A guide to checking accounts

Opening and using your own checking account is fundamental in learning how to manage your money. And, it's really easy to do once you know the basics.

Basic training: what is a checking account?

A checking account, or demand account is an account held at a bank or other financial institution for the purpose of securely and quickly providing access to funds "on demand." Money in a checking account is insured up to 100 thousand dollars through the FDIC. Money can be easily withdrawn by writing checks, using a debit card, or visiting an ATM.

What are the Rules?

• You must have enough money in your checking account to cover purchases made with a check or debit card. Spending more than you have available in your checking account will result in an "overdraft fee.”
• Check your statements regularly to ensure that all the transactions and your balance is correct.
• Deposit checks right away—most checks cannot be cashed after three months.
• Stick to your financial institution's ATMs. Using other ATMs may be convenient, but are often expensive due to the extra fees they carry.
• Keep accurate records of all the checks you have written and debit card purchases made. Make sure you sign for all debit card purchases and keep every receipt.

How to Write a Check

Here’s a sample check with an explanation of each field.

• Date — Write in the date of the check in standard month/day/year format, or write it out, "July 15, 2007."
• Pay to the order of. — Fill in the name of the person or organization (payee). In this case, “Barb's Flower Barn.”
• Dollar Amount. — Write the full amount in standard dollars and cents format in the Dollar Box to the right of the payee.
• Amount ($). — Write the full amount of the check out in long hand and draw a line to fill in space if needed. This line keeps anyone from altering the amount of your check. Writing the amount helps to verify the amount in the dollar box and vice-versa.
• Signature. — Sign your name! This shows you approve the amount on the check to be paid.
• Memo. — Write the purpose of the check, such as "July rent" or "June cell phone."

Here's a sample check register

• Track the check numbers in this column.
• The date of the transaction or the date the check was written.
• A brief description of the transaction is recorded here.
• The amount of the debit (money out) to the account goes here.
• The amount of any deposit (money in) is in this column.
• The current available account balance, adjusted for any debits or deposits, is logged here.

Best practices for writing checks

Make sure your signature is the last thing you fill out on any check. If you lose a check that’s already signed, anyone can fill in your name and cash it. Never make a check out to "Cash," this allows anyone to cash it if it's lost or stolen. Instead, always name a specific person or business on the pay to the order of section of the check.

• If your checks are lost or stolen, report it immediately to your financial institution and the police.
• Record all the checks you write in your checkbook register.
• When filling out a check always use a pen.
• Fill in every word and number of the check, leaving no room for anyone to write in something else. This will prevent someone from adding numbers to make the check a larger amount or altering the payee's name.
• If you need to correct a mistake on a check, tear it up and start a new one instead of crossing out errors or writing over numbers. Remember to enter it as "void" in your checkbook register.

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