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There are various accounts you can open in a financial institution for your financial goals. However, we have two main types of bank accounts. They include savings and checking accounts. You can open any of the accounts at a bank or credit union. Some mobile wallets also offer checking and savings accounts. For today, I will major in checking accounts. But what is a checking account?
I will discuss more checking accounts shortly and how they work to understand them properly before opening one. Some people open bank accounts without knowing how they operate. That is why some people open savings accounts while they mean checking accounts only to get restrictions about withdrawing their funds. Savings accounts do not allow withdrawals now and then. You have to withdraw at certain times of the month.
Nowadays, banks and credit unions allow you to open and manage your account online. That way, things become so easy that you do not have to line up at a bank or credit union office to open an account or make a particular transaction. The only challenge with online accounts is the risk of attack by hackers. However, if you are keen on your account operations, you cannot lose money that easily.
What is a checking account?
A checking account refers to a bank account that allows you to deposit money for everyday uses. The account allows access to your funds 24/7. Instead of keeping cash in the house for your expenditure, you should keep it in the bank for safety and convenience.
A checking account has a debit card to help you access your money. The card helps you to withdraw money or shop online.
How to open a checking account
If you need to open a checking account, you must research the best banks and credit unions with friendly terms and conditions. There are hundreds of banks and credit unions, each with its terms and conditions. You can get a free online checking account with no opening deposit and begin transacting with ease if you are keen enough.
Once you have chosen the most favorable bank or credit union to open an account with, you can begin your application. You can carry out the process either online or at a physical branch. When opening an account online, you need to submit your application details as precisely as possible. You should also upload all documents to the concerned institutions for approval. Online application is fast and efficient.
Opening a checking account at a bank’s physical branch is also applicable if you can access the nearest branch. You have to manually fill out some forms and attach photocopies of documents for verification. Once finished, you might get approval on the spot or wait for a few days for your account to be ready.
What are the requirements to open a checking account?
When opening a bank account, you require various things for the process to succeed. The following are what you will need for your account opening. Have a look.
- Social Security Number
- An identification document
- Physical address
- Phone number
- Email address
The Social Security Number helps the government track your working years for your retirement benefits, while the identification documents help ensure that only genuine people open an account. That way, terrorists and other criminals cannot access banking services.
To prove your physical address, you will need to provide the latest statement for your bill payments. These include water, internet, and electricity, among others.
Apart from the above, financial companies may require additional information. While some will require you to have no records with ChexSystems, others will allow you to open a checking account with no ChexSystems inquiries. That means you will be able to open a bank account even if you have poor banking records.
What are the factors to check when opening a checking account?
It is essential to check the ins and outs of any financial company before opening an account with them. There are various factors you should check before opening an account with any bank or credit union. They include the following.
1. Fees
Banks usually charge various fees, including monthly, annual, ATM, overdraft, and withdrawal fees. It is not possible to get an account without any fee. However, make sure that you open a checking account with fewer fees.
2. Ease of access
When opening a checking account, ensure that you can easily access funds from your account. You can have a checking account with online access so that you can access your money on the go using your smartphone. Online bank accounts allow you to view your transaction history, bank balances, and so on. It is possible to get an online bank account with an instant debit card that you can use to access money at an ATM.
3. Minimum deposit
Some financial companies require you to deposit some amounts of money in your account as the opening deposit, while others do not necessarily require a deposit as soon as you open an account.
4. Savings option
Some checking accounts allow you to save money when you maintain a particular balance. Such accounts are beautiful to help you grow your money. Checking accounts attracts immense interest, and you can easily earn lots of money from the account.
How do checking accounts work?
A checking account works in a simplified manner. When you open your account, you get an account number that distinguishes you from the rest of the account owners. The checking number allows you to receive money from others. You can also send money with a checking account number instantly to another account of the same bank like yours.
Checking accounts come with debit cards that are useful for everyday transactions. A debit card allows you to withdraw money from an ATM. Therefore, if you need cash from your checking account, you do not need to line up at a bank to withdraw money.
You can also make payments with your checking account. You can easily transfer money to someone’s account to get started. And you only need the account number of the recipient if sending money to an account of your bank. If sending money to another bank, you require the account and routing numbers of the recipient.
Remember that checking accounts become dormant when you do not use them. Some banks charge inactivity fees, and this can be a drawback to your financial advancement.
Can I open a checking account with bad credit?
You can open an account even if you have bad credit. Most banks are not concerned about your credit scores unless you apply for a credit card or a loan. What most banks Check is whether you are in the ChexSystems.
However, even if your name appears in the ChexSystems, you can still get a second chance of checking with no opening deposit. The account mainly allows you to rebuild your reputation with banks and credit unions.
Things that make you enter the ChexSystems include closing bank accounts with debts, bouncing checks, and other fraudulent transactions.
How can you use a checking account?
There are various kinds of transactions that you can do with a checking account. They include the following.
1. Buy goods and services
A checking account allows one to buy goods at retail stores as well as online. Therefore, you do not need to carry cash to purchase any goods or services. Most merchants accept payments by bank accounts. If you have a debit card for the account, you can use it to pay for goods and services.
2. Send money to others
You can conveniently move money from your account to someone else’s account. If you send the funds to someone from your bank, you will only need the recipient’s account number. As I mentioned earlier, transfering money to another bank requires both the routing and account numbers of the recipient.
3. Withdraw money
It is possible to withdraw money from your checking account using your debit card at an ATM. You require a PIN at the ATM to get money from the machine. The withdrawal transaction reflects in your checking account.
Also, you can withdraw money over the counter at your bank when you present your identification documents. Again, you can withdraw money over the counter using an ATM when you present your identification documents.
4. Save money
Some banks allow you to save money using your checking account when you maintain a certain balance in your account.
Can I grow credit scores with a checking account?
Using money in your checking account cannot help you to grow your credit scores. Banks do not report transaction activities for debit cards or checking accounts. You can use your checking account to register good account usage and avoid being listed in the ChexSystems.
However, if you get a loan via your checking account, you will grow your credit scores.
Conclusion
A checking account refers to a bank or credit union account which allows you to deposit and use the money for your daily needs. You can access your funds 24/7. You can open a checking account online or at a physical branch.
Checking accounts come with debit cards to help you conveniently access your money. You can utilize a checking account to purchase goods and services, send money, save money, and withdraw at an ATM or a physical branch.