There are a great number of things to consider before making the final decision of opening any type of banking account, but particularly a checking account. These decisions will ultimately help shape whether or not a person’s experience with the financial institution will be a good one or a nightmare. Exactly what sorts of things should be considered before making the final decision on opening a checking account and which financial institution to choose.
Paper checks, debit/ATM card, or both?
Many banks allow for the use of paper checks and debit/ATM cards both to be used on the very same account. If the banking customer fails to properly log their activities with their paper checks as well as their debit/ATM card, the result could end up costing the account holder hundreds of dollars in over-draft fees. It is best to stick with using one method over the other, or using one of them only in emergency situations, such as when they end up at a place that may not accept paper checks but will instead accept debit card transactions.
Location, minimum balances, and fees.
Most financial institutions require a constant minimum balance of a certain dollar amount or a minimum monthly account balance. Many of these institutions charge penalties for those who fail to maintain the minimum balances, monthly fees just for having the account, or a penalty fee for writing too many checks. It is best to first shop around before deciding on which institution to open up a checking account. Ask questions concerning the different types of checking accounts and options that may be available, and customers should ask for a printed schedule of fees that they can take with them in order to make a comparison to those made by other banking institutions. Location is another very important factor in making a decision in choosing which bank or institution to do business with. Even if a customer’s funds are all presented to the account by direct deposit, they should consider choosing a bank that is within a walking distance or a reasonable driving distance from their home, in the event that certain matters require more personal and direct attention.
When a check is presented and returned to the financial institution for any reason, both the bank and the merchant may present the check signer with returned check fees. Many states limit returned check fees to between $20-$40, but these do vary from state to state. Many banks also assess a monthly, weekly, or even daily fee against any and all outstanding checks, thus making it another reason that consumers should shop around before opening an account.
Multiple account holders.
Multiple people sharing access to the same checking account can be as beneficial as it can be disasterous. Maintaining a proper record of an accurate balance may or may not be more difficult, depending on how well each individual on the account communicates with the other. Three people each shopping at a different location on the exact same day, writing checks from the same account could prove to be a costly move. Having more than one account holder, even if their name is not printed on the check, means that each person is as equally responsible for maintaining the account. For example, If Jenny, Joe, and Harry each share the same account and Harry writes a bad check for $150.00, Jenny and Joe are just as responsible for paying back the debt, as well as any associated fees that arise from the incident, even if they were not the ones who signed off on the check.
Writing a check, as well as signing and presenting any check, is the same as making a written promise that the funds listed on the check are and will be available at any time the check is presented before its “Null and Void” date. Any check may bounce at any time, for any number of reasons.
The origin of the check does not matter, the person presenting it to be cashed is responsible for the authenticity of the check and the availability of the funds.
Checks bounce all of the time, even government checks and payroll checks, and this can happen for any number of reasons, from something as simple as a smudge on the check’s routing number and account verification area, illegible handwriting, an account has been closed or a number changed, to the date on the check being incorrect. When a person signs a check, they have just taken complete responsibility for making good on any debt that may arise as a result of the check being written. It is then up to the signer to make contact with the person, company, or municipality that presented them with the check to clear up the matter, as the matter between them and the original presenter of the check has become a civil matter. Some banks or companies may choose to go after the original writer of the check to recover the funds instead, but that is solely at their discretion, there is no legal mandate.
Most businesses rely upon the use of a check verification system before they will accept a paper check that is being presented for the purchase of goods or services. This is most common with larger businesses, franchises, or merchants who may offer credit lines to consumers. When a check is presented, the merchant’s computer systems makes contact with an electronic database that is maintained by a check verification company or system. There are many different check verification systems in the United States alone, the most popular two being Certegy and TeleCheck. These verifications do not verify the availability of the funds that the check is being presented for, but rather, it checks the database for statistics using the check’s account information, as well as the driver’s license/identification number of the person presenting the check. Sometimes, if an account is very recently established, below a certain check number, or the writer has recently had an outstanding check. There are many other reasons that a check may be declined at a point of sale. When this happens, the clerk should discretely explain that the check was declined by the check verification system and that there is a number available for the consumer to phone in order to find out more about why the check was declined. It should be noted that the clerks, under most federal, state, and local laws, are not able to contact the check verification system personally to retrieve this information for a consumer, as it may be a violation of privacy laws. It may also negatively affect other business that is being conducted at the time by slowing down line processing times. Ironically enough, many times when a check is declined at a point of sale, charges from the same account using a debit card may be accepted. This is not a guarantee of any sort that they will be, but instead, just a friendly tip.
It also needs to be as equally noted that some states and local governments enter all bad checks into a database that is accessible only by financial institutions. The information gathered from this particular database may or may not be a determining factor as to whether or not a financial institution will allow a customer to open up a new checking account. These databases were invented to help protect banks, merchants, and specialized lending institutions from those who would intentionally create bank accounts with the sole intent of committing fraud.
Availability of funds.
Writing a check before it has been verified whether or not a deposit has been released into an account is just a bad idea, regardless if the deposit is supposed to be a direct deposit. Occasionally there are factors that prevent a deposit from being released on a certain day or at a particular time, even if it normally is done so. The occurrence of holidays and verifications are just two of the reasons that these delays may occur. It may simply be cheaper, in the long run, just to pay the $5.00 late fee on the electric to mail the check after the release of funds instead of having to pay numerous NSF (non-sufficient funds) fees that might be incurred from the gamble of writing a check before the funds were already available.
What most people with checking accounts don’t know.
Many people do not realize the ramifications of having an outstanding and unpaid check against them. Even more people did not know that writing or signing a check that does not clear and failing to repay the cost of the check could lead to criminal charges being pressed against them. It does not matter whether or not the check bouncing was intentional. Failure to repay the debt against a bad check could also result in being unable to open up future accounts at financial institutions or bad marks being placed on their credit. The importance of maintaining good credit cannot be expressed enough as a person’s credit history can affect everything, even whether or not they get the job that they recently applied for.
Having a checking account is not a right, but a privilege that with which comes certain responsibilities. Although the importance of maintaining good money management practices is not emphasized enough in schools today, there are hundreds of thousands of educational resources available to consumers who are ready to arm themselves with the knowledge of responsible money and credit management.
For more information about checking accounts visit The Money Instructor at http://www.moneyinstructor.com/checks.asp .