Checking Accounts
What is a checking account? A checking account is a bank account that stores money until you want to access it. You can write checks from and link an ATM or Debit card to your checking account. Since the depositor has the right to the funds at any time, these accounts are called demand accounts. Typically, checking accounts do not earn interest and the ones that do require a minimum balance at all times. This means that if the minimum balance is $1,000, you will need to keep at least $1,000 in your account at all times, even after you withdraw funds. If you do not want to worry about a minimum balance and you want the option of making frequent withdrawals, then a non-interest-bearing checking account may be best for you.
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| Checking Accounts |
In the past, writing checks was the standard method for withdrawing money from a checking account. In recent years, however, check writing has been on the decline. For instance, in 2009 "U.S. consumers and businesses wrote 28 billion checks" but this number is decreasing by 1.8 billion checks per year. One study, completed by the Philidelphia Fed, predicts check writing will become a thing of the past by 2026 (Thomas, 2013, para. 8).
Paying by check is an alternative to carrying around cash. Instead of paying cash for new shoes, you can write a check. Writing a check is also the best way to pay your bills by mail; most utility companies will not accept cash as a mail-in payment. While checks are the preferred method of payment by mail, it is important to note that fewer and fewer businesses are accepting checks for face-to-face purchases, preferring debit cards instead.
Safety Tip: You should NEVER send cash through the mail. The greatest danger in sending cash is theft when the envelope is opened by an employee. And, if the envelope opens or gets lost in transit, your cash is gone and you do not have a receipt. However, if you pay by check, the check itself is your proof of payment. When a check is cashed, you will be able to see your payment on your bank statement.
If you do write checks, remember that you never want to write checks for more than the balance of your checking account. If you do, your checks will bounce, people won’t get paid, you will be charged additional fees and your credit rating will suffer. In order to ensure you have enough funds in your checking account to cover checks written, it is imperative that you reconcile your checking account versus your monthly statement and monitor your checking account using the online banking options available through your financial institution.
The Reconciliation Process
Reconciliation is a process that people perform monthly once they recieve their bank statement from their financial institution (either by mail or via their online banking website). In very general terms, reconciliation is the process of comparing your personal records of your account (receipts, check registers, etc.) versus the bank's record of your account and noting and adjusting for any discrepancies.
Check out the following video on reconciling your checking account.
Reference:
Thomas, O. (2013, March 13). The death of the paper check. Retrived from http://www.businessinsider.com/the-death-of-the-paper-check-2013-3
