Checking accounts are the bank accounts that make it easy to withdraw frequent or small amounts of cash or to receive direct deposits.
In short, checking accounts can play a huge role in your daily life than other financial product.
We can say checking accounts is a popular solution for people to encounter in personal finance.
Here let’s have a closer look at checking accounts, with few tips on how you can select the right account.
This blog post is divided into the following sections
- Checking account, defined
- Checking account vs Savings account
- Types of checking accounts
- Charges associated with checking account
- What should you consider when choosing a checking account?
Checking account, defined
A checking account is a type of deposit account managed by a bank that allows a person to deposit and withdraw the funds on a required basis.
Checking accounts are deposit accounts where funds are immediately available to withdraw.
Withdrawal methods contain cash withdrawals from ATMs, payment using check account’s credit or debit cards, or cheques.
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Checking account vs Savings account
|Checking account||Saving account|
|There are few or no limits of withdrawal in checking account||Limited withdrawals per month or year|
|You will get little to no interest||You will get a small interest rate|
|Designed for regular access to your funds||Designed for saving money for long or short term|
|Can make direct payments using checks, debit cards and account information||Can make direct payments using your account information, subject to the withdrawal limits|
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Types of checking accounts
In the UK, there are several different types of checking accounts you will find and choosing the right one is the first step you can take towards getting a perfect account that suits your daily requirements.
Standard checking accounts
This type of checking account is straightforward and comes up with a cheque book, debit card, online banking, and, usually, a somewhat overdraft facility.
Normally, you’ll not get any hidden charges or monthly fees when you choose standard checking accounts.
In addition, it comes with a quite low-interest rate that can also depend on the bank in question.
Basic bank accounts
You will find similarities between basic and standard check accounts, while basic check accounts are more stripped back and normally aimed at people with limited or poor credit histories.
Usually, a basic check account offers all the service you would get with a standard checking account without an overdraft facility or a cheque book.
Whether undergraduate, postgraduate, or any type of degree equivalent course, students in higher education will most likely be eligible for a student account.
Student accounts come up with their own free perks such as railcards, and in addition, it tends to come with interest-free overdraft with varied limits.
This checking account is aimed at the younger population and available from most banks.
Youth accounts are essentially standard checking accounts with few limited features.
Premium or packaged accounts
If you think you could afford to pay a monthly charge for the checking account, then you could benefit from various types of added extras, from free breakdown covers to Netflix subscriptions.
In order to get one premium account that comes with a good set of benefits, then don’t pick the one your eyes catch first but hunt around if you are actually willing to pay for your account.
Charges associated with checking account
There are no charges on personal bank accounts as long as you use them carefully and avoid exceeding their limit or using your overdraft.
However, they can come with several costs, such as:
- Monthly or annual charges
This is for keeping some accounts open. Such accounts generally come up with the features such as cash backs, bundled insurance, or high-interest rates on your balance.
- Overdraft fees
This can be charged if you spend more money than you have left, though several bank accounts let you use an overdraft with zero additional charges.
- Withdrawal charges
These are the charges for withdrawing cash or spending abroad on your debit card.
- Private cash machines fees
Some private ATM machines can charge you if you use them. Most banks’ machines are free to use.
- Standing orders fees or failed direct debits
These fees charged when there’s no enough money in your bank account for a bill payment to go through. Banks can charge you up to £25 when this happens.
If you request the following from your bank, then you may also be charged:
- Copies of your old bank statements
- A written reference from your bank
- Sending money using CHAPS – a same day bank transfer that can cost up to £35.
- Sending a banker’s draft – a cheque written by your bank to the payee of your choice
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What should you consider when choosing a checking account?
- Determine your needs
When choosing a checking account, you should consider what you will be using your checking account for and whether or not the specialised account, like a basic or standard account, could be right for you or meet your requirements.
Also, think about whether you will want any of the optional extras you can get if you go for a premium account and consider whether you will need the overdraft facility.
Just as a savings account, checking accounts may also come up with perks in the form of interest over time so consider getting a checking account in which you can benefit from interest on your balance.
Also, there are various accounts available with benefits for travellers. Such accounts charge zero commission on foreign transactions or offer free travel insurance as part of a deal.
You will also need to consider things such as are you able to contact your bank 24/7 and, of course, how far you are to a local branch if you need to visit often.
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If you want to open a checking account, keep in mind that In the UK, you can open a bank account if you are aged 16 or over and must be a UK resident with proof of your identity and address. If you meet all the criteria, then you’re ready to open your checking account and start using its benefits on the go and manage your money easily.