What are the basics of a checking account?

A lot of people have seen the benefits of having a checking account. The primary benefit of having a checking account is that they are safer than cash. Of course, before you start to shop around for the perfect bank, you need to know what the basics of this account so you know when you have the best deal. 

By definition, a checking account works a lot like a savings account because it enables the account owner to deposit and withdraw money. The main difference is that you don’t need to go to the bank to withdraw money – you can write a check payable to someone else’s name and they can go to the bank and encase it. Essentially, it enables you to provide other people the permission to withdraw from your account. These checks can be used as cash, you can use them to make purchases or use a service. 

I want to do this! What’s This?

Checks are usually personalized. They will bear your name, address and the check number. If you run a business, the name of the company will also appear on the check. It is recommended though that you put on the check your telephone number because it will give the payee a sense of trust and comfort since they have some way of contacting you in case they find trouble in encashing your check. 

Using a checking account is simple and fast but of course, before the money is issued to the payee, it has to undergo approval first. When a check is issued, it goes through several processes:

  • The check will be endorsed then deposited to the payee’s account or paid in cash.
  • The account gets credited – you get a deduction on your account.
  • Before the day ends, the check is processed and deposited in a Federal Reserve Bank in the locality.
  • Federal Reserve will then send the check to a bank which is nearest you or your business.
  • The check is brought back to you or your business firm or to the firm’s accounting department.
  • When the checks presented have enough funds, withdrawal is made out of your account and cash is wired to the Federal Reserve. In case the fund is insufficient, the check bounces back or is returned. 

At present, there are some banks which allow their clients to make a withdrawal out of their checking account with a debit card. These cards are also as good as cash and could be used to pay for goods and services. Since a checking account requires a minimum maintaining balance, it is important that you know your expenses so as not to exceed the limits. 

A wise checking account holder should be familiar with each and every technical terms used before, during and after opening an account. There are times when a seemingly simple mistake can lead to grave results. Our checking account involves our money so we can’t be too careless.

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