Checking account Vs. savings account

What would happen if you returned from work one day to find that your house just burned down, flooded, or was burglarized? As you are trying to sort out what happened, you get a phone call from your landlord, the car dealer, or even one of the utility companies, notifying you that you are late on your payment. They request that you either submit the payment immediately or they will have to take other measures to collect the debt and report your outstanding debt to the credit reporting agencies.

At this point you have two choices, resubmit the payment or prove that you made the payment. Do you have any receipts? Receipts are usually kept at home in a safe place, but remember your house just burned down or flooded.

How can you prove that you made the payment if your receipts just went up in smoke? You will not usually get a receipt when dealing with cash transactions. On the other hand, money orders are very hard to track without the copy or a receipt. Had you paid your debt with a check, all you would need to do is contact your bank and request that they provide you with a copy of the check written to the creditor or utility company. The bank can also tell you if and when the creditor submitted the check for collection of funds.

As discussed in one of our previous articles, most unbanked Latinos prefer a savings account instead of a checking account. I would venture to say that perhaps one of the reasons for choosing a savings account over a checking account is because they believe that there is less writing and math involved. It can be a very frightening experience for someone with very little or no knowledge about the banking industry suddenly have to deal with a check register, a bank account statement, writing checks, and so forth.

It’s safe to assume that the main reason why Latinos in most Latin American countries traditionally prefer savings accounts is that the economy predominantly functions in an all cash base economy. Foreign currency instability, currency fluctuation, lack of poor public transportation, poverty, lack of financial education, lack of trust from merchants, are just a few reasons why most Latinos don’t use financial institutions in their native countries. Lets try to dispel some of those myths and try to explain why and how one can benefit from the use of a checking account for your day-to-day expenses.

A checking account is a service provided by financial institutions (banks, savings and loans, credit unions, etc.), which allows individuals and businesses to deposit money and withdraw funds from a federally-protected account. The terms of a checking account may vary from bank to bank, but in general a checking account holder can use personal checks in place of cash or money orders to pay debts or make purchases. You can also use electronic debit cards or ATM cards to access individual accounts or make cash withdrawals.

Most banks require a minimal initial deposit before establishing a new account, along with proof of identification and address. The most popular of these accounts is the “Free Checking” account. With a free checking account a customer is usually allowed to make unlimited deposits and withdrawals from their accounts as needed without a service charge. Most banks will charge you to order checks but you can negotiate those charges depending on the relationship with your bank.

It is ultimately the customer’s responsibility to keep track of all transactions and funds available. Financial institutions will provide their customers with a monthly statement that will allow them to check their balances and reconcile their records. There are several ways that a customer can verify available funds and posted transactions on the account: the Internet, a paper or electronic statement, an ATM, visiting your local branch, etc…

When you receive the statement you can compare the entries in your personal transaction journal, called a “check register” with the bank’s monthly statement. As long as the account holder maintains accurate financial records, a checking account provides a safe and efficient way to pay bills and deposit your payroll checks and or any other types of checks and/or cash.

Finally, a savings account may pay more interest over time, but a checking account replaces the need for you to carry large amounts of cash with you to pay routine debts such as rent, mortgage, car, and any other bills. Walking around with a large amount of cash can also make you a very attractive target for robbery.

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January 17, 2018, 9:46 pm
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