Managing your checking account is about taking an active role in knowing what's going on with your money – when it's coming in and where it's being spent.
How people choose to manage their checking accounts may be as vastly different as how people choose to spend their money. Your checking account might be closely tied to your savings account, or you may not even have a savings account.
You may put everything you buy on your credit card and pay it in full each month rather than use your debit card. You may only log on to your online banking or mobile banking to confirm your direct deposit has arrived as expected.
So which way is the best way to manage your checking account? All of these.
Managing your checking account is primarily about taking an active role in knowing what's going on with your money – when it's coming in and where it's being spent. Having a few tips to make sure it's working for you may give you an extra handle on how you're managing your personal checking account.
How to move that money: checking account information and features
The best tip for managing your checking account may seem obvious, but it's the real magic of checking accounts: use them for money movement. Checking accounts are designed to be the main tool for your spending.
Money flows in and out regularly to cover living expenses, from a cup of coffee to a cart full of groceries. Your bills and payments pull from your checking account and the bulk of your paycheck gets deposited by your employer. It's where all your finances come together and checking account features facilitate that movement.
Standard checking account features
For this reason, your checking account includes a few features designed to make your spending easier. Everything from your financial institution's online banking site (or its mobile app) to bill pay services to your debit card is there to better facilitate the movement of your money.
For example, your checking account likely includes an unlimited number of transactions — it could be an auto-payment to your cell phone provider, your mortgage payment transferred to another financial institution, or using a debit card transaction to pick up a prescription at the pharmacy. A savings account or even a money market account limits the number of transactions. It's as if your bank or credit union is encouraging you to use your checking account.
Optional checking account features
Additional features such as overdraft protection and earning interest on your checking account may not be necessary for everyone's bank account based on how much money you choose to keep in your checking account. You may not need to check your account balance every day, but you may want to be certain automated payments are moving as planned. Checking accounts come with this functionality to fit lots of spending styles.
When you are trying to manage your checking account, look at all the features your bank offers. Ask your credit union about the benefits of specific checking services. Try a specific feature in the mobile app. Some features may become a helpful asset. The goal is to make sure you are using all the features at your fingertips to make your money work.
Let's explore several tips that might help you manage your money even better.
Why balance your checking account?
What do you do when you receive your monthly e-statement? Do you review it line-by-line for every debit card transaction, ATM fee, and mobile deposit? Probably not, even though that's one of the main reasons why your bank or credit union provides you with a statement.
Checking account statements, are delivered to you monthly. You may also get your savings statement each month, but that's because you are also getting a checking account statement. If you only have a savings account, those statements are only issued quarterly because you should not have as much activity in your savings account. (TIP: Did you know your bank statement is required to include step-by-step instructions on how to balance your checking account?)
In a 2018 survey, 36% of Americans said they look at their bank account daily. Yes, every single day! Another 30% look at their accounts weekly. Only 8% of Americans review their bank account monthly, so it may not surprise you that not everyone reviews their bank statements at the end of the month.
You may think this means people are managing their money more granularly. In fact, it could mean just the opposite. People may be looking to make sure transactions are clearing their account, but it may not give a broader picture of spending habits or alignment with budgets. It's like trying to manage your weight after you've eaten all those calories.
Taking time to review your overall spending regularly (even if it’s not monthly), should help form a clearer picture of where your money is going. It can also help you see if it is advancing your long-term goals.
Some online banking systems allow you to assign categories to each transaction, creating a clearer idea of where your money is going. Even if you don't balance your check in the “traditional” way by reviewing your statements line by line, making sure you understand your spending over time can help you adjust the way you manage your money.
How to manage spending with your debit card
Some people manage their money by allocating a set amount in cash each month to cover everyday expenses — from lunches with friends to groceries. When the cash is gone, all that money is spent If overspending is a challenge, this process makes sense. But at the end of each month, can you track where your money is spent?
Your debit card can provide similar services, plus more, to help you manage your spending in addition to just making purchases.
Many online banking platforms allow you to set limits on your spending. This restricts your ability to overspend beyond the pool of money you set aside for daily expenses. Using your debit card, however, gives you accountability to where that money is being spent, and clarity to where you can cut back.
Some debit cards can even be set up through your online banking to prevent purchases at specific types of stores. For example, if you are tempted to go out to lunch rather than pack a lunch but you want to avoid the temptation, you may be able to block restaurant purchases using your ATM card.
Not sure which features your online banking includes? Ask! Community banks and credit unions offer amazing customer service. Have them walk you through these features to help you better manage your money.
Transfer funds to other accounts to make saving easier
If you are saving for your long-term retirement, your checking account isn't the best place to do that. If you're already investing in your future (say with your employer's 401k) you have that money deducted automatically from your paycheck. Super smart!
What about other accounts? How about your savings account — are you building your emergency fund? Maybe you just want to pay ahead on your loan a little each month. A great way to manage your money is to transfer funds from your checking account to pay down your credit card or the open home equity line you used to renovate your second bathroom.
A.B.E.I. (Always be earning interest)
Managing your money from your checking account while still building your savings might be easier if you are moving all these transfers on a regular basis, or even automating those transfers. Keeping extra cash in your checking account when it could be earning a higher interest rate in your savings account may not the smartest way to make your money work for you.
Yes, there are checking accounts that pay interest on your balance, so there are advantages if you have an interest-earning checking account. To make the most of every dollar, keep enough money in your spending account to pay bills and buy gas and food, and transfer the rest to the place that's going to make it work for you... preferably without making more work for you.
Enroll in overdraft protection to avoid spending more than you have
If you keep a hefty balance in your checking account, this may not be one of those features you need. However, if you do dip near the break-even point at some point each month (or likely in the lead-up to payday) this might be a useful feature to help you better manage your money, and will certainly help you avoid unexpected bank fees.
Overdraft protection involves having a savings account connected to your checking account. Savings accounts can be helpful for accruing your emergency fund, but they can also be a companion to your checking account. Then if you spend more than you’ve got in your checking, funds are pulled from your savings to cover it. Smart, right? It will make sure your payments still go through without getting penalized by the merchant (but do your research and know how much this costs, as your bank will likely charge you for the privilege).
Set up account balance notifications and alerts to stay on top of your balance
Another suggestion, especially if you are one of those people who only check balances once a week or less, is to set up notifications of your balance. You can get notifications daily, so you don't have to log on every day, but still always keep tabs on your bottom line.
If you've recently opened a joint checking account and are adjusting to someone else also tapping into your spending account, simple notifications might just make the adjustment easier. Since you are into partnerships, consider using the overdraft feature and the notification feature together to manage your money.
Really, really use online banking
From top to bottom, using online banking offers so many benefits. If you're logging on daily, you're already on board. Just make sure you are using the additional features that can help you manage your money. Discover the additional features your checking account includes to make your online experience more effective.
It also helps to understand how money moves through your account — which transactions are instantaneous, which ones come with holds, and which ones are leading to extra fees (your ATM card might be guilty of this).
Your personal checking account can be more than just where money flows, it can also be your personal finance window into how you are managing your money.