Understanding banking begins with understanding the basic deposit accounts offered at virtually every financial institution. The most common primary account held by consumer bank customers is the demand deposit account, or DDA, better known as the checking account. The details of a checking account vary among different banks. Some banks offer checking accounts for those who are just starting out, accounts with low opening balance requirements and minimum deposit terms. While the specific terms and rules of your checking account will be determined by your particular bank, there are several aspects of a checking account that are nearly universal. Understanding the basics of a checking account will help you choose the account that will work best for you and enable you to get the most from your banking experience.
The minimum balance required to open a checking account varies among banks. Some banks offer checking accounts that can be opened with as little as $5 while others require larger deposits to establish the account. You can choose to fund your account by going into a branch and tendering cash, transferring the opening balance from another account within the bank, or transferring funds from an account with another bank into the new checking account.
The amount required to open a checking account not only varies among different banks, but customers are often able to choose among different types of accounts within the same bank. Basic checking accounts usually require the easiest terms to open. Checking accounts that come with more benefits commonly require a more substantial opening deposit and minimum balance requirement.
Your checking account is your main transactional account. You can use it to pay for your monthly financial obligations by writing checks or using an ATM card or debit card attached to the account. Debit cards attached to checking accounts are called commonly check cards and are signified by either a Visa or MasterCard logo. The Visa or MasterCard designation allows customers to use the debit card anywhere those credit cards are accepted. Unlike a credit card, a transaction through a debit card is not billed at a later time but rather deducted from the attached checking account balance immediately.
Accounting is made more intricate by the fact that so many options for debiting from a checking account are usually available. Customers can choose to complete transactions using checks, debit cards, ATM withdrawals, online purchases or automatic payments straight from the account. To ensure solid accounting, you should employ detailed record-keeping to prevent overdrawing your account. Many banks charge substantial fees for overdrawing your account – or completing a transaction for a sum greater than your account balance – and the bank can and will often refuse the charge or “bounce” the check if the funds are not available.
Consult the disclosure of terms for your checking account to make sure you are aware of the rules and fees of the checking account you have chosen.