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Norm Geddis
Norm is a contributing writer at Online Land Sales, LLC.



CHECKING ACCOUNTS

While every effort has been put forth in the last 20 years to try to usurp, circumvent, improve upon, and devalue the position banks have held for centuries banks still prove to be the most stable, safest, most respectable place to keep and grow money. Whether you see the alternatives like fast cash apps, cryptocurrency, and banks-that-look-like-banks-but-aren’t as honest improvements or attempts to cheat the system banks are still at the heart of every transaction in the world. Most of this book will cover options offered by banks except investments.

The most common interaction and type of account, often everyone’s first account, is a checking account. A checking account is a simple account that holds money and moves it from your account to other peoples and companies in the form of payments and vice versa. Banks, and some forms of checking accounts have existed alongside civilization for thousands of years. Every time civilization grows complex and productive enough that its people can accrue more wealth than can be hidden in pots at home, banks develop. If you were to think about all the money you have, will have, or family has and try to imagine what it would be like to hold all that physically at home and bear the responsibility of constantly guarding it, the idea of a checking account makes a lot of sense.

Let’s break down the benefits and risks of a checking account.
CHECKING

Pros

  • Brick & Mortar Convenience
  • Going to a physical store to do your business and make your purchases is hardly thought of as a convenience nowadays, but once you have your first problem with a PayPal cash app or crypto storage locker you will wish to god you had a number to call and a physical location with a real person you can deal with. The convenience apps bill themselves as a quicker and easier form of moving money than a bank, but just try to get in touch with someone when you have a problem. It's not gonna happen.

  • Easy Payments and Withdrawals
  • The primary purpose of a checking account is not to store money but to move money. Money does nothing sitting still. Storing money is what a savings account is for, and even those accrue interest. So, the most useful aspect of a checking account is easy automated payments to individuals, companies, and yourself from your employer or customers. It also is a fast fluid method of withdrawing money as opposed to some of our later options.

  • Write Checks
  • Paper checks are a rare site. Most banks now process what are called ACH or “paperless” or “E-Checks” that are payments made with the same accounting and routing number that your paper checks would be written with. It typically takes longer than a payment.

  • Access Direct Deposit
  • Banks also offer a fast and reliable way to receive direct deposit from your employer. People without direct deposits receive paper checks from their employer. Those paper checks must then be physically cashed at a counter. Banks will always cash physical checks for free if you have an account but then again, if you have an account, why not have your employer directly deposit from their bank account into your own? Cashing checks at a convenience store costs a high fee, plus typically anywhere from 3-5% of your paycheck.

  • Minimum Deposit Threshold
  • Access Debit Cards W/ No Fees
  • You may be familiar with the fact that practically every single fast money app, retailer, online store, etc. offers a debit card connected to an “account” you hold with them. Your checking account will have one too, so what’s the difference? Bank issued debit cards almost never carry fees for transactions. Because those apps like PayPal and stores like Target are not banks and are not lending money the only way for them to make any money off the “accounts” they offer is to charge 5%, 10% etc. every time you swipe that debit card they issue. A bank card often adds 5% cash back on certain purchases instead!

  • Get Paid Early
  • A lot of checking accounts will offer early payment of paychecks. Essentially these banks are willing to front you the money for your paycheck days early after you have an established income and recurring direct deposit set up.

  • Track Spending
  • All large banks, pretty much the only banks left around, devote large amounts of resources to account analytics. These often take the shape of interactive dashboards that break down your spending habits and where your money is going to help you course correct or save for a specific goal.

  • Not Carry Cash
  • Probably the largest immediate benefit of a checking account is not having to physically hold much cash. Cash is light. Its paper. Easily lost and stolen. When your wallet is lost or stolen that debit card has as many as 3 layers of protection before it can make purchases, and deactivating that card is a phone call away.

  • Pay Bills Automatically
  • With a checking account recurring payments can be automated, paying from your account directly on the same day every month. This avoids heavy missed payment fees.

  • Secure And Accessible
  • Almost a century ago, when the economy crashed in the great depression, the first thing everyone did was go and withdraw all their money at once from the bank. This seems logical to do, but everyone withdrawing all their money at once causes the bank to go insolvent. They collapse, and all the money invested in them, stored in them, transferred with them evaporates into thin air. Those who didn’t get there in time lose their entire life’s finances. Afterwards, as a part of the New Deal banks were insured by the FDIC, meaning that if a bank went under the contents of checking and savings accounts would be insured and paid out by the federal government. In 2008 the limit to the amount of money insured was increased to $250,000. This FDIC insurance only applies to bank accounts. Remember, things like PayPal, Cash App, and Crypto wallets are NOT banks no matter how much they appear to be. That money is not FDIC insured.

