A checking account is a primary tool for managing personal finances. All checking accounts operate in a similar method by all banking institutions, but account features and charges vary among the banks. Maintaining a checking account has both advantages and disadvantages that must be considered prior to choosing a bank and its checking account options.
Check Cashing, Access and Security
The main advantages of a checking account are to save fees charged by storefronts that provide check cashing services, and the ability to access funds by writing checks, instead of carrying cash with you. Funds are kept in a secure environment, with accounts insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC)(as of 2019).
Direct Deposit
Having paychecks automatically deposited to a checking account allows you to obtain your money faster, and it saves time and energy associated with depositing the check yourself.
Account Fees
One of the biggest disadvantages of a checking account include the fees associated with using it. Fees may be a flat monthly rate, or per service fees that include talking with customer service. However, although most of the major bricks-and-mortar banks charge fees, many online banks now offer no-fee checking accounts.
Minimum Deposits
Some checking accounts require minimum balances of $100 or more. Often, banks sell this as an advantage for you to not be charged a flat monthly fee, or to earn a small amount of interest. The disadvantages include being charged fees if the balance falls below the required levels, and not being able to access all of the money that belongs to you.
Debit Cards
The majority of banks offer check cards for use with ATMs (Automated Teller Machines), and for making purchases anywhere Visa or MasterCard are accepted by using checking account funds without writing a check. Debit cards are used for online shopping, renting cars, purchasing tickets from airlines and to receive cash at many point-of-sale locations without ATM fees.
Disadvantages include overdraft fees and less security than ATM cards, because they can be used with just a signature instead of always requiring a Personal Identification Number (PIN).
Overdraft Fees
Overdraft fees are among the biggest disadvantages of using a checking account. Individuals are often caught by surprise thinking that they had sufficient funds for checks or debit card purchases. Banks charge overdraft fees even if the overdraft is only a few cents. They will attempt to process the check or debit a couple of days later, before a notice has been received by the account holder and after they have charged the initial overdraft fee to the account, which often results in another overdraft fee to the account.