In order to be a successful freelancer, you need to be responsible for your finances, which means managing your money, where it’s kept, and how it’s used. Yes, everyone should be financially savvy, but freelancers have additional responsibility because there isn’t an employer setting things up for them. While it might seem basic, most individuals actually don’t understand how checking accounts work — and why they’re useful to have in today’s increasingly digital world.
Understanding Checking Accounts
Financial institutions, like banks and credit unions, offer checking accounts as a type of deposit account where you can make withdrawals and deposits. Checking accounts allow for a lot of flexibility when it comes to accessing your money, including ATMs, online check deposits, electronic debits, account-linked credit cards, and more. Unlike a savings account or investment account, checking accounts allow you to move money more easily (and more frequently) without any restrictions.
One of the downsides to only using a checking account, however, is that they rarely offer interest on money. That means, if the majority of your money sits in a checking account, then you won’t be getting the dividends that other types of accounts can offer.
Checking accounts also come with certain fees, which can come as a surprise if you’re not aware of what they are and how they work. One of the most common fees associated with checking accounts is overdraft fees, which come out if your expenses are more than the funds currently available.
Setting Up a Checking Account
Most banks and credit unions will help you set up a checking account at their institution. When doing so, you’ll need to choose which kind of checking account you’ll want: personal, commercial/business, student, or joint. Personal checking accounts are the most common, but some freelancers choose to utilize a business checking account, especially if they’ve set up a separate business that they work under. (This often happens for tax reasons.)
There are minimal fees associated with checking accounts, although these are nominal when compared to the benefits of having access to a checking account. One of the reasons that banks don’t charge a lot to have a checking account with them is that they’re hopeful you’ll use their services later for other financial needs, like a mortgage or personal loan, which makes them substantially more money.
Using Your Checking Account
Using your checking account is easy and convenient. When it comes time to deposit money, you can choose to use an ATM, direct deposit, checks, or in-person transactions. For withdraws, checking account funds can be accessed via checks, ATMs, or cards linked to the account. You can also use your checking account to automatically pay bills. Online transfers also make it easy to move money from your checking account to another account, like a savings account or even a credit card. Most financial institutions offer apps these days, making accessing your checking account even easier.
As you become more accustomed to using your checking account, you may run across times where you overdraw your account. The majority of accounts come with overdraft protection, which means that they’ll cover an expense for you until more funds are deposited. This service, however, comes with a service fee, which means every time you need to use overdraft protection, your account will be charged an additional amount. Depending on how your bank works, leaving an account overdrawn for an extended period of time can cost you quite a bit of money because they’ll charge a fee each day.