A lot of young people want to become responsible as early as possible.
Many of them have jobs. Babysitting jobs, paper route jobs, and ultimately they start to take on some bills and responsibilities of their own.
A lot of this occurs around the age of 18. Banks realize that, and that’s why they’ve made that age pretty much an appropriate age for opening a checking account. If you’re younger than that and still want a checking account, it can be guaranteed by your parents and indeed by your grandparents if that’s the case as well. They would be responsible for the activity on your account, so you would have to be very mindful of that.
A checking account is one of the first financial instruments that a person gets in their life, and if they treat it accordingly it can be a barometer to build credit going forward with the financial institution that you have your checking account with.
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Checking accounts may be America’s most common transactional account, but they are also a classic case of a frequently used item that is imperfectly understood. You have probably had a number of checking account related questions over time, and you are not alone. Below you will find the top three questions about checking accounts and their answers for your reference.
Why can’t I access my deposits?
Checking accounts are designed to have money flowing in and out of them at the account holder’s will. This is why they are also known as demand deposit accounts. You make a deposit, you can demand that spending ability . . . or can you?
A unique feature of checking accounts are holds. Holds on checking accounts mean that even though a deposit has been made, the funds aren’t available for spending until a later date. The rules around holds can vary from bank to bank and between credit unions and banks, but at their core they are governed by Regulation CC, the Expedited Funds Availability Act.
The point of Reg CC, as it is called in the business, is not actually to be a monumental pain in the rear. The regulation was created to protect banks and consumers against check fraud. Unfortunately, the environment in which it was created was a time when paper checks were a predominant feature of consumer spending, unlike the plastic dominated and instant transfer culture that exists now.
Although regulations are in the works to change Reg CC, consumers at the moment have a bit of a conundrum. Thanks to another regulation known as Check 21, electronic version of checks are as good as paper checks, meaning that outgoing funds can be processed immediately, debiting the account on the spot. Incoming funds, on the other hand, still are subject to the hold rules, meaning that consumers have to wait for the full processing of the transaction before they can access their funds.
To manage around the applicable holds and prevent unnecessary insufficient funds charges or bounced checks, here are the basic rules on holds:
- Reg CC does not apply to checking accounts that are less than 30 days old. During this time, accounts are on high fraud watch by the bank and additional holds may be applied, which should be explained to you by the person who helps you open the account.
- Electronic direct deposited funds have to be made available the same day, as do the first $100 of other deposits.
- Funds have to be available after two business days for local checks and the first $4,900 of large deposits
- Funds have to be available after five business days for non-local checks
There are additional exception holds on the market, generally put in place on extremely large deposits and suspected fraudulent checks, but these will usually be explained at the time of deposit by the teller.
What are all these fees?
Although free checking accounts are advertised all over the banking world, most checking account holders are well acquainted with fees. Checking account fees can include transaction based fees, cash access fees for using non-network ATMs, overdraft fees, and monthly service fees.
It really does pay to take the initial fine print forms that come with an account and get to know them well. These will explain exactly which activities trigger fees, so that they can be better avoided. With all the choices available on the market, it doesn’t make sense to pay fees for basic checking, so read carefully and shop around to get the best no-fee accounts.
What special benefits am I missing?
Modern checking accounts often have special account holder benefits associated with them. These can include purchase protection, travel insurance, life insurance, membership discounts at participating merchants, and the opportunities to earn points for rewards. These programs can change rapidly, so it pays to refresh yourself annually on the benefits associated with your account.
The most common new benefit is a points/rewards program for certain types of spending. As participating merchants will change more than the underlying program, bookmarking benefits explanation page for the program (most are online) will ensure that you don’t miss any of the associated benefits of your checking account.
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Checking accounts are one of the bank industry’s most changeable accounts. Although they are governed by federal regulations, such as Reg D about interest rates and Reg CC about funds availability, individual banks still have a great deal of flexibility for setting terms, fees, and features. Keeping abreast of the latest news and developments helps make you a more informed consumer and ensures that nothing takes you by surprise.
Regulatory Changes
The most recent major regulatory change to checking account usage happened in 2004, with the implementation of Check 21. Check 21 changed the way that checks were processed, allowing instant debits of checking purchases at the point of sale and eliminating the float period that many consumers had been relying on to manage their money. A big deal at the time, Check 21 has faded somewhat in importance with the rise of debit cards in the last five years, which also provide real-time charging.
