If you’re new to personal finance and starting to make an income or if you’re looking for a way to manage your money better while keeping it safe, chances are you’ll turn to a checking account. Many Americans find checking accounts essential in the digital era for everyday transactions, withdrawals, payroll, proof of financials, and more.
In this post, we’ll answer some of the most common questions for those wondering if they do or do not need a checking account. Read on to find out more.
What is a checking account used for?
If you’re unsure if you need a checking account, the first step is to know what a checking account is used for. Once you have an understanding of its purpose, you start to identify what your needs are to determine if a checking account is right for you.
Digital money management with online and mobile banking and ATMs
Keeping money safe from theft, fire, or accidental loss
You don’t have to carry physical cash around
Most come with a debit card, which can be used for everyday transactions, bills, online payments, withdrawals, and more much like a credit card
Faster payroll using direct deposit
Is a checking account necessary?
The short answer is, no, checking accounts are not necessary. It is possible to live without a checking account. In fact, the FDIC reports that around 7% of Americans do not have a checking account at all.
From overdraft charges, ATM fees, and keeping up with digital platforms to access and manage your money, some find checking accounts to be more troublesome than it’s worth. If you find that you would prefer not to have a checking account, it’s important to consider the advantages and disadvantages of this decision.
What are the disadvantages of not having a checking account?
Carrying cash can leave you vulnerable to loss or theft
No formal record of spending
Most lenders require bank information for a loan or mortgage
Check-cashing business usually take a percentage of your check to cash
Lack of protection for your money (I.e. fire, theft, etc.)
Keep in mind that the disadvantages of not having a checking account are all relative. While some are not bothered by some of the above disadvantages, some find that these are major setbacks.
What are the advantages of having a checking account?
Now that we’ve covered the disadvantages of not having a checking account, we’ll now discuss the advantages of having one. Here are some of the most common advantages of having a checking account:
Debit cards linked to your checking account make everyday transactions fast and easy
Direct deposit to your checking account allows your employer to pay you faster than a check
Bills and online payments are easier to pay bills and easier to pay bills on time with automatic payments
Access to bank statements which makes budgeting easier
Your money is protected under the FDIC up to $100,000
You can make money with interest by leaving your account with a bank
Does it cost money to have a checking account?
The answer to this question depends on the bank you opened your checking account with. Usually banks do not require a fee to open a checking account other than the minimum required deposit, however, many banks require fees to maintain the account.
So, what is a minimum deposit? If your bank requires a minimum deposit, the actual dollar amount required will vary depending on the bank. If yours requires one to open an account, that means you will need to put at least a certain dollar amount, for instance, $100, to open and establish the account. This deposit essentially tells the bank that you have money, so they won’t have to waste resources on very small accounts.
Once your account is open and established, your bank might start charging maintenance fees monthly or yearly. According to a study conducted by MyBankTracker, the average checking account fee at top banks in the United States is $9.60. Some banks allow you to avoid maintenance fees if you meet certain requirements, like using your debit card a certain amount of times a month, utilizing direct deposit, or keeping your balance above a minimum level.