While growing up, you may have seen your family or other adults in your life using a checking account in a variety of ways: depositing funds, withdrawing cash, writing a check, or swiping a debit card. However, if you were never encouraged to get a checking account of your own, you may be wondering why it might be useful to have one, especially in a world where mobile wallets and contactless payments are becoming the norm.
It’s okay not to know very much about the uses or benefits of a checking account. Our role at SouthEast Bank is to meet you where you are on your financial journey and guide you to where you want to be; so, if managing your money efficiently is a goal of yours, we think you’ll want to consider the advantages of a checking account to help you get started.
What Is a Checking Account?
A checking account is a type of account offered by most financial institutions, including banks, credit unions, and online banking services, that allows you to store your money while offering flexible access to it. This flexible access includes:
- Making Deposits – You can make almost any type of deposit to a checking account, including direct deposits (or ACH) from your employer, ATM deposits, mobile or in-person check deposits, and more.
- Paying for Purchases – You can use your checking account to make payments by writing a check, using a debit card, or providing account information: 1) directly to a vendor, 2) through a secure portal such as a mobile wallet, or 3) third-party service like Paypal or Venmo.
- Withdrawing Funds – Similarly, you can take out money from your account by writing a check (to cash, or to a recipient), withdrawing cash from your bank or through an ATM, or using a debit card at an establishment, including those that offer cashback services.
Unlike a savings account, in which money is often reserved for emergencies or financial goals, the money in a checking account is designed to accommodate everyday transactions, like spending on groceries and household bills.
Like with any bank account, it is your responsibility as the account holder to manage the funds kept in your checking account, including verifying transactions and balancing your account (that is, tracking the total money available in your account, including any pending transactions that may not have been posted yet). For instance, if you attempt to make a payment without sufficient funds in your account, you may be subject to fees such as an overdraft or returned item fee. Fortunately, financial institutions often provide tools and resources to help you budget your available funds and monitor transactions as they are posted, including online or mobile banking.
Types of Checking Accounts
Checking accounts can vary by institution and product type, offering different benefits or fee structures based on certain eligibility criteria. For instance,
- Traditional Checking Account – These refer to checking accounts that offer basic options for account holders, typically without any “extras.”
- Interest-Bearing Checking Accounts – These refer to checking accounts that include earn interest on money kept in the account. Depending on the financial institution, this account may require a threshold for minimum deposits or balances or account activity to be eligible for earning interest.
- Rewards Checking Accounts – These refer to checking accounts that allow you to earn “rewards” when you spend money from the account, similar to credit card rewards. An example of a reward that banks may offer is earning a certain percentage of cash back on qualified purchases.
- Student or Senior Checking Account – These types of accounts generally have eligibility requirements based on age and/or student enrollment status. They typically include benefits such as discounts or waived fees that cater to certain ages or lifestyles.
For all these checking account types and more, fees and minimum deposit amounts may vary. Be sure to explore your options and consider what type of account benefits or features would suit your needs and goals.
Advantages of Checking Accounts
Regardless of which type of checking account you choose, there are many common advantages to keeping one.
First, checking accounts help simplify the everyday management of your finances by providing a safer means to keep and access your money. Plus, your financial institution may offer resources to help you track your balance and budget your money expenses with online banking or mobile apps.
With a checking account, you can set up direct deposit for your paycheck or recurring income and take advantage of mobile deposit, saving you time and energy that might have been used handling in-person transactions. Many banks let you transfer funds between accounts and send money from your account to others, often without fees.
Finally, having a checking account at a federally-insured institution means that your funds are FDIC-insured up to $250,000 per depositor, per category, providing a level of security higher than keeping your funds in cash alone. To learn more about or calculate insurance coverage for personal accounts, visit the FDIC’s Electronic Deposit Insurance Estimator.
Note: Not all institutions that offer checking accounts are insured by the FDIC or National Credit Union Administration (NCUA). Anytime you open a checking account, including with an online banking entity, it is important to confirm if and how your funds are insured.
Disadvantages of a Checking Account
However, when you’re looking for the right type of checking account, keep in mind these considerations, which may cost you otherwise.
As with all types of bank accounts, there are usually fees on checking accounts, which may include monthly fees, overdraft fees, or minimum balance fees. These may be avoided by meeting account requirements, such as maintaining a minimum balance.
Inquire with your potential banking partner about fees or penalties associated with the checking account in question, and if there are ways to waive or avoid these potential fees.
Enjoy the Advantages of a Checking Account
Whether you’re receiving your first paycheck or looking for better ways to manage your finances, a checking account offers a convenient and secure place to manage your money. With options for direct deposit, online access, and even rewards, these accounts support everyday spending and help you stay on top of your budget.
At SouthEast Bank, we offer several different types of checking accounts to fit your needs and financial goals, many of which can be opened online with a $50 minimum deposit. Our team is always ready to provide assistance or help answer questions, so feel welcome to stop by a branch or contact us as you explore your options.
Information contained in this blog is for educational and informational purposes only. Nothing contained in this blog should be construed as financial, legal or tax advice. An attorney, financial advisor, and/or tax advisor should be consulted for advice based on your circumstances.
Links to other websites or references to services or applications are provided as a convenience only. A link does not imply SouthEast Bank’s sponsorship or approval of any other site, service or application. SouthEast Bank does not control the content of these sites, services or applications.
