Feature article: Family Finances
Checking Accounts – Your History Follows You
Cynthia E. Crawford, Ph.D., Consumer & Family Economics Specialist, University of Missouri Extension
Edited by Rob Weagley, Ph.D., FFE Department Chair, University of Missouri
Most employers expect to direct deposit their employee’s
paycheck directly into a bank account. Imagine that upon
graduation, you have to explain to your first employer
that you’re not eligible to have a checking account
because of your poor financial management during
college.
If your relationship with your “checking account” bank
was similar to how the Hatfield family got along with
the McCoy family, the problems may follow you for years.
Moreover, the likelihood of a longer term problem is
greater, as companies like Chex Systems, Inc. make their
living by providing deposit account verification
services to its financial institution members to aid
them in identifying account applicants with a history of
mishandling accounts. An example would be a bank client
that chronically overdraws her account to the point that
the bank has had to close the account.
Unlike negative information in credit reports that stays
in the records for up to 7 years (up to 10 years for
bankruptcy), negative information stays in the Chex
System for only five years. This can be shortened, if
the bank or credit union that filed the report requests
its removal or Chex System is forced to remove it under
the Fair Credit Reporting Act.
You must remember that a checking account at a financial
institution is a privilege, not a right. Financial
institutions are not required to offer a checking
account to any one, particularly those with a history of
poor financial management.
It is important to foster a sound business relationship
with your bank or credit union. Here’s how:
Reconcile your checkbook with the bank statement every month. Less than half of all checking account holders reconcile their checkbook with the bank statement each month. You are exempt from this rule, if you have never made a math error or have never forgotten to write down a check or ATM transaction in your check register.- Record ATM and Debit Card transactions. ATM and debit card transactions need to be written in your check book record just as quickly as paper checks. Far too many overdrafts are triggered by forgotten ATM and debit card transactions.
- Know your balance. Don’t assume that the balance on your ATM slip or the bank’s website is actually how much you have available to spend. You may have outstanding checks or other transactions that have not been posted.
- Know what your checking account costs. Is there a monthly service charge? Is there a per check charge? Are the ATM locations convenient (driving is costing more and more these days)?
- Keep a cushion in your checking account. With overdraft bank fees hovering around $35, keeping a $100 cushion in your account is good insurance.
- Ask about overdraft protection. Ask your bank about overdraft protection options and their costs. The peace of mind might be worth the interest charges you occasionally incur.
For most students and young families, the goal is to
find a free checking account. Most require you to never
overdraw the account and some may require you to hold a
minimum balance in a savings account or money market
account. Do the math, based on your patterns of use.
You might like to receive interest on your average
balance in your checking account. For low balance
checking accounts, however, it is probably unrealistic
to expect interest to be paid in today’s market. Still,
ask the question.
There will be a fee for check printing but you do not
have to have your checks printed by your financial
institution. You may have your checks printed by
mail-order or through an on-line check printing company,
sometimes at a substantially lower cost.
Finally, establishing a business-like relationship with
your financial institution can be the factor that the
bank uses to judge your character as client. Hence, it
can have a great effect on your ability to make the most
of your opportunities for Financial Success.
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Last update: Tuesday, August 05, 2008
