A checking account is one of the most basic of all financial services. In its most basic form, it allows you to give money to another person or business when it is not safe or practical to give them currency. In this section of StreetWise, we'll explain the benefits of checking accounts, how they work, how to use them, and how to choose them.
A check is a written order on a credit union, bank, or savings institution, by the account owner, payable on demand to the person named on the check (payee), to that person's order, or the bearer. The check is drawn on funds on deposit in the account owner's checking account.
On demand? That means the financial institution, by contract with the account owner, must honor the check unless there are not sufficient funds in the account to cover it.
To that person's order? If you look on the front of a check, you'll see the words Pay to the Order Of at the beginning of the line where you write the payee's name. This language is one of the things that legally makes a piece of paper a check. Payees communicate their orders with the type of endorsement they write on the back. See endorsing a check below. If the payee simply signs their name on the back, then the bearer (any person who has the signed check) can legally cash or deposit the check.
Your checks will usually be personalized for you. They will have your name, address, the financial institution name, and a check number printed on the face. It's recommended you add your telephone number as well. This helps payees feel more comfortable accepting your check.
The numbers that appear along the bottom of the check are pre-printed in special magnetic ink that can be read by magnetic ink character readers (MICR). Starting from the left, there are three numbers. The first is the routing and transit or ABA number. This number identifies the financial institution. The next number represents the checking account. At many institutions, this is your account number. At DCU, because we identify your checking account by your Member Number and your Account Number (5 for most checking accounts), we instead use a checking cross reference number. The final number is the number of your check. It matches the check number usually found in the upper right corner of the check.
When you pay someone by check, your check begins a long journey. If you pay someone out of the area, here's what typically happens:
The payee will endorse the check and deposit or cash it at their financial institution in person. They might also deposit it online through a scanner, smart phone, or tablet computer; at an ATM; by mail, or at a CO-OP Shared Branch location.
That institution will credit their customer's account.
Before the end of the day, they will process the check, then deposit it with others received that day at the local Federal Reserve Bank branch. To get credit, the checks have to be at the Fed by a certain time each day. Many banks used to close at 2 pm so they could meet that schedule with the day's checks. By this time, the check will have been converted from a paper check to a digital image file showing the front and back.
The Federal Reserve will transmit the check image to their branch closest to your financial institution.
Next the check image goes to your financial institution or their check processing firm.
When presented with the check image, the institution will determine if there are sufficient funds to honor the check, either in the account or through overdraft protection. If the funds are available, the institution will withdraw them from your account and transfer them to the Federal Reserve. If there are not sufficient funds, the institution will return (or bounce) the check back through the system.
The MICR (Magnetic Ink Character Reader) numbers at the bottom enable the efficient travel of your check through this payment system. Some people wonder why the names of their payees don't show up on their statements. That's because MICRs only recognize the institution, account number, and check number. The amount is added manually when the check is processed. Adding payee names to statements would be a costly, slow, manual error-prone process.
Proof of payment Checks provide a "paper trail" or written proof that you paid someone. Each time you write a check that ultimately clears your account, there will be several records of it. Having this proof is important for tax purposes (when you make tax deductible charitable donations) and whenever you are paying a person or company by mail.
on your credit union statement,
in your check register (checkbook),
a carbon copy if you are using duplicate checks,
a printable front and back image of your cleared check in online banking (available for at least twelve months),
and an image of your check electronically stored in our files indefinitely.
Safer than cash If you shop by mail, paying by check is safer than cash. Cash can be taken and spent by anyone without a trace. The paper trail a check leaves discourages theft.
Cheaper than money orders Personal checks are cheaper than buying money orders or cashier's checks even on checking accounts with fees.
Lots of access options There are many ways to conveniently access your checking account that other types of accounts don't offer.
No transaction limits Checking accounts have no Federal limits on the number of electronic transfers you can make each month. All other types of savings accounts have limits on how many transactions you can make each month when not at a branch or ATM.
Writing a check is a simple process, however it is important that it is completed correctly so it can be processed quickly and smoothly. Just follow these easy steps:
Record the check in your register Immediately record the check number, date, payee, and amount in your register and subtract the amount from your balance so you will know how much you have left in your account. Get in the habit of doing this before you write the check. It ensures you look at your running balance and deduct this new check each time.
