Learn 8 Pros and Cons of Checking Accounts

The Drawbacks of Checking Accounts

1. Financial institutions may restrict access to your funds.

A financial institution maintains the right to cancel or limit a purchase if spending does not appear to be coming from you. They accomplish this by preventing anyone from accessing the account. If this occurs on a Friday and there are no Saturday hours, you may not be able to access your money until Monday, when you can speak with a representative. This can be especially detrimental if you are traveling at the time.

2. Generally, spending actions are not recorded by credit reporting organizations.

Although financial organizations will disclose harmful account activity, such as overdrafts or actions that are detrimental to the bank’s or credit union’s benefit, they very rarely record positive behaviors in your checking account. Even if you have the most responsible checking account in the world, there’s a strong chance your credit report won’t reflect this.

3. Organizations can track your spending habits.

Your checking account generates transactions that can be saved for later use. Although your payment information is only saved with your agreement, your purchasing habits enable firms to build tailored advertising that follows you everywhere. At best, this is inconvenient. At worst, it means you spend more money than you intended because of the constant assault of advertising.

4. Not all checking accounts are free.

There may be fees associated with opening a checking account. Fee fees may be assessed if a minimum amount is not maintained on your account. Even if you do everything correctly and avoid fees, you’ll still have to pay for new checks and maybe up to 1.5% of a transaction cost in the United States for using your debit card.

Those costs do not occur if you spend money instead. The benefits and drawbacks of checking accounts demonstrate that they are helpful but not for everyone. Sometimes, prepaid credit cards and cash can readily substitute a bank account. That is why, before opening your checking account, you should carefully consider all of these crucial elements and the financial institution’s terms and conditions.