Do You Need A Checking Account?
Checking accounts do not earn you interest and are not a popular choice for saving money. However, for day to day transactions, and for ease of use and convenience, they are perfect.
Unlike other types of bank accounts, checking accounts require no advance warning when you want to withdraw funds. With a checking account, the depositor can make use of a variety of payment methods like checks and money orders, ATMs, direct debit, SWIFT, standing order, online banking services, etc.
An added benefit of checking accounts is that an overdraft facility is typically included with them. This means that the account holder can withdraw money over the actual amount that they have left in credit in their account. The negative balance might be previously agreed upon with the bank. This means that the account provider is actually lending money to the depositor.
Should you go even slightly over the overdraft amount agreed on though, then you may be liable to pay penalty fees and / or a high interest rate. This may well be highly disproportionate to the extra amount borrowed, so you should do your best to avoid this happening.
If you would like to earn interest on the money that you have in your checking account, then one option is to opt for a NOW (Negotiable Order of Withdrawal) account, which is very similar, but which includes interest payments on the funds in your account. Not all financial institutions offer this type of account, but ask around and you will be able to find one that does.
Typically, banks determine a minimum account balance for applying a particular interest rate but, in 2003, a maximum balance was established. In practice, this means that you will only really earn interest on money that falls within the lower and upper thresholds. Though not ideal, it is better than not earning any interest at all.
Disclaimer: This article is provided for educational and informational purposes only and should not be considered a substitute for financial advice. The information found in this article is provided “as is”, and all warranties, express or implied, are disclaimed by the author.
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