Write to the left and print Print or type all words and numbers as far to the left in each space as possible. Printing is less easily altered than cursive writing. Always use a ball point pen. If you use pencil, someone could erase and alter the check. Markers can also be removed.
Date Fill in the date that you are writing the check. It is preferable to use words and not numbers, but not mandatory.
Pay to the Order of Write the name of the person or company receiving your check. Make sure that you print the full name. This will help prevent someone from stealing the check and changing the name. If paying a bill, make sure you make out the check as requested by the biller. If you are writing the check out to two people make sure that you include the word "and" or "or" between their names, to indicate whether you want the check to be cashed jointly or individually.
Amount box Located to the right of the "Pay to" line beginning with a dollar symbol. Enter in numerical form the exact dollars and cents to be paid to the person or company. Write cents as a fraction instead of a decimal (10/100 instead of .10) to prevent the number from being altered.
Amount line Below the "Pay to" line, write out in words the amount of the check. For example $145.10 is ONE HUNDRED FORTY FIVE DOLLARS AND TEN CENTS. Start writing as far left as possible and draw a line through any blank space left on the line. This will stop someone from adding words to the amount. Make sure this amount matches the numbers written above. If they do not match, the written amount is considered legally binding.
Only use the word "and" in between the dollars and cents. Do not put one hundred and forty five dollars.
For line Also known as the Memo line, completion of this space is optional. You can make a note to remind yourself of the purpose of the check. If you're paying a bill, this is a good place to write your account number.
Signature line Write your name as it appears on your account on the line that appears at the lower right corner of the check. Signing the check tells your financial institution that you've approved payment. You should never sign a check until the rest is completely filled out and you've confirmed that the information is correct. Make sure your signature matches exactly the way your name appears on your debit card at DCU.
Make sure your signature matches exactly the way your name appears on your debit card at DCU.
If you make a mistake, write VOID in large letters across the face of the check and put the check in your files. Then write a new check. Mistakes make the check look suspicious and may prevent it from acceptance by a financial institution. Make sure you write the check number and VOID in your register to make it easier when settling your account.
If you accidentally tear a check so the numbers are unreadable, void the check and write a new one. Missing information makes processing the check difficult. Remember to list any unused checks in your check register.
Endorsing a check shows the financial institution that you've given permission for that check to be processed. A check must be signed on the back side, at the top of the left-hand edge before it can be processed. You must sign exactly as your name appears on the front of the check. If your name is misspelled, write your correct name underneath. Below your signature, write your DCU member number and the number of the account you want us to deposit this check to or place any check holds against. Endorsements must be confined to the area indicated at the top of the check. The bottom area is reserved for the financial institution processing the check to record information.
Always wait until you are ready to cash the check before you endorse it. An endorsed check is like cash anyone can take the money. If you use a restrictive endorsement (see right), with your signature, your account number, and the words For Deposit Only, no one else can cash your check.
It's important to make deposits promptly to prevent loss of checks or cash and get immediate credit in your accounts. It also keeps your records up to date. A deposit made in person at a DCU branch requires a deposit slip only for the cash portion of your deposit. The branch teller will provide you with the deposit slip at the time of your deposit.
Another option is to deposit checks from home, the office, or even while traveling with DCU's free Online Deposit! Online Deposit allows you to deposit checks using the camera in your smart phone or tablet computer or by using a scanner and your computer. You can sign up inside Online Banking.
If you are mailing a deposit to DCU, complete the Online Deposit Form (.pdf format) and mail it with your deposit. Deposit slips also come with your order of checks, in the back of the stack, and can be used to mail a deposit. If you are depositing more than one check, list them one at a time. Identify each check by the ABA (American Banking Association) number in the upper right hand corner of the check. This number is the top line of the "fraction". They indicate the state in which the financial institution is located and the institution's identification number. DCU's number is 53-9182.
You will get a receipt for your deposit for your records if depositing in person. Remember to record the deposit amount in your register. Mail deposits will show up in your account history in Online Banking within 48 hours from the day we receive them.
Never mail cash to anyone including DCU. If you have cash to deposit, use a branch, deposit-taking ATM, or a CO-OP Shared Branch location.
Deposits at an ATM don't require separate deposit slips. Endorse all your checks with your signature and account number. Fill out an ATM deposit envelope (available at the ATMs that require envelopes) with the same information you would on a deposit slip and seal the envelope. Insert your card into the ATM, choose deposit, and choose checking. Insert the envelope according to instructions at the ATM. Save your receipt. Deposit to no more than one account per envelope.
