Checking Accounts 101

The most obvious things in life are often overlooked, and your checking account is just one of them. Most people hardly give a thought to this necessary account and how to manage it best effectively. We’re here to change that.

Here’s all you need to know about checking accounts:

What is a checking account? 

Your checking account at Members Choice CU offers easy and convenient access to your funds. The minimum balance required for opening a checking account is $0. Like most financial institutions, we also allow an unlimited number of monthly withdrawals and deposits.

Checking accounts are designed to be used for everyday expenses. You can access the funds in your account via debit card, paper check, ATM or in-branch withdrawals, online transfer, or through online bill payment.

Making transactions using the connected debit card or through a linked online account will automatically use the available balance in your account and lower the balance appropriately.

A paper check is also linked directly to your account but will generally take up to two business days to clear. It’s vital to ensure enough funds are in your account to cover a purchase before paying with a check.

Maintenance fees 

Many banks charge a monthly maintenance fee for checking accounts.

According to Bankrate’s most recent survey on checking accounts, only 38% of banks now offer free checking, compared with 79% in 2009. Monthly fees can be as high as $25 a month.

Fortunately, as a member of a credit union, you never have to worry about steep fees. Members Choice CU checking accounts have no monthly service fees or hoops to jump through to receive a free checking account.  

Interest rates

Most checking accounts offer a low Annual Percentage Yield (APY) on deposited funds or none at all. Institutions that offer checking accounts with interest or dividends will generally charge a monthly fee, with the fee being higher for accounts that have higher rates. They also typically require a minimum balance in the account at all times or a minimum number of monthly debit card transactions. According to Bankrate’s survey, you’ll need to keep an average of $7,550 in an interest-yielding checking account at a bank to avoid a steep maintenance fee.

Members Choice CU currently offers a .15% interest rate on our checking accounts.

Security

The FDIC federally insures funds kept in a checking account at a bank for up to $250,000. Credit unions feature similar protection for your funds, with all federal credit unions offering government protection through the National Credit Union Share Insurance Fund (NCUSIF). State and private credit unions may be insured by the NCUSIF or through their state or private insurance. Members Choice CU is insured by the National Credit Union Administration (NCUA) to offer you complete protection for your funds.

Managing your checking account 

Managing a checking account is as simple as 1-2-3:

1 – Know your balance

It’s essential to know how much is in your account at all times. This way, you can avoid an overdrawn account or having insufficient funds to cover your purchases. Being aware of how much money you have will also help you stick to a budget and spend within your means. You can generally check your balance by phone or via online banking.

2 – Automate your finances

Make life a little easier by setting up automatic bill payment through your checking account. You won’t miss the hassle of paying your monthly bills, and you’ll never be late for a payment again. As a bonus, you’ll save on the processing fee that is often charged on bill payments made via credit card.

You can also set up direct deposit to have your paycheck land right in your account.

Finally, ask us about automatic monthly transfers from your checking account to savings, so you never forget to put money into savings.

You may also want to consider adding overdraft protection or a transfer from your linked savings account to checking when your balance is getting low.

3 – Keep your account well-funded but not overfunded

Financial experts recommend keeping one to two months’ worth of living expenses in your checking account at all times. This way, you’ll always have enough funds to cover your transactions without fear of your account being overdrawn. You’ll also be able to cover the occasional pre-authorization hold that a merchant may place on your debit card transaction until it clears.

It’s equally important not to keep too much money in your checking account. Once you’ve reached that sweet spot of two months of living expenses, it’s best to keep your savings in an account or an investment that offers a higher APY, such as a money market account or a share certificate.

Checking accounts offer the ultimate in convenience and accessibility. Now that you’ve learned all about these often overlooked accounts let this financial tool help you manage your finances in the most effective way possible.