5 Things You Need to Know About Checking Accounts
One of the most straightforward and efficient ways to manage your finances is to open a bank account. For those who are employed, you may already have one: a payroll account. Essentially, it’s a kind of deposit account that doesn’t require a maintaining balance. You can go for a savings or time deposit account if you want your money to earn a little more interest.
Another type of bank account is a checking account, which is also called a current account. As its name implies, this type of bank account allows you to issue checks to make deposits and pay bills.
Most Filipinos usually don’t see a need to open a checking account, unless a biller requires them to issue post-dated checks for payments. However, there’s so much more to a checking account than meets the eye. Here are some important things you need to know:
Why Do I Need a Checking Account?
Among all types of bank accounts in the Philippines, only a checking account grants you the ability to write and issue checks. These are especially useful for large and/or recurring payments. For example, if you take out a personal loan, the lender may offer you the option to pay using post-dated checks. (In fact, some lenders don’t allow any other form of loan payments aside from post-dated checks.)
Nowadays, a checking account may also come with an ATM and passbook for easier payments and transaction monitoring. This means that you can use your checking account for more than just issuing checks. Below are some examples:
- credit card bills payment
- utility bills payment
- tuition fee payment
- paying rent
- making purchases in-store and online (through the linked ATM card)
If you’re a business owner, you can also use checks to pay for various expenses. For example, if you hired a freelancer for a project, you can issue them a check instead of paying them in cash. This makes documentation a lot easier.
Will My Money Earn Interest in a Checking Account?
A checking account is also a type of deposit account, so it has the capacity to earn interest. However, the rates are usually lower than savings accounts and time deposits. If you want to grow your money passively, these latter two are much better options (with time deposits being more ideal).
Nevertheless, some banks offer checking accounts that have the same or sometimes even higher interest rates as regular savings accounts. However, they have a higher maintaining balance compared to regular checking accounts.
What Are the Advantages of Having a Checking Account?
One of the biggest advantages of having a checking account is that you can conduct safer transactions, especially at large amounts. As long as the check isn’t made payable to cash, only the person or company whose name is on the payee line will be able to encash it. What’s more, it’s also easier and more secure to carry a check than a huge stack of bills.
Another benefit of a checking account is hassle-free, more organized budgeting. You can use it for all your bills payment needs, while the money you’re setting aside for emergency funds, investments, and savings can stay in their separate accounts.
Finally, checking accounts don’t have the typical withdrawal limits of a regular savings account. If you frequently make multiple transactions, it’s better to have a checking account. This way, you don’t have to worry about a transaction getting cancelled because you’ve reached a daily cap.
Are There Different Kinds of Checking Accounts?
In general, there are two kinds of checking accounts: personal and business. A personal account is used for personal banking. This is what you need for paying bills and issuing post-dated checks. A business checking account, on the other hand, is ideal for conducting business transactions like purchase orders. They’re not “exclusive” for businesses either; if you’re an entrepreneur, consider opening a checking account for smoother operations.
Some banks also have dollar checking accounts, just in case you need to transact in U.S. dollars. There are also hybrid checking accounts, which combine the best features of savings and checking accounts.
What Are the Disadvantages of a Checking Account, If Any?
For the most part, the requirements for opening a checking account is the same as a savings account. However, banks can be stricter with regards to screening. It’s best to have a good credit history so your application can be approved faster.
You also have to be mindful of your account balance. If you issue a check and your account doesn’t have enough money in it to cover the amount, the check will bounce. This will incur penalties, and can also affect your reputation with the bank and the person or company you paid. There are also a few fees that are exclusive to checking accounts, such as the cost of ordering a new checkbook.
All in all, however, these disadvantages are quite minor. In fact, keeping these details in mind may even help you become even more responsible about handling your money.
Ultimately, having a checking account is quite practical even in a highly digital world. If you want an easy way to track and manage your finances, a checking account is one of the best tools you have.