sign a sales slip. Either way, the purchase amount is automatically deducted from your checking account. Since you're accessing your own money, you will not have interest charges unless you activate an overdraft line of credit. To avoid this, make sure you include what you purchase with your debit card when you are balancing your checkbook.

Recording Transactions
Every time you record a check, you should be sure to record the transaction in your check register. That way, you will always be sure of your account balance. Record in your check register any time you make a transaction including using an ATM. Also, be sure to keep a running account balance after each transaction.

Record the date of the withdrawal, the amount, and for whom the amount was intended. Record the check number if it was a check. Also record the balance after the amount is withdrawn and every deposit, including automatic payroll deposits. See the example:

Date	Check No.	Transaction	Amount	Deposit Amount	Balance
					203.55
3/08	1562	local phone company	17.85		185.70
3/08	1563	long distance	35.42		150.28
3/09		payroll deposit		1000.00	1150.28
3/10		deduction/ rent	500.00		650.28
3/10		cash withdrawal	100.00		550.28
3/10		bank fee	8.00		542.28
3/15		ATM Deposit		50.00	592.28

Exercise
Comparison shop checking accounts use the table below to track your comparisons.

Question	Bank A	Bank B	Bank C
Does this bank offer a free checking account?
Is there a minimum balance requirement? What is it?
Does the bank pay interest on balances? How much?
Will I be charged if I write more than 10 checks monthly? How much?
Can I choose a check design?
Does the bank have ATMs?
Can I use other banks’ ATMs to withdraw money?
Do I have to pay ATM fees? How much?
Does the bank offer a debit card?
Does it cost to use my debit card? How much?
Can I get overdraft protection? How much does it cost?
Does the bank have online services? Is there a fee?
Is the bank insured?

 

Quiz

1. When comparison shopping checking accounts, it is important that you consider the total cost of the account.
True False

2. If you write on 1-2 checks per month, an account that charges a fee per check would be best for you.
True False

3. Some checking accounts have a monthly maintenance fee.
True False

4. Money Market Deposit Accounts earn a rate of interest.
True False

5. Purchases made with your debit card can be charged interest.
True False

6. Debit card purchases should be recorded in your check register.
True False

7. ATM checking accounts usually require direct deposit.
True False

8. For consumers who don’t write many checks, an account with $4 monthly maintenance fee and a limit of 5 checks per month is the best option.
True False

9. Often times, regular checking accounts offer unlimited check writing.
True False

10. When deciding on a checking account it is important to first determine your needs.
True False

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