Checking Accounts
A checking account offers quick and convenient accessibility to your funds. Depositing money into a checking account provides you with a record (receipt) of bills that you have paid. Funds in a checking account is safer than carrying large amounts of cash. If your checks are lost or stolen, you can close your account and your liability would be limited. It is important to store your blank checks in a safe place. Someone may be able to gain information on your account or attempt to gain access to your account.
Regular Checking Account:
You can write unlimited checks and make as many deposits as you wish. The fee to maintain this account is normally waived if you keep the required balance. Check to see how the balance to waive maintenance fee is calculated.
Limited or low cost checking accounts:
If you write a very limited amounts of checks and keep a relatively low balance, check to see if the bank offers a low-cost flat fee account. With these accounts you are not normally not required to maintain a certain balance. These accounts may also be recommended for students that write very few checks.
Deposit Checking accounts:
Some banks offer a free checking account as long your employer directly deposits your payroll into your account. Instead of receiving a paycheck from you employer you will receive a voucher with all the breakdown of information. This can be a very convenient method. You won’t have to stand in line at the bank to make your deposits.
Interest Checking:
Interest rates paid on these accounts currently pay under 2%. You may avoid paying a service fee if you keep the balance to waive maintenance fee in your account. This is a convenient account if you keep high balances in your account. Another preferred method would be to keep a higher paying money market account and transfer as needed to your checking account. Seemoney market account for restrictions of transfers.
Federal Deposit Insurance Corporation, better known as FDIC:
Banks that are covered under this insurance are required to display the sign. In the event of a failure of a bank or savings association, FDIC will cover a single ownership account up to $100,000, including principal and interest. For more information see the FDIC website at www.FDIC.gov
Lost or Stolen Checks:
Always keep your stock of black checks in a safe place. If the event that your checks are lost or stolen notify your bank immediately. If you know exactly which check is missing you may be able to put a stop on the one check. However, if you are missing a number of checks it would be best to close your account and open a new one. If you have other checks issued but not cashed (outstanding) work with you bank so they may be paid.
Balance to waive Maintenance Fee:
There are several different methods when it come to the required balance to waive a maintenance or service charge. A daily minimum collected balance means the balance can never fall below a certain limit and funds have already been collected. Other accounts may require an average collected balance. This is just like it sounds, if the average collected balance is say $1000. The balance may fall below the benchmark, however, the average must be $1000.
Linked Accounts:
You may link a checking account to a savings account to cover any overdrafts. This way if you do not have enough funds to cover a check, the funds will be automatically transferred from a linked savings account. You may also want to link accounts so that you can transfer funds from checking to savings and visa versa.
Interest Compounding:
What does compounding mean? If interest is compounded daily you will be earning more than if it were compounding monthly or quarterly. The more frequent interest is compounded and added to an account the more value the account will have. If a bank compounds interest every day you be effectively earning more interest than if it compounded monthly. Banks are required to quote the annual percentage yield at the time you open your account. This will be a true reflection of how much you earn.
Savings Accounts
Having a savings account will give you a little peace of mind. You may wish to open more than one type of interest bearing account. One for short term needs, that is more accessible and perhaps a higher paying account for long term savings.
Savings Accounts:
The minimum balance for opening a savings account is normally $100 to $200. Most basicsavings accounts have limitations on withdrawals or transfers per month before the bank imposes a fee. Basic savings right now are paying somewhere below 2%. These accounts may also be linked to a checking account. On a statement account the bank will regularly send you a statement showing the current balance, reflecting any transactions made. If you tend to make a number of transactions you might ask for a passbook savings. The bank will give you a little book where they record each transaction. This may be a little easier in tracking your accounts.
Money Market Accounts:
Money market accounts require higher opening balances and if the balance falls below a certain level a fee may be imposed. You may have no more than 6 transfers on the account to yourself or a third party (3 may be by checks). The transfer restriction is by federal law. If excessive transactions occur, the bank is required to notify you and close the account or cease paying interest. These accounts may not be FDIC insured. Also check to how often the interest is compounded.
Certificate of Deposits:
With the introduction of money market accounts, the certificate of deposits (C.D.) are not as popular as they once were. With C.D.s you are required to leave you funds in the account for a certain period of time (term). The interest rates are tiered to the dollar amount and the length of time that you pledge your money. Let’s say you open a C. D. account and six months later you sudden discover that you need the money for an emergency. You will not only forfeit some of the interest, since it did not run until maturity. You will also end up paying a penalty charge. If there is insufficient interest to off set the penalty, the fee may be taken out of the principal.
If you let the C.D. run until maturity, you will have 10 days after maturity to close the account or convert the money to some other type of account. If you fail to notify the bank, the C.D. will roll over to the same term C.D. that you had before.
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