Checking Accounts and Check Writing: How To’s

What Is A Checking Account | What You Need To Know About Checking Accounts

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A checking account is a bank account that you use for everyday expenses, such as bills or any time you need money right away. There are no limits per month as to how many times you can access your money, though you generally earn much less interest than a savings account.

What is a Checking Account?

Checking accounts are used in everyday life. Whether it's writing checks to pay bills, or depositing money or checks from work, or using a debit or ATM card to get cash at a machine, checking accounts are your one-stop shop to access your money whenever you need it.

Banks expect customers to use their checking accounts often, and because of that, checking accounts are usually made as convenient as possible. This includes the bank providing you checkbooks, debit cards, mobile apps, and payment services to customers.

Do Checking Accounts Have Fees?

Unlike savings accounts, which limit your monthly transactions, checking accounts generally have unlimited transactions. Since money moves in and out of checking accounts frequently, banks have to keep more cash in reserve to accommodate. To compensate for this, banks typically charge fees. The two most common fees are monthly maintenance fees and overdraft fees.

Maintenance Fees

A typical monthly maintenance fee can be as high as $15 a month. Generally, having a minimum balance or setting up direct deposit can get these fees waived. Avoid banks that have maintenance fees, or keep your balance over the minimum.

Overdraft Fees

When you have a checking account, you can sign up for overdraft protection. Overdraft protection allows transactions to go through that would normally fail due to insufficient funds, but it will cost a fee.

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For example, if you have $100 in checking and use your debit card to pay for something that costs $120, instead of your card getting declined, your balance would be reduced to negative $20, and you would be charged a fee. The average overdraft fee is approximately $35 per transaction.

Avoid overdraft fees and overdrawing your account like the plague. A $35 fee is about the equivalent of the interest you'd earn with $2,000 in a high-yield savings account for one year.

ATM Fees

Some banks charge a foreign ATM fee. If you use an ATM that is not part of your bank, you may have to pay a few dollars. When possible, look for banks that don't charge ATM fees. Many online banks fall into this category.

Bottom Line for Fees

If you're looking for a financial institution with minimal fees and a high interest rate on your money, I personally use Charles Schwab. If you open a Charles Schwab account with this link, Schwab will give you up to $500 after your first qualifying deposit. Whenever you can, fee-free is the way to go.

Are Checking Accounts Safe?

Checking accounts through FDIC banks or NCUA credit unions are insured up to $250,000 per owner, per bank.

Before opening a checking account, read about the bank's fraud policy if you are the victim of someone stealing your debit card or checking account information. Fraud is a risk of having a checking account.

Benefits and Drawbacks

Benefits

Checking accounts are a great place to store immediate-need money. It's handy for whenever you need to write a check, such as to send a gift to someone, or pay a bill that you can't pay online.

I use mine as the source that feeds everything else. Our income comes into our checking account. Then, money from the checking account is automatically sent to pay our bills, pay our credit cards, add to our savings account, and grow our investment and retirement accounts further. Automatic payments make life a lot easier.

Drawbacks

Many checking accounts have minimal to no interest rate paid out to you. That means all money in the account is generally not growing much, if at all. Consider opening a high-yield savings account with money you don't immediately need!

How to Write a Check

Below is a picture of what the front of a check looks like, this one for a fictional person for a fictional bank.

The owner of this sample check is John Smith, which is seen in the upper lefthand corner of the check. His address is included underneath. Below that is where you write the name of the person who the check is for.

If anyone can cash the check, you write “Cash”. When writing “Cash”, you give anyone the ability to cash your check, so only do this if you truly intend for anyone to cash it.

Below the “Pay to the order of” line, you write the dollar amount, in words, for how much the check is for. For example, if the check is for $250.25, you would write, “Two Hundred Fifty Dollars 25/100”, where 25/100 means 25 cents.

In the small box to the right of the “Pay to the order of”, where you see the dollar sign, you would write, in numbers, how much the check is for. In this case, you would write 250.25. 

On the upper righthand corner, you'll see a line for today's date. Add today's date there. At the bottom of the check, you'll see the word “For” on the left. This is the memo line and can be left blank, or you can write in what the check is meant for, such as “Rent” or “Car repairs”. 

Finally, the bottom right line is for your signature. A check cannot be cashed if the issuer doesn't sign it.

The numbers on the bottom left of the check is the bank's routing number. To the right of that is the issuer's bank account number.

It is very important to be very careful about signing a check without an amount written and a person to pay to the order of on it. This is called writing a “blank check”, and anyone who is given a check with a signature with no amount on it can write their own name any amount they want. They can then cash the check, and if you have sufficient funds to cover, your checking account will debit the amount of the check. 

Example: How to Write a Check for $1000

Taking the picture above and using the guide provided, I've filled in some sample numbers to show you how to write a check for $1000. See below on the filled-in check.

This is how to write a check for $1000. The check shows the date of July 13th, 2020, a pay to the order of Jane Doe, an amount of one thousand dollars (written in words and as a number), a memo for “Rent”, and signed by John Smith. If this check was handed to Jane Doe, Jane could go to the bank and cash this check, where she would receive $1000 from John Smith.

It can sometimes day up to five business days for a check to clear, depending on the bank and the amount that the check was written for.

What to Do if a Check is Lost

If you lose a check, or if it's stolen, you can place a stop payment order on the check by contacting your bank. This will prevent the check from being cashed and protect you from having money withdrawn from your account should someone attempt to cash it.

What to Do if a Stolen Check is Cashed

If you write a check and someone steals it and forges your signature, contact your bank or credit union as soon as possible. State laws should protect you from having to pay the amount. If you tell your bank what happened, they should restore the lost money to your account. 

Note, if you sign a blank check, you may not be able to get your money back, which is another reason not to write blank checks.

How do I Void a Check for Direct Deposit?

To void a check, write VOID in large letters on the front of a blank check. By writing VOID, your check will not be able to be filled out or cashed. You can now submit your voided check and a direct deposit authorization form to the correct person at your employer.

How to Get Overdraft Fees Refunded

If you're wondering if you can get your overdraft bank fees waived and refunded, the answer is, sometimes. If you are hit with an overdraft fee, ask yourself:

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  • Have you been with the bank for a long time?
  • Do you earn the bank money by storing a lot of cash with them?
  • Are you a business customer?

If any of these are true, you have a good chance of getting your fees waived. Call the bank and mention the fees and ask what they can do about them. Avoid yes/no questions, that is, don't ask, “Can you waive these fees,” instead, say, “What can you do about these fees?”

If you have to, ask to speak to a supervisor, as not all customer service reps have the power to help you. Be polite yet firm.

How Much are Overdraft Fees

The average overdraft fee is $35. That said, they can range from $10 to $40, depending on the bank. Some banks will charge a fee for each transaction that triggers an overdraft, even if they're back-to-back, such as multiple recurring expenses occurring on one day. Other banks will charge one fee per day. Where possible, avoid overdraft fees at all costs.

Wrapping It Up

It's definitely a good idea to have a checking account. It will allow you to make transactions regularly without keeping a stash of cash under your mattress. Open an account at Charles Schwab bank using my referral link and you'll get up to $500 when you make your first deposit.

Almost everyone has a checking account in order to do everyday transactions. In this post, I go over checking accounts, and what you need to know about overdraft fees, maintenance fees, and more. Make sure you always have the best checking account.

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