These types of accounts use cheques (or “checks,” as most banks and consumers spell them today), as negotiable instruments (that is, they can be exchanged for money).

• Checking Account Facts
  • There are non-interest-bearing and interest-bearing checking accounts. Generally there are fewer restrictions associated with non-interest-bearing accounts.
  • Usually there’s a “clearing time” involved with checks, but not always. Don’t assume that writing a check allows time for the money to clear. Many companies are now converting the paper check to an electronic check (Check 21 law), which means funds are instantaneously withdrawn, just as they would be with a debit or check card.
  • Do not assume that if you deposit a check, the money will be available immediately. Check your bank’s funds availability policy to see when funds will be available for withdrawal.

Even a Blank Check Tells a Story

This check tells a financial institution a lot of information.

• In the top right is the check number – that’s the number you enter into your check register when you write someone (or some business), a check
• The “date” line tells when you wrote the check (in the U.S., the order for “date” is “month,” “day of the month,” and “year,” such as “June 3, 2008” or “6-3-2008”)
• The “Pay to the Order” line tells the financial institution to whom the check was written
• There are two fields for the amount:
  
  • On the “dollar-sign” line, the amount should be expressed as a number, such as “$47.53”
  • On the next line, the amount should be expressed in writing, such as “Forty-seven and 53/100”
• The “For” line allows you to add a note to remind you what the check was for, such as “plumber” or “cleaners”
• The blank line to the right of “For” is for your signature
• The numbers at the bottom of the check have special meaning. The first set of numbers is the routing number, which tells which bank or financial institution issued the check. The second set of numbers is your account number. The third set of numbers is your check number (the same one that’s at the top of the check)

Smart Principles for Checking:

• Balance your checkbook on a regular basis. Avoid fees and other penalties resulting from bounced checks by knowing how much money you have in your account.
• If you’re opening your first checking account, ask an employee of the financial institution or a money-wise friend or family member to show you how to write a check, complete a deposit slip, balance your checkbook, and reconcile your monthly account statements.
  • Most financial institutions will provide instructions with your monthly statement that show you how to balance your checkbook

A Word About Overdraft Protection

What happens when, even with the best of intentions, you write a check to someone when there isn’t enough money in your account to cover the amount? That’s where overdraft protection comes in. This service protects your “draft” (check) from going overlimit by being connected to another account that can cover the cost. Usually, that other account is a credit card and, if there is an overdraft, you will be charged a small fee for the money necessary as an advance against your check

• You don’t have to worry about “bouncing” a check or having it turned back for “insufficient funds”

• The fee you get charged every time you use it

All things considered, however, Overdraft Protection is a benefit that is certainly worth looking into.