If you mail a check that you want to deposit, write "For Deposit Only" with your endorsement. This will ensure that someone else can not cash your check if it's lost or stolen in transit.
When you open your account you will receive a supply of personalized checks. To order more, you have some options. If there is a printing charge for your order, we will collect it from your checking account. The charge will appear on your statement.
Reorder online Just go to our Ordering Checks page and select the appropriate link. Your order will go directly to Harland Clarke, our check printer, for processing with the same style and information as your last order. The check number on the new order will follow the last number you already have. This is the fastest way to order checks.
Reorder online with changes Log onto Online Banking and choose Account Manager. Then choose the Check Ordering link. You can view the available styles of paper and lettering before you fill out and submit the online order form. Your order will go directly to Harland Clarke for processing.
By Mail Just fill out the order form enclosed with your checks and mail it to the address indicated.
In Person Bring the order form enclosed with your checks to any DCU branch. We have catalogs on site so you can choose a new paper or lettering style.
There are a number of companies now, who offer pretty designer checks for you to use. While attractive, we do not recommend that you order from one of these companies. The quality of the printing of the MICR numbers at the bottom of the checks may not be of the same standard as DCU's check printer. This can cause problems when your checks are being processed. We offer a wide variety of styles and colors to suit your needs.
DCU offers you many ways to access your account, get information or perform transactions.
Online Banking You can do the following:
Transfers in from other DCU savings accounts or lines of credit.
Transfers out to other DCU savings accounts.
Loan payment transfers to all your DCU loans.
Bill payment Pay bills online free.
Withdrawals Mails a withdrawal check to your address on record.
Account information Online Banking gives you access to all the information on your monthly statement most of it in real time (as it happens). You can also see and print front and back images of your cleared checks within a week.
Mobile Banking Gives you most of this functionality free through iPads, iPhones, Androids, and most web-enabled digital cell phones.
Visit our Online Banking guide for more information.
DCU Visa® Debit Card Use it to make purchases almost everywhere Visa Credit Cards are accepted. Purchases still come out of your checking account. It also acts as an ATM card (for withdrawals, deposits, and transfers) and a POS card for purchases at electronic Point-of-Sale terminals on selected ATM networks. For members that don't want checking account access through Visa networks, a regular DCU ATM Card is available.
Direct Deposit Employers, Social Security, pension administrators, and investment companies can often send you payments through ACH (Automated Clearing House) direct deposit. Most members have direct deposit go directly to their checking. It's safer and faster than having payments arrive to you by check. It's more convenient and can qualify you for a variety of extra DCU Checking benefits.
Pre-authorized payments Also known as pre-authorized debits or ACH payments, this is a convenient way to pay recurring bills. Many utilities, insurance companies, and others that bill you regularly offer this option. You send them a voided check and sign an agreement. They charge your checking account each month as if you had written the check yourself. It's reliable and saves time.
Online Deposit Online Deposit allows you to deposit checks using the camera in your smart phone or tablet computer or by using a scanner and your computer. You can sign up inside Online Banking.
Easy Touch Telephone Teller Easy Touch is our audio response service. You access your account by touch tone phone to get account information, make transfers, make loan payments, and more.
Treasurer's Checks If you need a certified check for a particular transaction, DCU can give you a Treasurer's Check drawn on your checking account at any branch.
Money Wires You can request DCU wire money to another account at another financial institution anywhere in the world. There are fees for the service.
ACH Origination This service allows you to have us move money from your account at another institution to your account at DCU, by ACH, on a recurring basis.
Your checks come with a check register. This booklet is designed to help you maintain a running total of the amount in your checking account. If you keep your check register up to date and correct, you'll never write a check for money you don't have. If you write such a check, you may incur fees. Your credit rating could be affected if you do it too frequently (See overdrafts below).
Start out by writing the opening balance at the top right on the first page of the register. Enter the details of each transaction that will affect your checking balance before you make it. Add or subtract the amount from the total. Record the check number, date, payee, and amount. Put a check by items that are tax deductible, such as charitable donations, for reference when you prepare your tax return.
