Features and fees of checking accounts

0:00- [Instructor] So you are probably already familiar with the idea of keeping your money in a bank or having a bank account. You would do that. First and foremost, the bank is a safe place to keep it. You don't wanna keep a bunch of cash in your mattress, but also you can access that money easier, and we'll talk about that in a second.

0:17And you might be able to get some interest. And so that's earning money on your money. Now, there are two... There's a bunch of different types of bank accounts, but the ones that you're going to see most often are savings accounts and checking accounts. Now, savings accounts, you can imagine, the word implies that that's money that you're saving, that you're not going to use, and that's typically what they're for.

0:43Now, the world has gotten a little bit more complicated. There's different types of accounts that are kind of in between, but when someone says a savings account, that's typically money that you wanna put away, you wanna earn money on that money, maybe get some interest, but you're not going to need to access that money a lot or do a lot of transactions.

1:01Checking accounts are on the other side. This is money that you are going to access. And the reason why it's called a checking account is in the past, and people still do this, they would write checks in order to access that money. And there are other videos where we could learn more about writing checks and what those are, but people use actual physical checks a lot less common now, but the checks could be used to take money out of an account or someone else might write a check to you and then that would put money back into the account.

1:31So you're able to exchange money or pay from one party to another without actually having to give cash. And it's also a good way of keeping track of what's going on. Now, in modern times, as I just mentioned, you could still use paper checks, but people typically access their money, either put money in the account or take it out, doing other things.

1:51One way is with what's known as a debit card. A debit card looks very much like a credit card. It'll have some numbers on it there. It'll have your name, et cetera. It'll probably have some type of thing that shows where you could use it, what networks could use it.

2:10And it's usually the same place that you can use credit cards. It'll often even say "debit" on it. And a debit card, when you use it at a store to say buy something, it takes money out of your checking account. So let's say that I have $500 in my checking account.

2:28I go to a restaurant, it costs $20. I pay with my debit card, it's gonna take $20 out of that $500. So my checking account would then be 480 and it will give it to the restaurant in some way. Now, another way of accessing money from a checking account, and this is if you really want cash, is to go to an ATM machine.

2:50You've probably seen those machines on the sides of buildings. There's a little bit of a keypad here. There's a screen, there's a slot where you could put, usually you put your debit card into it, and then there's another slot where you could take things out, which is typically you going in there, you put your debit card in, you have to put a password in, and then you can withdraw money.

3:09You can withdraw cash. So this is when you do need cash, even in today's world, then you could use this to access it. Now, I also emphasize this debit card could be useful if you want to access the money in your checking account say to do things like online payments.

3:25Now, if you wanted to keep track of what's going on there, you can go to the bank, but more often now, there's apps on your phone and there's websites that your bank has where you put in your password, et cetera, and you can see what's going on, what have been all of the transactions in that checking account.

3:42Where's money come from into the account and where is it going to? Now, the last thing I will talk about is the notion of fees. And I'm gonna write it in red really big because most of us don't want to pay fees. That's us paying money that we're not usually getting something in return.

4:02So there's a couple of typical fees that you might see involved with a checking account. One is just a monthly fee. So the bank is giving you all of these services. They're giving you a debit card, you have access to ATMs. You can write checks. So you might say, how is a bank going to make money, especially if they can't lend this money out because you might access it, et cetera.

4:24Well, one thing is if your amount that you have there is fairly low, they might charge you a monthly fee for all of these services. Now, typically, if you meet some minimum balance, if you have enough money in your bank, your bank will usually waive these fees because then they can start to do some interesting things with your money that you aren't using.

4:45They can start to make money off of that. Now, another type of fee is known as an overdraft fee. Overdraft. Let's say that you have $30 in your bank account. So this is what you have in your checking account, and then you use your ATM and you use it to buy something that is $50.

5:08In that situation, let's say the bank lets you do that transaction. So they're going to pay that $50 to whoever you're buying that thing from. But now your account, your checking account, is below zero. You owe the bank if you had 30, and if you took out 50, you now owe the bank $20.

5:30Now, if they allow that transaction to go through, they're probably going to charge you some money for it. One, they're going to want their money back, but they're also going to charge an overdraft fee. Last but not least, there are situations where the bank says, "You know what?

5:43I'm not going to allow this to go through. You only have $30. You're trying to spend 50. We're not going to allow you to do it." So rather than an overdraft fee, they're just going to charge you what's known as an insufficient funds fee. Back in the day, this was sometimes people would say, "You're bouncing a check, you're writing more money than you have," and they'll just decline that payment.

6:04So they'll oftentimes... That might be a not sufficient funds fee, in which case the transaction won't even go through. You're not going to be able to spend that money, and they're going to charge you money for trying to spend more money than you have. So I'll leave you there.

6:20Hopefully you get the main big differences between savings and checkings and the types of things that a checking account might involve.