There are a few different ways you can store your money. Some people like having it in cold, hard cash, others exclusively hold stocks and bonds. One of the most common, and most useful, ways of storing money is through a checking account. In this article, I’ll be explaining what a checking account is.
A checking account is one of the two most common accounts, alongside a savings account. Checking accounts can be opened at any bank or similar institution. Checking accounts allow you to store your money with a bank, rather than having it in cash. Through a checking account, you can freely deposit and withdraw money. By storing your money in this kind of account, you’re not at risk of theft of physical cash, and there's virtually no chance that you will lose/damage your money, unlike physical cash which can be torn or lost.
When you open a checking account with a bank, you’ll receive a debit card. A debit card can be used instead of cash, as it allows you to pay directly from your account. However, a debit card can only be used to pay for items that you actually have the money for, unlike credit cards, which allow you to make purchases you may not have the cash for.
For example, if you have $100 in your checking account, the debit card can be used to pay for only $100 worth of items. A credit card, on the other hand, will allow you to spend up to your limit, so if you have a $300 credit limit, you’ll be able to buy $300 worth of items, even though you only have $100 in your account.
With a checking account comes a checkbook (no surprise). Checks are small pieces of paper that you can use instead of physical bills. You fill out the check with a few details, like the amount you're paying and the person who you're paying to, sign the check, and hand it over. Whoever receives the check can then use it to transfer that specific amount of money from your account to them.
You can deposit and withdraw money from a checking account in a couple different ways. The first is through an ATM. You can withdraw/deposit cash and checks at an ATM, and they’re pretty common, so finding one won't be difficult. They’re also automated, so they're pretty fast.
Another way of depositing money into a checking/saving account is by actually going into the physical bank/institution. You can go up to a teller, and request to deposit or withdraw money. However, this is a pretty time-consuming process, and it's a lot quicker to just go to an ATM.
Some banks even allow the cashing of checks through your phone, using their mobile app.
Checking accounts are used to store smaller amounts of money for everyday purchases, so you can access money easily, unlike a savings account. I’ll discuss this more in a future article.
In short, checking accounts allow you to store your money, and still easily access it. You receive a checkbook and debit card when opening an account, which you can use instead of physical bills.
Tune in next Tuesday to learn about savings accounts!