In addition to your checks, remember to record all ATM and Debit Card transactions, fees, dividends, electronic bill payments, pre-authorized transfers, transfers to or from other accounts, and automatic payments. To ensure there is money to cover scheduled transactions, mark them in your register a day or two before they happen. A good strategy is to deduct these payments on your register on the payday immediately before the scheduled payment or transfer date. This is so you'll always know how much you really have in your account.
StreetWise Tip: Don't use Online or Mobile Banking as a substitute for your check register. The Online Banking balance you see today cannot include transactions you've made that have not yet cleared checks you've written, Debit Card purchases, or deposits you've just mailed.
Maintaining your current balance is an extra challenge when two people are using the same checking account. Open communication is very important between the individuals to make sure there is always sufficient funds in the account. Set up arrangements when you first open the account to ensure smooth coordination. One person should be designated with the primary responsibility of maintaining the records. Whenever the second person does any transaction that affects the balance, the information should be immediately passed on to the designated record keeper. Any transaction receipts, such as a deposit slip or ATM receipt, should be put with the checkbook as soon as possible and the amount noted in the register.
You should treat your checking account the same as cash. Don't let anyone gain access to your money. Don't leave your checkbook in an unlocked car, unsecured locker, or coat pocket where someone could grab it. Only share your Personal Identification Number (PIN) with your joint owner and never write it in your checkbook, wallet, or on the ATM/Check Card. If your checks are stolen or lost you should notify DCU as soon as possible to limit your liability and chances of checks being cashed by an unauthorized person. Visit the StreetWise page on checking account security for more information.
Under certain circumstances, you may want to stop a check from being cashed. A stop payment order is an instruction from you to DCU that a particular check, such as one lost or stolen or a payment that is being disputed, should not be paid. You may request a stop payment on the phone, online through Online Banking, in writing, or in person. A written confirmation of a verbal request will be sent to you for your signature. A stop payment can only be done before the check has been cleared by DCU.
Even if you consider yourself a conscientious person, there may be an occasion when you write a check and discover that there isn't enough money in your account to cover it. Numbers may get transposed when you enter a deposit in your check register, or a fast-food debit purchase that didn't come with a receipt could push your balance lower than expected. With the use of digital check images, checks clear very quickly.
When a transaction hits your account and there are not enough funds in the account to cover it, one of two things can happen. If the financial institution returns the transaction unpaid, it is called Not Sufficient Funds or NSF. There is typically a stiff fee from the financial institution and potentially another from the vendor you attempted to pay.
If the financial institution pays the item even though you don't have funds in the account, it is called an Overdraft. Typically there is a fee for the overdraft and you need to make up the shortfall quickly in some way. This can be done with overdraft protection of some sort, or you will need to transfer enough money into the account to cover the shortfall and any fees.
DCU can provide you with an overdraft safety net (see below), but you can do your part to help prevent bounced checks from springing to life in the first place. To keep your balance in check, take these steps:
Record all debit card purchases, checks, deposits, credits, transfers, and ATM withdrawals in your check register as soon as the transactions occur. Then, add or subtract the amount to your running balance.
Remember to subtract any automatic bill payments you may have set up for loans, utilities, or insurance.
Consider keeping a cushion in your account equal to one week's bills to cover mistakes.
Review your account statement each month. You can check your account balance online with Online and Mobile Banking. In addition, you can review your monthly statements through eStatements within Online Banking. Verify entries in your check register with the amounts on your statement.
For your protection, you should link your checking account to another DCU account that provides protection against returned items or overdrafts. DCU offers three options to protect your checking account.
Visa Overdraft Protection. If you're a DCU Visa Platinum cardholder, you can sign up for optional overdraft protection for your DCU Checking Account. If your checking account balance ever falls into a negative zone, the overdraft amount is automatically charged to your Visa as a cash advance, up to your available credit limit. If you qualify for Free Checking with Relationship benefits, there is no overdraft transfer fee.
Home Equity Line of Credit. Equity LinePLUS offers you yet another way to protect your checking account. If your checking account balance ever falls into a negative zone, the overdraft amount is automatically charged to your line of credit, up to your available credit limit. If you qualify for Free Checking with Relationship benefits, there is no overdraft transfer fee.
Limited Overdraft Protection from Savings. Your DCU Savings Account can kick in to cover an overdraft against your checking account (subject to federal Regulation D transfer limits). If you choose this overdraft protection option, funds are automatically transferred from your savings. There is a transfer fee for each transaction.