However, there are some after effects of Check 21 that continue to percolate through the regulatory system. The biggest motivation is the perceived consumer unfairness created by Check 21. While debits are instantaneous, deposits are still subject to extended holding rules, causing consumers to bounce checks and incur overdraft fees.
To even the playing field, a law known as the Consumer Checking Account Fairness Act was introduced in 2005. Basically, the law proposed to make funds instantly available in the same way that debits were instantly charged. The bill was sent to committee, and never emerged.
The sentiment behind the legislation remained, however. Some of the laws tenets were incorporated in the Obama’s administrations advice to lenders and credit card companies. It is likely that further regulatory response to Check 21 will occur, so as a consumer you should monitor any funds availability updates you get from your financial institution related to your checking account.
Mobility Upgrades and Virtual Deposit
One of the major developments in checking accounts has been closely tied to the advances in technology and mobile Internet applications. Now that millions of American account holders have the Internet in their hands all day long courtesy of their phones, financial institutions have upped the ante on mobile banking. There are applications for bill paying, balance checking, and funds transfers for most major phone networks.
Mobile banking has also forced many financial institutions to add layers of security to their online banking platforms to prevent unauthorized access and consumer fraud. Photo verifications, additional security questions, and new PIN numbers are all common.
Another technology driven update are the current innovations in virtual deposit. With virtual deposit, approved consumers can scan checks in for deposit in the bank account from home. This provides small business owners and many others with the convenience of not needing to go to a branch. However, as the technology is quite new, it is not available in all areas or from all banks.
Features and Protections
The other major developments you need to know about checking accounts have to do with bonus features and consumer protection services. Checking accounts are no longer plain vanilla institutions. Now, most checking account types come with added bonuses.
For features, the most common innovations are points or rewards programs. With your regular spending behavior, you can earn incentives for continuing to use the account. You may also earn discounts or rebates from participating merchants.
In some cases, the rewards programs and points are also tied to savings accounts. These innovations can be particularly helpful in the tight economy, as some offer matching funds for savings account transfers. Most programs target debit card users, but there are also rewards and matching services for those who simply fulfill a certain set of checking account transaction requirements.
For consumer protection services, there are additions regarding insurance and fraud issues. On the insurance side, many checking accounts now offer purchase insurance for defective items, which can be particularly helpful if the store won’t take the item back. On the fraud side, new consumer fraud alerts, spending pattern analysis tools, and identity protection services have been added to prevent losses and make life easier for those concerned about identity theft.
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From basic free checking to bonus gold accounts, there are certainly a number of different kinds of checking accounts available to consumers. The average bank offers three to five different kinds of checking accounts, many with features unique to that particular institution. Finding the best checking accounts can take time and be a confusing challenge unless you are organized about your search. Here are four tips to help you ensure that you get the best checking account possible.
Tip #1: Understand Your Needs
Banks, credit unions, and online checking account providers are competing fiercely with each other to see who can offer the most perks, benefits, and other special features. This war of bonus features is a win for you as a consumer, but only if you know how to take advantage of all the special offers. Signing up for an account that has tons of bells and whistles is great, but only if you can actually use them.
As you start looking for a good checking account, think about the way you spend and the ways that you like to access your money, pay your bills, and monitor your spending. This can have a dramatic impact on which accounts are going to give you the most benefit. For example, if you always get your cash as cash back from the grocery store, then an account with no ATM fees doesn’t benefit you at all. You might, on the other hand, get more satisfaction out of an account that gives you cash back for shopping at the local supermarket.
Tip #2: Watch Out For Fees
Checking accounts have fees. Not all of them apply to you all the time, but knowing what they are and how they might apply is important. You will save yourself anger, headaches, and stress by knowing about all the relevant fees associated with your checking account in advance.
Pay particular attention to activity based fees. Know what it will cost you to get money from an out of network ATM, or what you will be charged if your balance dips below a certain level. These are good apples to apples points of comparison that can help you choose an account that won’t cost you an arm and a leg.
Maintenance and account service fees are also something to consider. While some people shy away any account with a monthly service fee, sometimes the associated benefits more than offset the cost. Understand the benefits you are entitled to with the fees before rejecting these kinds of accounts outright.
Tip #3: Look For Good Access
A big part of checking account usage for most consumers is the ongoing monitoring of their account balance and the ability to readily access their cash. Thus, access points on a checking account are crucial points to consider. You’ll want to consider the ATM network, the mobile or online account features, and your ability to move funds freely.
