Checking Accounts (2000)

The better, safer way to handle your money

A fact sheet explaining the basics of checking accounts. Describes what to look for in a checking account and a checking account check list, as well information about electronic transfer accounts (ETAs), ATM cards and how to open a checking account

Checking Accounts (2000)

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Banking basics

Some people don't use banks to keep their money safe. They stuff it in a mattress, a cookie jar, or a piggy bank, and use cash to pay bills and buy things. But people who do don't use a bank run the risk of losing their money or having it stolen. Cash is not replaceable.

There's a better, safer way: Use a bank. You can pay bills, make withdrawals and save and invest money through a bank or other financial institution such as a credit union or brokerage house. Now banking is easier than ever, with 24-hour access by ATM, phone and computer. You can use your ATM card to buy groceries, gasoline and other essentials.

Choosing bank services

If you want an account to hold the money for monthly expenditures and bills, look for a checking account. If you want to put money away for emergencies, for a future purchase or retirement, also shop for a savings account.

Checking checklist

Of all basic banking services, the most basic is a checking account—the workhorse of banking. Checks are the primary method of transferring money from one location or from one person to another, although in recent years, electronic banking through ATMs (automated teller machines) and POS (point of sale) terminals at stores have grown in use.

As you shop for a checking account, consider:

  • Convenience—bank location, access and services, hours.
  • Electronic services, if you think you will use them.
  • Check clearing policies.
  • Pricing—account charges, fees for checks, services or problems.
  • Other services, such as a link-up with savings and credit cards.

What to look for

Don't get carried away by advertising campaigns and promotional offers (forget the free cooler). Consider your own needs—banks offer many different types of checking accounts with different rules and benefits:

  • Account and checking fees. A few banks offer "free checking," which comes with no monthly service (or maintenance) fee, whatever your balance is. But most banks charge monthly fees on checking accounts. In order to get a free account at these banks, ask if they have free checking if you use direct deposit for your paycheck or benefits check, or if you agree to use the ATM for your deposits and withdrawals and not to visit a teller.
  • Limited check-writing accounts. Some banks offer "lifeline" accounts that charge for each check you write or have no charge up to a certain number of transactions (e.g., 10 checks a month) and charge heavily after that. If you plan to write few checks, you may save money on this kind of account. If you write a lot of checks, look for a free checking account with no per-check charge. (You still have to pay to order checks.)
  • Check processing. Some banks put a "hold" on deposits that are personal checks, with a longer hold for out-of-state checks. Others give you instant access to part of any deposit (for example, the first $100) but hold back some of your account balance until the deposit check clears.
  • Fees for services and problems. Many have very steep fees for bounced and returned checks (from you, or written to you and deposited by you); others waive these charges if the problem is infrequent. To avoid bouncing a check, ask about overdraft protection, which advances you the money to cover the check for a fee, usually smaller than the bounced check fee.
  • Checks make a good record of payment. One advantage of using checks is that you have an automatic receipt (the canceled check) to record a transaction. Some banks send checks back with your monthly statement, or send you small pictures of them. Others copy them onto microfiche then destroy the originals. If so, you have to pay a fee to get a copy.
  • Disability access. All banks are required by law to be accessible to people with disabilities; however, some are more helpful than others in overcoming obstacles in communicating or helping a physically impaired consumer carry out transactions.


Federal payment recipients are encouraged to use direct deposit for Social Security, Supplemental Security Income, veterans benefits, and federal salary and retirement payments. To help federal benefits recipients who have past problems that keep them from opening an account, the government designed a special account called an electronic transfer account (ETA). It is available to anyone who receives a federal benefit, wage, salary or retirement payment. The maximum monthly fee for an ETA is $3 and it must provide a minimum of four free cash withdrawals per month and require no minimum balance. For more information, call 888-382-3311 (TTY: 877-326-5833).

Opening a bank account

Most banks require two pieces of ID, one with a picture on it. You will usually need a Social Security number to open a bank account. If you are in the United States temporarily, you may obtain a non-work Social Security number from the Social Security Administration, a U.S. government agency. To find your closest Social Security office, look in the U.S. government section at the front of your white pages phone directory.

You must have some money to open an account. Some banks require only $1 to open an account—others ask for $50, $100 or $500. You may use cash or a check to open an account.

Account screening

When you have chosen a financial institution, visit a branch and sit down with a bank officer to open your account. At this point, the bank may verify your banking history with an account screening company, such as ChexSystems. If you've ever had a problem with a checking account, such as closing your account without enough money to cover outstanding checks, you may be denied an account. (Such information is kept on file for five years.) If you are kept from opening an account because of the information, you have rights. If you believe that the denial is based on incorrect information, ask the bank how to contact the account screening company. If incorrect information is on file about you, you have a right to dispute it.

If one bank won't open an account for you, try another bank—different banks have different requirements.

Electronic banking

Electronic banking includes direct deposit, online bill-paying (for people with a computer), ATM/debit card services and telephone tellers. It is important to monitor your account, especially if you use electronic services for many of your transactions. You need to know if a specific bill was paid or if your check was deposited or to be sure your balance will cover a check.

  • Automatic deposit. Many employers or benefits programs, such as Social Security, will deposit your paycheck or benefits check directly into your account. It is convenient with less risk of loss.
  • Automatic bill paying. Many banks allow you to set up automatic debits from your account to pay monthly bills. If you have a computer, you can use it to pay your bills on line. There are fees for this service.
  • Telephone banking. Most banks allow you to authorize certain transactions and access account information over the phone. Account information is usually free for the first few times each month, with a charge for each call after that.

ATM/debit cards

The ATM allows you to make deposits and withdrawals almost any time of day or night. (Be cautious about your safety when using an ATM at night or in a deserted location.) ATM machines are usually located outside banks, shopping malls, supermarkets and convenience stores. If you use only your bank's own ATMs, you will save money. When you use another bank's ATM, you may be charged twice—once by your own bank and once by the ATM you are using. Write down all transactions so you do not overdraw your account.

To access an ATM machine or use a debit card, you need your card and your PIN (personal identification number). Never write the PIN on the card or keep it with the card—anyone who has it can access your account.

This brochure was originally created by the Community Service Center for the Disabled of San Diego, CA, with funding from Bank of America Consumer Education Fund (BACEF) and the Parker Foundation. It has been revised by Consumer Action with funding from BACEF.

Published / Reviewed Date

Published: April 01, 2000

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Banking   ♦   Money Management   ♦  


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