A checking account at a depository institution allows you to write checks against amounts you have on deposit. Checks transfer your deposited funds to other people and organizations. Checking accounts also can be accessed by using a debit (or check) card in an automated teller machine (ATM) or a point-of-sale (POS) terminal at a retail store. When you use a debit card, funds are instantaneously removed from your account. They are given to you as cash or sent electronically to an account owned by any other person or organization you designate to receive the funds. You can also access your checking account via telephone or home computer. When you use a checking account, record the date, check number, amount of the check, and to whom it was written into the check register you received when you obtained your blank
checks. Also subtract the amount of the check from your previous balance in the account. Deposits into the account are added as they occur, as well. This section examines the types of checking accounts available and checking account charges, fees, and penalties.
Types of Checking Accounts
Checking accounts may or may not pay interest. If you have an account that does not pay interest, you may pay no fees or lower fees than an account that does pay interest. However, interest-paying accounts with no or very low fees are available since all depository institutions can offer some form of interest-earning checking account [also called a negotiable order of withdrawal (NOW) account]. A share draft account is the credit-union version of a NOW account. Its name arises because members of the credit union actually own the organization and their deposits are called shares. Costs for a share draft account are often lower than those for a checking account at a bank or savings bank. NOW accounts and share draft accounts may pay higher interest rates on larger balances (such as amounts above $1000).
Types of Checking Accounts
Checking accounts may or may not pay interest. If you have an account that does not pay interest, you may pay no fees or lower fees than an account that does pay interest. However, interest-paying accounts with no or very low fees are available since all depository institutions can offer some form of interest-earning checking account [also called a negotiable order of withdrawal (NOW) account]. A share draft account is the credit-union version of a NOW account. Its name arises because members of the credit union actually own the organization and their deposits are called shares. Costs for a share draft account are often lower than those for a checking account at a bank or savings bank. NOW accounts and share draft accounts may pay higher interest rates on larger balances (such as amounts above $1000).
The combination of a base rate and a higher rate is calledtiered interest. For example, an account might pay 2.1 percent on the first $2000 and 3.0 percent on any additional funds in the account. A lifeline banking account offers access to certain minimal financial services that every consumer needs regardless of income to function in our society. An applicant’s income and net worth determine acceptance into a lifeline program. The cost of lifeline banking accounts is extremely low, often about $5 per month; however, they do not pay interest
Checking Account Minimum-Balance Requirements
Most interest-earning checking accounts have a minimum-balance requirement that, if not met, will result in the assessment of a monthly fee. In addition, interest is usually not paid for a month when the account falls below the minimum. An account with no minimum-balance requirement is preferable but not always available. Checking account users must consider the amount of interest that will be lost and the fees that will be imposed
Decision making becomes more difficult when the institution offers an interest-earning account in combination with either a minimum- or average-balance requirement. With a minimumbalance account, the customer must keep a certain amount (perhaps $500 or $700) in the account throughout a specified time period (usually a month or a quarter) to avoid a flat service charge (usually $5 to $15). A fee is assessed whenever the triggering event occurs that is, when the balance drops below the specified minimum. With an average-balance account, a service fee is assessed only if the average daily balance of funds in the account drops below a certain level (perhaps $800 or $1000) during the specified time period (usually a month or a quarter). In addition to monthly fees, institutions may assess lots of other fees. People interested in getting their money’s worth in banking would be wise to avoid as many of the charges shown in Table 5.2 as possible.
Checking Account Minimum-Balance Requirements
Most interest-earning checking accounts have a minimum-balance requirement that, if not met, will result in the assessment of a monthly fee. In addition, interest is usually not paid for a month when the account falls below the minimum. An account with no minimum-balance requirement is preferable but not always available. Checking account users must consider the amount of interest that will be lost and the fees that will be imposed
Decision making becomes more difficult when the institution offers an interest-earning account in combination with either a minimum- or average-balance requirement. With a minimumbalance account, the customer must keep a certain amount (perhaps $500 or $700) in the account throughout a specified time period (usually a month or a quarter) to avoid a flat service charge (usually $5 to $15). A fee is assessed whenever the triggering event occurs that is, when the balance drops below the specified minimum. With an average-balance account, a service fee is assessed only if the average daily balance of funds in the account drops below a certain level (perhaps $800 or $1000) during the specified time period (usually a month or a quarter). In addition to monthly fees, institutions may assess lots of other fees. People interested in getting their money’s worth in banking would be wise to avoid as many of the charges shown in Table 5.2 as possible.
.
0 comments:
Post a Comment