What is a checking account?
A checking account is a must in our daily life. When you are out to dinner or shopping online, the most popular payment method is through your checking account.
Almost everyone has a checking account, which allows withdrawals and deposits. A checking account is also called a demand account or a transactional account. Money in a checking account is of high liquidity, which can be accessed via checks, automated teller machines and electronic debits. There’s no limits for withdrawal and deposits from a checking account.
Nowadays, with the development of technology, more and more procedures are simplified and can be done in your smart phones via apps. This kind of electronic transfer no longer needs paper checks. Customers can also set up automatic payments monthly to make life more convenient.
However, in order to reach high liquidity, a checking account typically does not offer a high interest rate or no interest at all.
If you only have $20 in balance but you need to pay $25 for your purchase, what can you do? Your bank may help you cover the difference, if you choose a checking account with overdraft coverage.
It helps, most of the time. The overdraft coverage can help avoid awkward situations when you don’t have enough money in your account and make a successful payment.
However, sometimes you may not aware that, banks will charge you overdraft fees for each transaction that overdrew your account. Soma banks charge high overdraft fees. Furthermore, if your account remains overdrawn, your bank may also charge you daily interest on the loan. Yet, there are banks that can forgive one to three overdraft charges in a one-year period if you call and ask for cancelation.
Since the payment procedure is easier than before, it is riskier if your checkbook or debit card is stolen. Others may purchase stuffs with your own card. Therefore, it is important to report it immediately in order to avoid losing a large amount of money.
So, if you have a lot of money, keep them in a saving account or other type of investment tools.