For everyday banking and spending, checking accounts are the more common and flexible option. Nearly 90 percent of Americans have checking accounts, which tend to have fewer restrictions than savings accounts. Checking accounts allow you to deposit and withdraw money frequently, with few limits on account activity.
Common checking account fees
While checking accounts make it easy to access your money, they do come with some fees for certain items and activities. For example, your account might require you to maintain a minimum balance and charge a fee if you fall below this threshold, even just for one day. Check with your bank about how much this fee might be and often it can be charged if your balance remains below that threshold.
Some accounts may charge a monthly account/maintenance fee, in addition to other usage fees. This type of fee will likely be debited automatically from your account balance around the same time each month.
If you use a different bank's ATM to withdraw money or even check your balance, you could be charged a "foreign ATM" fee, which might be as much as $6 from each bank per transaction. If you will need to access cash regularly, make sure you choose a bank that has branches and ATMs near you.
Be extremely careful not to overdraw your account! Overdraft fees average around $30 per transaction, so if you pay for something and don't have enough in your account to cover it, your bank may deduct the overdraft fee in addition to the payment amount. You could also be charged an additional fee from the store or biller where you made the payment, so make sure you have enough in the bank to cover any payments you make. Online banking and mobile apps make it very easy to keep an eye on your bank account balance and activity.
Your checking account might come with a debit card, which conveniently allows you to pay bills or make purchases directly out of your bank balance. Debit cards usually have a 16-digit number (like a credit card) that is different from your checking account number. You can usually use this 16-digit number when making payments online, as with a credit card. Debit cards also double as ATM cards, so you can withdraw cash from your account. ATM withdrawals are typically subject to daily limits.
Debit cards tend to be safer than carrying cash; if you lose your card or the card number is compromised, you should be sure to contact your bank immediately to have the card cancelled and reissued. In some cases, you may be reimbursed by your bank for any fraudulent purchases.
Tip: Your bank is required to give you the option of allowing your debit card transactions to overdraw your account – for example, being able to make a $30 purchase when you only have $25 in the bank – or to opt out of this type of "overdraft coverage." On the one hand, if you're standing at the grocery store checkout, you might value this "convenience" so you can complete your purchase, but you could be charged a $30 bank fee if you don't notice the overdraft, or can't run straight to the bank and make a deposit to cover it. On the other hand, if you opt out of this feature, your card will be declined if you attempt to make a payment your balance can't cover – but then you will also avoid the hassle and expense of unnecessary bank fees.
Writing checks & paying bills
In addition to a debit card, your checking account may also come with a checkbook. Checks are much less commonly used and accepted for everyday purchases, but you might find that they are a convenient way to pay your bills, such as rent and utilities. Standard checks may come free with your account or be available for a small fee; custom checks with designs or logos tend to be more expensive.
Be careful with your checks: The routing number and account number at the bottom are a direct map to your bank account. If those numbers are compromised, they can be used by others to make purchases or payments (particularly online), and the only way to regain control of your account information in this case is usually to close your account and open a new one. You might rather use online bill payment through your bank's website, which is usually free, and might be faster and more secure than mailing a check.
Checks and online bill payment don't come with the overdraft "opt out" feature that debit cards have, so if you are writing a check or paying a bill online, make sure you keep enough in your account to cover it until the check is cashed.
Choosing a checking account
A checking account might be a good option for you if you will need to access your money frequently and easily, or if you might not be able to maintain a higher minimum balance, which is commonly required for savings accounts.
When selecting a bank, you should also consider location. Most credit unions and many smaller bank chains are regional. If you want to be able to access your account easily both at home and while at Northwestern, make sure you choose a bank that has branches and ATMs in both locations.
Some banks have special checking account deals for students, which might have lower monthly fees or no minimum balance requirements. Others might waive minimum balance or maintenance fees if you meet certain requirements, such as setting up a recurring direct deposit like a biweekly paycheck. Ask:
- What is the minimum balance to open the account?
- What are the account fees?
- Is there a monthly maintenance fee?
- Is there a minimum balance requirement? What are the fees if I fall below it?
- Is there a direct deposit requirement?
- What are the overdraft fees?
- What is the daily ATM/cash withdrawal limit?
- Does the bank have a phone app?
- Can I set up text or email notifications for my account balance and activity?
- Make sure your bank or credit union is FDIC-insured – if not, go somewhere else!