In previous lessons, you went through some different types of payment methods. Think about the types of payment that work best in different situations. If you are going to buy something that is expensive, do not want to carry cash, and want your payment to be secure, what method of payment would you choose?
A checking account is a type of bank account that allows you to easily deposit and withdraw money for daily life transactions. A checking account is a liquid account, meaning you have access to your money very easily. The main purpose of a checking account is to have a secure place to store your money for the short term so that you can pay bills and expenses.
Joanna recently graduated from college. She loves her new job and is excited about earning a salary. She just received her first paycheck for $800. What does she do now? How will she be able to access the $800? One way is to open a checking account at a bank. Then she will have multiple ways to access the money. She can withdraw cash by using a debit or ATM card or by writing a check. She can even set up direct deposit, so her employer can directly deposit her paycheck into her checking account.
Now that Joanna is earning a salary, her parents have told her that she needs to pay for her own car, insurance, and her cell phone. How can she pay her bills? She can use her checking account by writing checks to pay for everything.
What is a check?
A check is a written and signed document that you use to directly pay money to someone. One person is writing a check to someone else to make a monetary transaction.
When you write a check, you will fill out multiple parts of the check, including the date, the person being paid, the amount of the check, a description of the transaction, and your signature.
Joanna has started to use her account by writing checks. She wants to learn all the other ways she can use her checking account. Some checking accounts feature the use of ATM or debit cards, electronic funds transfers, and deposit slips to replenish funds.
Joanna has started driving her car to work every day and needs to fill her car with gas weekly. She finds it inconvenient to walk into the gas station to use cash. Is there any easier way to pay? She can use her debit card at the pump to pay for the gas. The debit card uses money right out of her checking account.
Joanna babysits her neighbor's kids on Friday evenings. They pay her $100 in cash every week. She wants to put the money into her checking account. How can she deposit the money? She can do this by using deposit slips to deposit the cash directly into her checking account at the bank.
Joanna and her friends go out to celebrate her new job with dinner at a restaurant. She realizes she left her wallet at home and does not have any cash or her debit card with her. Her friend tells her that she will take care of it. How can Joanna pay her friend? One way is through an electronic funds transfer. She can use a payment app on her phone that can link to her checking account and instantly send the money to her friend.
Joanna uses her checking account all the time. She writes checks, uses her debit card, and makes deposits into her account. She wants to start keeping track of everything she purchases. How can she do this? She can use a check register to record the transaction every time she uses her checking account and then keep track of the balance in her account. At the end of the month, she knows exactly how much has gone into her account and how much she has spent.
A checking account can have many uses. It can make receiving payments easier, whether it is a paycheck from work or getting money from someone else. It can also make purchasing items and paying expenses easier. A checking account is a great way to start and to stabilize your financial future.
Let's Practice
Take a look at the following scenarios. Based on what you know about a checking account, in which situation is writing a check the BEST payment option?
