About Checking Accounts
Because you can’t keep your money in an old crayon box forever, most us have probably had a checking account since we turned 18. Does a checking account for your 13 year old sound a little crazy? It’s never too early to learn to manage your money. With a parent or guardian signature most credit unions allow children as young as 13 to open a checking account. An entry level free checking account is a great way to teach kids to manage the credits and debits of their financial life and in the world of direct deposit payments from employers, that momentous event, the first job, should probably coincide with the first checking account. This author started working as a babysitter at 13 and that first free checking account that I opened with my measly $25 carried me all the way through several first jobs and college.
Learning to manage a debit card and checking account while still at home and under adult supervision will prove especially beneficial when finally out “on your own.” Before opening the account, go over the basics with your children. It is especially important for everyone to understand how to balance their account with paper and pencil, as opposed to just relying on the electronic “available balance.” Equally important is understanding the consequences of writing a check (or using their debit card) when there are not enough funds to cover the amount of the purchase. Although most debit cards can be set up with the credit union to prevent overdrawing the account by declining transactions that would exceed the funds available, it’s important to know how to carefully maintain your balance manually. At the very least it will eliminate some of those panicked phone calls to home during the first years of college!
Checking accounts come in many shapes and sizes and what’s right for a teenager just starting out is likely not the best option for you. In addition to the “Free Checking” accounts (no fee’s) available for young persons and students, most credit unions will offer a basic free checking account for all of their members. Keep in mind however, that even if a checking account offers no monthly fee’s there may be an ATM withdrawal fee charged for using non-affiliated ATM’s. Whenever you open an account, read the fine print and ask questions to be sure you totally understand the options and limitations of your account.
Even when we try to balance our checkbooks regularly (as opposed to going by the on-line balance) mistakes happen. We’ve all gone a few months without looking too closely at our debits and credits and then, oops, we’ve run our balance down to the last few dollars, or worse-overdrawn it! For a financially independent, bill paying, semi-responsible adult, it’s probably a good idea to attach overdraft protection to your account. The easiest way to do this is by attaching a basic savings account at the same credit union to your checking and instead of the $30 plus dollars in fee’s you are likely to incur as a result of an oversight, you will likely pay less then $10.00 for the credit union to process an automatic transfer to cover the transaction.
Beyond basic checking there are a number of reward based checking options available at most credit unions. These range from a points system, to cash back, to interest bearing. Points based rewards are a great option for someone who uses their card frequently as the rewards are typically accrued per-transaction. On the contrary, an interest bearing checking account would be beneficial for someone who maintains a larger balance in their account. Again, it’s important to do your research and understand the terms as there will be caveats with the rewards based checking. Common terms include: requiring direct deposit of at least $500 per month, minimum balance requirements, monthly fee’s and required electronic statements. Be particularly diligent with “high interest” checking offers as some credit unions will use a higher interest rate, say 5% for new customers, but offer it for a limited amount of time, perhaps only 6 months before dropping the interest rate to below 1%. Typically, the credit unions can make this change at any time so see that you have the terms of your account in writing and thoroughly understand them before signing on. Of course, even at the lowered rate, an interest bearing checking account will be beneficial to someone maintaining a fairly high balance.
As usual, doing your research gives you the best opportunity for the best deal. One last tip-if you find there are options that another bank provides and yours does not; ask your bank to match the offer. You never, know they just might do it, and if not, it’s a lot less painless that it sounds to switch!
-L. Steele (ExperienceCreditUnions.com Staff Writer)
