FDIC Money Smart Financial Education Program

Transcription

1 Check it Out Use this tip sheet to help you in the process of selecting, opening, and maintaining a checking account. This tip sheet covers the following topics: Determining your checking account needs Finding the best account for you Knowing what fees to expect Balancing your checkbook Choosing a Checking Account Overdraft Options Tip #1 Determine Your Checking Account Needs In order to select the checking account that best fits your needs, ask yourself the following important questions: Consider 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? Consider Costs: 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?

2 Tip #2 Find the Best Account for You Based on your responses to the questions in Tip #1, use the following checklist to help you to select the checking account that is best for you. Bank Name: Bank A Bank B Bank C Low-Cost Checking: 1. Monthly fee? 2. Number of free checks per month? ATM-Checking: 1. Paycheck direct deposit? 2. Monthly fee? 3. Unlimited check writing? 4. Fee for teller services? Regular Checking: 1. Minimum balance or monthly fee? 2. Unlimited check writing? Interest Checking Account: 1. Minimum balance or monthly fee? 2. Amount of interest? 3. Transaction restrictions? Additional Considerations: 1. What, if any, fees will be charged? (Refer to checking account fees.) 2. Is it close to your home or work? 3. Does that bank offer other services that are important to you?

3 Tip #3 Know What Fees To Expect There are many fees associated with checking accounts. Knowing what fees are typical and reasonable will help you to find the checking account that best fits your needs. Monthly Service Fee Also called a maintenance fee. The bank might charge a fee each month just for having the account. You might also be charged a fee if your balance drops below the required minimum. Per Check Fee Some accounts charge a fee for each check you write. Depending on the account, you might pay the fee for each check or only when you write more than a certain number of checks (perhaps five) a month. Check Printing Fee You can buy checks from the bank or through the mail from other companies. If you buy checks from the bank, the charge for printing the checks is usually automatically deducted from your checking account. Fancy checks cost more than basic checks. You can buy more than one box at a time. Carbon copy checks are an option. ATM-Use Fee You might be charged each time you use the ATM at your bank or each time you use an ATM at a bank other than your own. Overdraft Fee Also called non-sufficient funds (NSF) fee. Expensive fees apply when you bounce a check. The bank will notify you if a check is returned to the person or company to whom it was issued because there were insufficient funds in the account. Your bank will charge a processing fee to your account because of the cost to return the check. Merchants might also charge a fee if a bounced check is used to purchase goods or services. The fee charged is usually posted near the cashier. Returned Deposit Item Banks might charge a fee if a check you deposit in your account bounces. Stop-Payment Fee If you lose a check or need to make sure a check is not paid by the bank for some other reason, you can request a stop payment. There is a fee for this service, and the bank might not be able to catch the check before it is paid. Phone Inquiry Fee

4 Some banks charge a fee if you call to check your balance or to see if a check or deposit has cleared. Fee for Helping You Balance Your Checkbook Some banks will help you balance your checkbook. Others might charge you for this service. Teller Fee Some banks may charge a fee if you use a teller to make deposits or withdrawals more than a set number of times each month. Banks that charge this fee do so to encourage you to use an ATM for your basic banking transactions.

5 Tip #4 Balance Your Checkbook Your check register is a tool that will help you to know how much money you have in your account at all times. Each time you put money into your account, write a check, or take money out, you should record key pieces of information in your check register. Follow these steps to balance your checkbook: 1. Record the Check Number If you are writing a check, record the check number (usually the first column on your check register). 2. Record the Date Record the date you wrote a check, made a deposit, took money out (made a withdrawal) or were charged a service fee. 3. Describe the Transaction that Took Place Record items, such as who you wrote the check to, reason for the deposit, or the location of the withdrawal (such as ATM or debit card), in the large blank space. 4. Record the Payment/Debit Record the dollar amount of checks written, ATM withdrawals, or debit card transactions. 5. Describe Fees Record any fees charged, such as a monthly maintenance fee or an ATM fee. 6. Note Deposit/Credit (+) Made to Your Account Record any deposits or credits made to your account. 7. Calculate the Balance Add any deposits or credits and subtract any fees, payments, or other debits to your account to determine how much money is available in your checking account.

6 Tip #5 Choosing a Checking Account 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. Keep in mind that banks sometimes refer to these accounts by different names. Before making a decision, read the materials (disclosures) and ask questions to understand which checking account best fits your needs. The main types of checking accounts include: Free/Low-Cost Checking If you do not plan to write many checks, a free or low-cost checking account might be right for you. The charge for a low-cost checking account is often no more than $5 per month. However, there may be a limit to the number of checks you can write. Electronic/ATM Checking This account usually requires you to use direct deposit. If you do not plan to use teller services often, an electronic checking account might be right for you. This type of account usually allows you to write an unlimited amount of checks per month without incurring a fee for each check you write. However, you may be charged for in-person teller services. Regular Checking With a regular checking account, there is usually a minimum balance required to waive the monthly service fee. This type of account usually offers unlimited check-writing privileges. Interest-Bearing Checking There are also different interest-bearing accounts: The Negotiable Order of Withdrawal (NOW) account. The Money Market Deposit Account (MMDA). With these accounts, you usually have to maintain a high minimum balance in order to earn interest and avoid fees. The minimum balance is usually at least $1,000.

7 Tip #6 Overdraft Options Do nothing No protection Overdraft Protection Line of Credit Bounce Coverage or Courtesy Overdraft Linking savings account to checking account Consequences with check payee Potential of incurring substantial fees; criminal prosecution; creating negative relationship with payee None, provided the line of credit is sufficient to cover the overdraft. None, provided the bank chooses to cover the overdraft. None, provided the savings account balance is sufficient to cover the overdraft. Cost Bank and check payee may each assess a sizable fee for each item (often at least $30). Generally, you will pay interest on the outstanding balance. You may also incur a fixed advance fee or an annual fee. Plans vary, but most banks charge a flat fee (often $20 to $30) for each item. Generally, no fee, or a fixed transfer fee (often less than $10). N/A How to get Submit a credit application. Request to enroll; bank will likely have a specific procedure or application. Request to enroll in this program, if offered by your institution.

8 Additional Information Go to the Information Booth in the CBI to find out more about these areas: Under Checks Check Example Understanding the Preprinted Information on Your Checks Under Checking Account An Example of Bounce Protection Checking Account Fees Choosing a Checking Account Consequences of Bouncing a Check Determine Your Checking Account Needs Types of Checking Accounts Under Check Writing Tips Check Example Deposit Slip for Cash Example Checking Account Register How to Correct a Mistake on a Check How to Write a Check for Cash Less Cash Received Deposit Slip