  • Secure And Accessible
  • Almost a century ago, when the economy crashed in the great depression, the first thing everyone did was go and withdraw all their money at once from the bank. This seems logical to do, but everyone withdrawing all their money at once causes the bank to go insolvent. They collapse, and all the money invested in them, stored in them, transferred with them evaporates into thin air. Those who didn’t get there in time lose their entire life’s finances. Afterwards, as a part of the New Deal banks were insured by the FDIC, meaning that if a bank went under the contents of checking and savings accounts would be insured and paid out by the federal government. In 2008 the limit to the amount of money insured was increased to $250,000. This FDIC insurance only applies to bank accounts. Remember, things like PayPal, Cash App, and Crypto wallets are NOT banks no matter how much they appear to be. That money is not FDIC insured.

  • Initiate Digital Transfers
  • Though once caught without a paddle by the ease and speed by which companies like PayPal moved money from person-to-person banks like Bank Of America have caught up with their versions like Zelle. It used to be that moving money from an account at one bank to an account at another was a day’s long process of routing numbers and interbank communication. Nowadays the bank's money sending services are on par with PayPal and with the added protection of an actual bank account.

Cons

  • Daily withdrawal Limits
  • Most banks have daily withdrawal limits. Unless you are closing your account your account may be subject to a limit to how much cash you can withdraw from it a day. That’s withdraw not spend. Most larger banks will have withdrawal limits in the thousands so it’s likely not to be an issue. Small may have low daily withdrawal limits in the hundreds.

  • Monthly Fees
  • Except for promotional deals, student accounts, and other unique qualifications most bank accounts charge a monthly fee. This fee is usually low, at around $15-$20 a month. Banks often waive this fee if the account either maintains above a specific balance or has a deposit over a certain amount.

  • Overdraft Fees
  • The biggest downside to checking accounts is overdraft fees. Banks will charge a fee to an account when that account is debited for an amount that is more than the account holds. This, nonsensically, makes the negative account worse. To make it even worse overdraft fees can stack and can be charged for each purchase that goes over the amount the account holds. Accidentally charged your card and brought your account negative on the same day that 4 automatic recurring bill payments are charged? That’s a 30$ overdraft fee for all 5 payments. You now owe the bank 150$ on top of what you need to feed your account to bring it back to the positive.

  • No Interest
  • Checking accounts do not garner interest on money stored in them. They are made for spending, not for growing.

  • Minimums
  • Some bank accounts require a minimum balance be maintained in your checking account, lest the bank close the account forcibly. This minimum balance can be in the tens of dollars, or the hundreds.

  • Lost/Stolen Debit Card Risk
  • Banks are constantly investing in and improving security on debit cards making any actual risk to the money in your account from a lost or stolen card minimal. Cancelling your card is as simple as a call to the bank aswell. Sometimes debit card numbers are sold online on explicit websites, but banks are good at recognizing false charges. If you made a purchase today in California and then 5 minutes later make a purchase in new york this is considered suspicious, and the transaction does not go through and you are notified.

  • Only FDIC/NCUA Insured to 250k
  • Touching on the explanation in the last section about FDIC insurance; while bank accounts are insured in the event of a bank becoming insolvent the federal insurance on a bank account tops out at 250K.

  • Subject to Bad Check Passage Charges
  • When a check “bounces” that’s when there is not enough money in the account to pay on the check you wrote. When a check bounces, the bank pays the person you wrote the check out too to cover the payment. In exchange, in addition to bringing your account back into a positive you will have to pay a fee.

  • Withdrawal Fees
  • Withdrawing money at an ATM, or cash back from store may carry a fee. Almost no bank will ever charge you a withdraw fee for withdrawing from their ATM. But if you withdraw from an ATM owned by another bank, or public ATM, you may be charged a Fee on the withdraw from BOTH the ATM owner and your bank.

  • Log In Info Subject to Cyber Attack
  • Thieves are starting to forego trying to buy card information online and instead try to gain access to your account directly and transfer all your money out. Banks are increasingly coming up with ways to defend against this. Still, some of the ownice is on you to protect yourself like keeping a separate password for your bank, having a password that is 20 characters long with letter cases and numbers and symbols, and making sure to uncheck any “remember me” button if logging in on a public computer.

Is A Checking Account Worth Having?

YES. Unequivocally a checking account is indisputably necessary in the modern world. The benefits far outweigh the risk, and without a real checking account in your name most institutions, jobs, colleges, and even courts will not take you seriously. Even if you end up using cash apps or crypto wallets more, a real checking account opens a lot of doors. Its also the safest way to store money, move money, make payments, with a responsible and accountable bank.