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How to Open and Manage a Checking Account

For a young man just beginning to establish his financial life, opening a checking account is a small, but important, step in that process. A checking account is the workhorse of your accounts. It's for money that you plan on spending or transferring to another account quickly. Because of the ease at which you can deposit and withdraw from a checking account, it will likely be the hub of all your financial activity.

Below we provide important tips and considerations on opening your first checking account. (While you're at it, open up a savings account too for your emergency fund.) For those of you who already have a checking account, we also provide some friendly reminders on managing it wisely.

What to Look for in a Checking Account

Not all checking accounts are created equal. Some banks offer higher than average interest rates, while others offer accounts with no interest; some banks charge a monthly fee to keep your money with them, while others offer free checking accounts. Below we highlight a few things to consider when selecting and applying for a checking account:

Look for free checking accounts, but understand that a free checking account isn't really "free." A free checking account is an account that doesn't charge you a monthly service fee to keep your money in that account. Many banks used to offer free checking accounts without any strings attached, but those days are largely over. These days, most banks won't charge you a monthly fee so long as you meet certain conditions. Usually the conditions are that you make a certain amount of direct deposits and debit card transactions each month, or you maintain a certain minimum balance.

Look for accounts with no minimum balance. When you're young and just starting out in life, your cash flow is likely minuscule. When I was in college, it was common for my checking account to dip below $100 despite my best efforts at budgeting. If you have a bank account that requires a minimum balance and you dip below that number, you're going to be slapped with a penalty. Many free checking accounts have no minimum balance requirement (but require you to make direct deposits or debit card transactions to keep the account free), so select one of those. Avoid checking accounts that offer higher than normal interest rates. They look enticing, but they usually require a minimum balance of a few thousand dollars.

Look for accounts with online access. You want to keep on top of how much money is coming in and going out of your checking account. It used to be you had to religiously keep track of every single one of your transactions in a check register if you wanted to know how much you had in your account. Today most banks offer free online services that let you check your account online. Get one that does. Also check if your bank allows you to hook up your accounts with services like Mint.com or Quicken. Keeping track of your checkbook on your computer is much easier than using the old pocket register.

Ask how check "holds" are handled. Let's say you get a big fat $2,000 from Grandpa to help pay for school. You deposit it in your account. You're ready to drop a $2,000 money bomb at the bursar's office the next day, right? Nope.

Banks usually place "holds" on checks from other banks, especially out-of-state banks, for a few days to ensure the check or electronic deposit will be honored by the issuing bank. During this hold period, you won't have access to the money you deposited. For checks from local sources, the hold period is usually two days; for out-of-state check sources, the hold period can be up to five days.

Get an account with a check/debit card. Most banks offer customers a debit card when they open up an account. Debit cards offer the convenience of credit cards, without the crippling high interest rates. Whenever you swipe a check card, your checking account is deducted.

Look for a bank with plenty of ATMs in the area and ask about ATM fees. You'll have those days when you need quick access to cash. That's where ATMs will come in handy. But the convenience of ATMs come at a price. While most banks offer machines that don't charge withdrawal fees for their own customers, banks will charge you a fee for using a competitor's ATM. When you add that fee, to the fee, or surcharge, the competitor's bank charges you to use their ATM, you're looking at paying about $5 just to get your cash.

Opening a checking account is a breeze. Just walk into the bank and inform the teller that you'd like to open an account. All you have to do is fill out a short application, show the teller your photo ID, and deposit some money to open up an account. The amount you have to initially deposit will vary from bank to bank -- some require only $1, while others ask for $50, $100, or even $250.

Some banks even let you open up an account online, but you'll have to have an account at another institution that you can use to fund your new account.