Understanding how to manage your checking account is an important part of financial wellness. Taking care of your account helps you avoid unnecessary fees, keeps you aware of your spending habits, and ensures you’re never wrongfully charged. Even if you don’t write checks, you will probably receive them, and a checking account has many uses beyond paper checks.
But managing your checking account is more than just a good idea—it’s required in order to stay in good standing with your credit union or bank. Here in Hawaii and the rest of the US, a history of bad account management could hurt your ability to open a new checking account for up to five years!

So what does it mean to manage your checking account? Let’s start with the basics.

What are the benefits of a checking account?

  • It’s more secure than carrying cash. Your deposit is insured up to a certain limit, so your money is protected
  • You can access your money almost anywhere, in different forms. Checks and debit cards give you payment options, and cash is still available when you need it
  • There is a record of transactions, which helps you track spending and stay on budget. It also allows you to identify if unauthorized charges were made so you can take action quickly

When opening a checking account, what should I consider?

  • First, do you need an individual account or joint account? Be aware that with a joint account any account holder can withdraw money
  • Compare different types of checking account features and fees
  • Bring the appropriate identification and funds to deposit. Keep in mind that the funds in the first deposit may be unavailable for withdraw for a period of time, usually a couple of weeks
  • If you have a history of negative checking, savings, or credit account activity, you may not qualify for a checking account. Visit chexsystems.com to see if you have a ChexSystems report (negative checking and savings activity) and annualcreditreport.com to get a free copy of your credit report from each of the three major credit bureaus annually. Even if you do not qualify for a traditional checking account, ask your financial institution about options to help you get back on track

How do I deposit money?

  • Cash may be deposited at an Automatic Teller Machine (ATM) or in person at a branch. Be sure to follow the instructions to ensure your funds are properly deposited
  • Checks may be deposited at an ATM, branch, or remotely using your smartphone if your financial institution offers this service. Checks must be endorsed, or signed on the back.

    There are three types of endorsements:
    • Blank endorsement – signing your name only on the back of the check exactly as it appears on the “Pay to the order of” line on the front. Be very careful with this type of endorsement because once you sign it, anyone can cash your check! Only use a blank endorsement if you are cashing the check immediately
    • Restrictive endorsement – writing “For deposit only” on the back of the check, with your signature underneath. This will ensure the check can only be deposited into your account. When you do a remote deposit with your smartphone, you may be instructed to use this type of endorsement
    • Special endorsement – writing “Pay to the order of [name of recipient]” on the back of the check, and signing your name underneath. This endorsement will allow the check to be deposited only to the person you assign
    • Check with your financial institution to see  if checks need to be endorsed a certain way for a certain type of deposit
  • Direct deposit allows money to be transferred electronically and is commonly used for paychecks. It is convenient and quicker than depositing a paper check

When will my money be available?

  • Generally, cash deposits are immediately available; just keep in mind that there may be processing time at a night drop or ATM
  • For paper checks and electronic deposits, expect up to a few business days’ hold before they are available to withdraw. It takes longer to process paper checks than direct deposits
  • Transfers between your accounts at the same financial institution may be immediately available


Now that I have the money in my account, how do I spend it?

  • Debit cards allow you to withdraw cash from an ATM or pay at a register or online. When using an ATM, be aware of which are in your financial institution’s network. If you use one outside of that network you will be charged a fee, usually by your financial institution and the ATM operator. Ouch!
    • When you pay with your debit card at the register, they may ask “debit or credit?” If you select debit, you’ll need to enter your pin and may have the option of choosing cash back. If you select credit, you may need to sign for the purchase and it may be covered by additional benefits offered by the credit card company whose logo appears on the card. Either way, the money will be deducted from your available balance in your checking account; some immediately, some may require a few business days to process
    • The difference between a debit and credit card is that a credit card is a loan – you are borrowing money from the financial institution in advance and must pay it back later. With a debit card, you are drawing directly from your checking account balance
  • Paper checks are less common, but whether you write one per month or one in your lifetime it’s important to do it right. Avoid nicknames and abbreviations, write in pen, and don’t sign it until you’ve filled out the amount and recipient. Most importantly, don’t forget to record the details of the check, ideally in a check register or log. Because the recipient of the check generally has up to 180 days to deposit it, it’s up to you to deduct it from your available balance in the meantime. Think of it this way: as soon as you hand over the check, the money is promised to someone else
  • Electronic checks and automatic debit allow you to withdraw money without writing a check or swiping a debit card. Automatic debit is convenient for paying bills automatically on a regular basis


How do I keep track of my balance?

  • Email alerts are a great tool for a heads up when your account reaches a certain balance or to be notified when a transaction clears
  • Online banking allows you to see all transactions on your account rather than waiting for the monthly statement
  • Keep your check register handy. Chances are you won’t remember that check you wrote three months ago that hasn’t cleared yet. Only your check register will remind you to deduct that amount from your available balance


What happens if I don't have enough money in my account?

  • This is called overdrawing and there are consequences. Your debit card and automatic debits may be denied, your checks may bounce, and on top of that you’ll be charged fees. Overdrawing can be a costly, embarrassing experience. If it happens repeatedly, your account may be closed
  • Everyone makes mistakes on occasion. Consider enrolling in an overdraft protection program. Overdraft protection may help you avoid costly fees associated with return payments from insufficient funds


How do I keep my account secure?

  • If your debit card is lost or stolen, or if you notice questionable activity on your statement, report it to your financial institution immediately. The quicker you report it, the less liability you may have for unauthorized charges. If you wait longer than 60 days you may be liable for the entire amount
  • Ensure no one is watching when you enter your personal identification number at the ATM or checkout counter
  • Only do your online banking on a secure, private wireless network
  • Don’t give out your private information to people you don’t know or trust
  • Keep your online banking password in a safe place


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