Okay. You now have a checking account. If you have decent credit, you might even have one with bells and whistles, such as interest, low fees, overdraft protection, or some combination of the above. The next step is learning how to use it to minimize charges and prevent returned (“bounced”) checks.
The first step is to know the rules, provisions, and charges that go with your account. Yeah, this means, in plain English, READ THE DAMNED FINE PRINT! Seriously. It’s how you will know how long it will take for your deposits to become available, what fees your bank or credit union will charge for various services, whether or not you need to maintain a minimum balance and how much it is, what penalties will be assessed for returned checks or being overdrawn, etc. For example, my credit union has an online bill-pay service that is free as long as you schedule at least one payment per month through it. For any month you do not do so, you are assessed a $5.00 service charge.
Your next step is even more self-evident: Do not write a check unless the funds to cover it are both IN YOUR ACCOUNT and AVAILABLE FOR USE. In 1987, Congress passed The Expedited Funds Availability Act, which sets rules as to how long banks may hold your deposit before clearing it for your use; in 2003, they passed The Check Clearing for the 21st Century Act, which effectively did away with the float (the delay between when a check is presented for deposit by a payee and when the money is actually deducted from your account).
Further, at the end of the day some banks process debits to your account before credits, so if your deposit and a check written against it hit your bank the same day, your check might be returned or paid against uncleared funds. Regardless of whether the check is returned or paid, you will be charged. My roommate’s bank charges $5.00 less if it pays the item than if it returns it, but those charges still mount up. Also, if only part of your deposit is available, or if your deposit was made after whatever your bank declares to be end of day for deposits, the same problems may occur. Not only that, but they may cause shortfalls in your account, creating a nasty snowball effect (of more checks bouncing and more charges levied against your account) that can rapidly become an avalanche!
Next, you need to know WHO is going to debit your account directly, HOW MUCH they will take, and WHEN they will take it. This means that any time you set up a payment plan wherein a third party (collection agency, phone company, Internet loan shark, etc.) will debit your account directly, you must not only know how much they are supposed to take, and when they will do so, but you must follow up by checking your account each time to ensure that only the agreed-upon amount was taken. Further – and this seems to be where many people have problems – you must record each of these transactions in your check register. If you don’t, you will neither have an accurate picture of what is in your account at any moment, nor be able to balance your checkbook.
As you can see, maintaining a checking account requires nothing more than common sense and consistent record-keeping. Once you have acquired those habits, balancing your checkbook, which I will cover in the next part of this series, is easy.
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