With credit cards and prepaid cards making payments easy, a lot of people are closing their checking accounts. But is this a wise move? Consider the following advantages of having a checking account or business checking account before you decide that one isn’t something you need.
The fees may not be as high as you thought
A lot of people think that prepaid cards are cheaper than check account fees, but that isn’t necessarily true. Prepaid card fees can actually be shockingly high. Check on what you are being charged for – some prepaid cards even incur fees for something as simple as checking your balance or making a withdrawal from an ATM. Although prepaid cards are safer than carrying wads of cash around, you could be carrying a huge fees burden compared to what a checking account would cost you.
There are ways to keep your check account fees to an absolute minimum. Find out what your bank’s check account maintenance fees are and what minimum balance you would need to maintain to have them waived. If you maintain a positive balance on your check account and use direct deposits, your check account fees should actually be quite low, and there are a slew of other advantages that will make your choice of a checking account well worth the fees that you do pay.
Free statements make budgeting easier
If you don’t check your statements every month, it’s time you developed the habit of doing so. Tracking your spending habits can ultimately save you a lot of money, helping you to remain within your budget. While many see balancing checking accounts as a pain, it’s a great way to see where your money is going. This is especially true with business checks helping to keep track of business expenses.
Paying your bills is easy and cheap
Money orders are an extremely costly way to handle your regular bills and once off payments, and there’s a $1,000 transaction limit that can prove extremely inconvenient. With a checking account, you have complete control over your spending, and you can pay your regular or business bills online, or automate payments with low to no transaction fees. In fact, a checking account could be the best way for you to send and receive payments – as long as you manage your money well.
Build your creditworthiness and your relationship with your bank
Maintaining your check account efficiently helps you to build creditworthiness by showing that you know how to manage your finances. You can’t do that with cash or prepaid cards, and having access to a line of credit is extremely handy for those curve-balls that life and business throw at you and you suddenly find yourself needing to raise money.
Sticking with your bank over the years also makes you a valuable client – and that means perks that wouldn’t be available to you otherwise. By taking good care of your checking account, you actually get yourself into a position where you have a certain amount of bargaining power with your bank. After all, they want to keep clients like you.
Security and no transaction limit
Banking security on check accounts is extremely tight, which is just what you need for peace of mind. The Federal Deposit Insurance Corporation (FDIC) automatically covers you in the unlikely event that your bank should fail. All deposits are insured up to a value of at least $250,000 – yet another reason to stick with your bank and your checking account. And as we’ve noted, there are no transaction limits to bog you down when you have big business to do.
Paper checks are still a trusted means of payment
While Americans are certainly writing fewer paper checks, they still have their share of advantages. You can pay on the spot without the need for a shared app or a credit card machine, and your payment will be trusted by those who are still a bit shy of all the technological bells and whistles. And you’re not limited to paper checks either. Most check accounts offer you a card that can be used anywhere where Visa or MasterCard are accepted, giving you much the same convenience as you have with a credit card.
Keep your transactions separate
A checking account is a transactional account. It’s meant for making transactions easy, and with so many ways to make payments, it certainly achieves that. If you handle most of your transactions through a checking account, it’s easy to keep track of where your money goes every month.
If you’re hoping to do a bit of saving, you can salt money away in a separate savings account that may have higher transaction fees, but also a better interest rate – and by keeping your spending, savings and business money separate, you’re less likely to dig into your savings or run into trouble with the IRS.
If you qualify for a checking account, get one
A checking account remains one of the easiest and most convenient way of managing your finances, whether that be personal or business. Manage it properly, and fees are actually pretty low compared to other options. If you don’t have a checking account, it’s worthwhile to get one if you qualify, and if you already have one, keep it and manage it well to boost your financial reputation.
(Photo courtesy of David Goehring)