Are you unsure of how to use your new checking account? Don’t worry, you’re not alone. Around 14 million adults just in the US do not have any type of bank account. This figure is even higher in other countries, like Mexico, where about 37% of adults don’t have any type of bank account.
Learning how to use a checking account is one of the most important foundations to your financial health. Without one, you can lose out on many important benefits that account holders enjoy. If you’re not quite sure how to get started using yours, keep reading to learn how.
How does a checking account work?
A checking account is a type of bank account into which you can deposit money or from which you can withdraw money by using checks, a debit card, an ATM, or transfers. Most checking accounts don’t earn as much interest as savings accounts, but they let you safely house your money and make it available for easy use.
Checks
A check is a document that is used to transfer funds from your checking account to another one after making a purchase. After signing and dating this document with the transaction cost, the recipient cashes or deposits a check at a bank or ATM machine in order to complete the transfer of funds from one account to another.
You can get checks from your bank in order to withdraw funds from your account.
Debit card
After you open a checking account, most banks will provide you with a debit card so that you can make purchases and ATM transactions. Like checks, debit cards take the cost of a transaction out of your existing account funds. In other words, debit cards are checks in card form.
ATM
An ATM, or Automatic Teller Machine, is like a self-serve bank vending machine. ATMs complete many of the same functions that a teller in a bank can. Most ATMs allow users to withdraw money and check account balances.
Some specialized ATMs permit patrons to perform additional functions, including check and cash deposits, transfers, payment processing, and other services. This is one way you can withdraw or deposit funds in your checking account.
Transfer
You can also make or receive money transfers using your account with the help of a bank teller, online banking, or a banking app. Whether you make a wire transfer or an electronic transfer, usually you fill out a form including your own bank information and the recipient’s legal name, their ID number, and bank account number.
With this information, you simply indicate the amount you wish to transfer online or with the teller and to whom. On banking apps, the process is usually similar, but it may require additional steps of verification using email or text messaging.
Why should I open a checking account?
Stashing your money in a bank account is far safer than squirreling it away into a piggy bank or under your mattress. Bank security, regulations, and FDIC insurance protect your bank accounts far better than home security.
Aside from security reasons, opening a bank account is also important to your financial health. This financial instrument can help you develop savings, build credit, and take advantage of investment opportunities. Plus, it is a key component to developing your financial independence.
Opening a checking account is key to improving your financial fitness. It allows you to safeguard your money and makes it easier to access for transactions. Remember that keeping your money safe and investing aren’t luxuries for the wealthy, even when your budget is tight.
Keep exploring our financial literacy library to learn more tips to grow your money!
