As a student who is just beginning to establish a financial life, one of the most important steps to take is opening up a checking account. A checking account will provide you a means to learn how to responsibly handle cash, make smart financial decisions, and keep track of your spending records. Review these tips and considerations for opening and managing your first checking account.
Opening a Checking Account
When opening a checking account, you should shop around for a bank or credit union that best fits your needs. Different banks and credit unions will have various policies for account requirements, charges, and fees. As a student who is establishing a first-time account, here is what you should look for in a financial institution and/or checking account (depending on your needs):
- No minimum balance. Some institutions offer accounts that require you to keep a minimum amount in your account, such as $100. If your balance falls below this amount, the bank may charge a small fee or close your account. Because your cash flow is likely to be pretty minor as a student, you should look for an account that offers no minimum balance in order to avoid any penalties.
- No annual or monthly fees. Some institutions charge a fee just for housing your account, so look for an institution that offers free checking. Be sure to understand the specific policy of your free checking account, as some banks will offer accounts with totally free checking while others will provide free checking as long as you meet certain requirements. These requirements may include having a certain amount of transactions per month, maintaining a certain minimum balance, or enrolling in electronic statements.
- Convenient ATMs. You will most definitely have days when you need quick access to cash, so choose a financial institution that has plenty of convenient ATMs. When you use an ATM that is owned by your bank or credit union, there is usually no cost involved. However, if you use an ATM that is not owned or affiliated with your bank or credit union, you will be charged service fees.
- Free online and mobile banking. With your busy student schedule, you will need to choose a financial institution that offers convenient banking services, such as online and mobile banking. These services will allow you to perform tasks, such as transferring funds, balancing your checkbook, and confirming electronic transaction amounts, anytime and anywhere.
- Properly insured. When searching for a financial institution, you need to make sure that your money will be properly insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA). These are federal agencies that will protect consumers in the event that a bank or credit union fails.
Managing a Checking Account
Once you open a checking account, it’s crucial that you stay on top of your finances. Knowing how to effectively manage your account will help save you from potential embarrassment, financial penalties, or possible fraud. Consider the following tips for managing your checking account.
- Weigh the pros and cons of overdraft protection. Overdraft protection is a feature offered by many financial institutions in which your checking account balance is allowed to go below zero. For instance, if you have $100 in your account and use your debit card to buy $300 worth of textbooks, the transaction would still process and you would have a negative balance of $200. However, this protection is not free. Financial institutions charge an overdraft protection fee each time you overdraw on your account. To decide if overdraft protection is right for you, consider your individual circumstances. Would you rather a card transaction be approved or declined if there is not enough money in your account? How often do you write checks? Can you afford possible overdraft protection fees?
- Monitor your account on a regular basis. Make a habit of checking your account online at least once a week to check for any errors or fraudulent transactions. Reviewing your account on a weekly basis will also keep you abreast of how much money you have in your account so you can adjust your spending accordingly until your next paycheck. And even in the digital age, you should consider “balancing your checkbook” once a month to make sure your records are in alliance with your bank’s records.
- Set up a checking account balance alert. Determine a minimum amount that you don’t want your account balance to go under. If your bank has this option, set up an alert with their online system that will notify you whenever your checking account balance gets close to that minimum amount. This will help keep you from overdrawing on your account.
For more information about opening and managing a checking account, speak with a financial advisor at your chosen bank or credit union.