People can use checking accounts to pay for goods and services. Money can be obtained promptly via cheque, debit card, or electronic transaction authorizations. In many cases, they are tied to a local bank and, in most cases, offer cash access through ATMs.
However, like with any financial product, there is always the potential of theft, which might ultimately limit a person’s access to their money. Should you keep your money in a checking account? Here are the advantages and disadvantages of checking accounts to consider now.
The Benefits of Checking Accounts
1. Your expenditure is constantly documented.
Even if you merely check your account, a record of your expenditure is permanently kept. It could be through a carbon copy of a check, an electronic or physical bank statement, or check documents that the bank has paid out. This makes creating a personal budget and managing spending much more straightforward.
2. Many checking accounts pay interest on balances.
Although most financial institutions demand a minimum balance in a checking account to receive this benefit, the current savings interest rate will also be transferred to the checking account. With most interest rates below 1%, this may not seem like much, but anything is better than nothing.
3. Maintenance expenditures are frequently minimal or non-existent.
Many financial institutions provide no-fee checking. It doesn’t have to pay anything to access your money as long as overdrafts are avoided or safeguards are in place. This is especially true for accounts that provide free ATM access or reimburse ATM fees.
4. You don’t need to carry cash with you.
Cash cannot be tracked. If it is stolen, there is no way to compensate for the loss. You can secure your money by blocking access to your debit card or instructing your financial institution to stop taking checks from your account if you have a checking account. Losses are frequently limited by timely reporting even if the cash is obtained.
The Drawbacks of Checking Accounts
1. Financial institutions may restrict access to your funds.
A financial institution maintains the right to cancel or limit a purchase if spending does not appear to be coming from you. They accomplish this by preventing anyone from accessing the account. If this occurs on a Friday and there are no Saturday hours, you may not be able to access your money until Monday, when you can speak with a representative. This can be especially detrimental if you are traveling at the time.
2. Generally, spending actions are not recorded by credit reporting organizations.
Although financial organizations will disclose harmful account activity, such as overdrafts or actions that are detrimental to the bank’s or credit union’s benefit, they very rarely record positive behaviors in your checking account. Even if you have the most responsible checking account in the world, there’s a strong chance your credit report won’t reflect this.
3. Organizations can track your spending habits.
Your checking account generates transactions that can be saved for later use. Although your payment information is only saved with your agreement, your purchasing habits enable firms to build tailored advertising that follows you everywhere. At best, this is inconvenient. At worst, it means you spend more money than you intended because of the constant assault of advertising.
4. Not all checking accounts are free.
There may be fees associated with opening a checking account. Fee fees may be assessed if a minimum amount is not maintained on your account. Even if you do everything correctly and avoid fees, you’ll still have to pay for new checks and maybe up to 1.5% of a transaction cost in the United States for using your debit card.
Those costs do not occur if you spend money instead. The benefits and drawbacks of checking accounts demonstrate that they are helpful but not for everyone. Sometimes, prepaid credit cards and cash can readily substitute a bank account. That is why, before opening your checking account, you should carefully consider all of these crucial elements and the financial institution’s terms and conditions.