Checking accounts that provide more options for access help you integrate smart financial management into your daily life. Mobile banking access, telephone banks, and a broad ATM network all help reduce the stress of managing your money. In general, the more access points you have, and especially the more access points you have for free, the better the checking account is for you.
Ranking your personal preference for account access can also help you weed through your options. If you like telephone backing, but the account only has an iPhone banking application, it’s not a match. Sort account not by what’s cool, but by what works for you.
It really is a war for your business in the financial services sector. As a result, to ensure that you have the best checking account at all times, it pays to continually shop around. Make it an annual tradition if you like, but be sure to take the time to see what’s new in the market and assess if new features are more attractive than your current features. By keeping your eyes open to new developments and keeping abreast of new benefits, you will be able to get the most out of your checking account relationships.
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Checking accounts are one of the most common financial accounts in the United States. However, while they are a first account for many, checking accounts are rarely completely understood by their owners. Learning about the basic features history, major types, special features, and modern developments around checking accounts can help you get more out of your banking relationships.
Basic Features of Checking Accounts
Checking accounts are basic transactional accounts. Consumers can deposit, withdraw, or transfer funds at will. This ability to move money demand has led checking accounts to be called Demand Deposit Accounts in some banking circles.
Checking accounts may or may not carry service fees or account maintenance fees. This varies sharply by financial institution, account balances, and volumes of transactions in the accounts. Checks are not necessarily included free of charge with the accounts. Basic fees associated with checking account usage are:
- Monthly fees. Monthly fees for checking accounts can be assessed or avoided depending on consumer decisions. Many fee based accounts have extra features, but free checking accounts are also available.
- Processing charges on checks. These are fees charged for checks written, especially on high volume accounts.
- Access fees (ATM fees). To get money from the account at any time, you have the option to use in network or out of network ATMs. Most banks and credit institutions charge ATM fees for out of network transactions.
- Overdraft fees. Many checking accounts charge penalties for overdrawing the account, in the form of bounced check or overdraft fees.
The History of Checking Accounts
Checking accounts have a long and colorful history. Some sources claim that checks were invented by the Romans, although others dispute this as checking writing didn’t really catch on as a practice until the Renaissance. Dutch traders in Amsterdam found it inconvenient to take all of their cash around with them, so they left it with cashiers and wrote notes between them.
Checking accounts truly caught about 200 years later, and were a feature in the American colonies as cash money was often in short supply. Checks served as local currency, and the federal deposit bank system emerged to process all of the checks that went back and forth. Checking accounts swiftly became the dominant transaction accounts for individuals, and retain that dominance today, even though debit cards have replaced paper checks in many cases.
Major Types of Checking Accounts
Checking accounts are available as transactional accounts with or without associated fees. In general, the marketplace distinguishes between so-called “free” checking accounts and accounts that are fee based or require a minimum balance.
Free checking accounts are quite popular, but have few features. ATM charges, charges for checks, and fees related to account balances are often associated with these accounts. These charges are bank’s ways to offset the cost of operating the account.
Fee based checking accounts offer additional features in return for a recurring monthly charge. Often, this charge is waived if a minimum balance is maintained. Benefits may include free checks, no fee ATM withdrawals, or other members – only style benefits.
Special Features of Checking Accounts
There are two main special features that consumers need to attend to on checking accounts. These features are float and holds.
Float refers to the time period between when a check is written and when the check (or debit transaction) clears the account. The money to cover the check remains in the account, making it appear that balances are higher than they really will be once the funds clear. It is important to keep track of float to ensure that overdrafts are avoided.
Holds are another special feature of checking accounts. Like float, holds refer to a gap in time between when a transaction occurs and when the funds related to that transaction are in the right account. However, unlike float, holds on funds mean that you can’t access the money until the transaction is completely processed. Depending on the source of the funds, hold times will vary.
Modern Developments Around Checking Accounts
Checking accounts continue to develop new features in response to shifts in consumer behaviors. For example, as little as five years ago all checking accounts came with checks, while now all checking accounts have the option to have debit cards in lieu of any paper checks associated with the accounts. However, the switch to plastic account access methods is not the only modern development related to checking accounts.
In addition to being basic transactional accounts, many checking accounts now also function as membership accounts. Account holders can get discounts at participating merchants, earn points towards rewards, and enjoy purchase protections on good bought with the checking account. These membership type benefits shift rapidly, so it is always a good idea to stay on top of promotions and changes to maximize your personal benefit.
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