A checking account is an essential tool to keep track of finances, budget, and pay bills.
To get the most out of your checking account, avoid these five common mistakes.
1. Not Checking Your Account Balance and Available Funds
Whether you reconcile your checkbook using a checkbook ledger or by consistently looking at your account online, keep a watchful eye on your checking account balance to make sure you don’t overdraw. Before making a purchase, writing a check, or making a withdrawal, check your account balance and make sure you have the funds available to cover the transaction. Being aware of your available balance before you spend can help protect you from overdrawing your account balance.
2. Failing to Watch Your CheckCard Transactions
Some CheckCard transactions take longer to post than others. When checking your transaction activity and balance, remember to subtract any transactions you’ve initiated that have not posted to your account to know how much you have available to spend or withdraw. You should also be aware of holds placed on your account as a result of a merchant’s request for authorization of a purchase. The amount of the authorization request and the actual transaction amount may differ on occasion.
A common example of this is the addition of a tip to your restaurant bill. Pay-at-the-pump gas stations sometimes request a hold of $15 or more. Likewise, hotels and car rental companies can sometimes request a hold of $200 or more to cover room cost or potential incidents. These holds are often either placed on the account until the transaction clears or drop after three days, so being mindful of your transactions can keep you from overdrawing your account and having checks returned. “It’s also important to make sure your purchases have processed correctly,” says Michael Carter, senior vice president at Regions.
3. Not Understanding Overdraft Protection
Overdraft protection is a checking service that helps ensure that your checks or CheckCard purchases will clear, even if there are insufficient funds in your checking account. By linking your checking account to your savings account or to a credit card or line of credit, overdraft protection will automatically transfer money to cover your transactions if you have available funds or credit in the linked account. This way, your transactions are not declined. But keep in mind that there could be a fee for the transfer.
Many customers do not take advantage of overdraft protection because they never intend to overdraft their account. However, an overdraft can happen to anyone. Having overdraft protection in place can make an overdraft less expensive if it happens to you.
Before opting out, be sure to read What You Need to Know About Overdraft Fees.
4. Closing an Account Before Checks Clear
“Before closing a checking account, you should balance your checkbook or reference your online statement to make sure all checks and CheckCard purchases have cleared,” Carter says. If checks come through after the account closes, they’ll be returned to the depositor and you might incur a returned item fee.
5. Post-Dating Checks
Say you need to pay your rent on a Wednesday but don’t get paid until Friday. Some people might post-date their rent check — writing Friday’s date on it instead of Wednesday’s — to prevent that check from being cashed before their paycheck is deposited. But this system can result in fees from insufficient funds.
If your landlord, or whomever you paid with a check, were to present your check to the bank for payment before the date you wrote on the check, it might be cashed and cleared before your paycheck is deposited in your account, and this could result in an overdraft. To be safe, don’t write a check until you have the funds in your account to cover it.
Even if you’re careful, mistakes can happen. If you do overdraw your checking account, contact your financial institution and deposit funds as soon as possible to bring your account back in balance.
Learn more about keeping your financial planning on track by creating a budgeting plan, learn which checking account might be right for you and learn how to open a checking account.
The terms of your financial institution’s account agreement will control how your account works and related fees.