If you opt-in to and are approved for DCU's Standard Overdraft Payment Service, the following coverage applies:
We do authorize and pay overdrafts for the following types of transactions:
Checks and other transactions made using your checking account number
Automatic bill payments and other pre-authorized transactions
Everyday check (debit) card purchases (processed outside of the PIN network)
We do not authorize or pay overdrafts for the following types of transactions:
Debit card purchases (processed through the PIN network)
Note: We may authorize and pay overdrafts at our discretion. If we do not authorize or pay the overdraft, your transaction will be declined or returned. Business checking accounts do not qualify for this service.
Financial institutions try to guard against fraud by following verification and identification procedures. Policies are established to minimize losses from bounced or fraudulent checks. Federal law allows financial institutions to limit a customer's access to funds for a specified period after a check is deposited. For a personal check, the time limit for the funds being held depends on whether the check is drawn on a local or non-local institution. These restrictions have been created to protect the funds of the membership. In most cases, you will have access to your funds the day following the deposit. DCU's policies are as liberal as prudently possible to minimize any inconvenience from check holds. DCU's Funds Availability Policy is available online.
While everyone will make an occasional mistake, you should make every effort to never write a check without the funds in your account to cover it. The most reliable way to do so is to keep your check register up to date.
Institutions charge penalty fees for people that overdraft their accounts. Merchants also charge fees when paid with a bad check. If overdrafts get excessive, an institution may close the checking account and report the closure to credit bureaus. A history of checking account abuse can prevent an individual from obtaining another checking account or credit at favorable rates.
Intentionally writing checks without funds behind them is considered check fraud. It is a serious crime.
Every month you will receive an eStatement (displayed in Online Banking) or paper statement outlining the transactions that have been processed for all of your accounts. At the top of the statement are dates indicating the period of time in which the transactions occurred. The checking section will show each transaction that was processed on your account by the date that they took effect. Following the transaction listing is a summary of your account activity, showing transactions by type, totaled and detailed. The checks are summarized in numerical order, making it easy to check against your register.
Actual checks are not included in your statement, however, you can see them online and print them through Online Banking.
When your statement or eStatement arrives Locate the check-balancing section on the back side of your monthly statement and follow the instructions.
Compare checks, deposits and other transactions to your register. It is helpful to make a check mark next to the checks in your register and on your statement of the checks that have cleared.
Identify checks and Debit Card purchases that haven't cleared. On a separate piece of paper subtract them from the statement balance, then add any deposits or Debit Card credit slips that haven't cleared.
Adjust your check register balance for any fees or interest incurred during the month.
The balance that you just calculated on the piece of paper should agree with the balance that appears on your register, if not recheck.
If the difference between the two totals can be divided evenly by two, you may have added when you should have subtracted or vice versa. A difference divisible by nine may indicate that you transposed numbers when recording a transaction (for example, $23 instead of $32). Be sure to deduct or add any fees or dividends earned, if applicable.
A fast way to balance your account is to download account history from Online Banking into financial software such as Intuit Quicken. Downloading history into your electronic register can make balancing a snap. For more information, read your software manual and the Account History/Download help screen.
Open your statement promptly each month for two important reasons...
For your security You should check each transaction to make sure it is correct and you made it. Read the StreetWise information on identity theft for details.
For important notices We use the statement to send you news and information affecting your membership and accounts. In addition we include the Members' Monthly newsletter, educational material, and time-sensitive offers we think will benefit you.
eStatements are electronic statements that can be viewed through Online Banking. eStatements offer many additional benefits above the standard paper statement. These benefits include:
Electronic Tax Forms No waiting for tax forms in the mail. You even get your electronic tax form earlier in the month than if you had to wait for the paper version. You can view and print year-end tax forms when it is convenient for you (including 1098 and 1099-INT).
Account reconciliation Allows you to enter outstanding transactions and balance your checkbook, and look at your Visa activity.
Pie Charts Shows you how your funds are allocated.
Enhanced Check Image Printing Allows you to print all your check images for the month, front and back, without having to print them individually.
eStatement Archive for Statements Holds one year of history for statements and check images.
eStatement Archive for Visa Bills Holds one year of history for Visa statements.
Printable PDF Statements Account statements and Visa statements can be downloaded and saved on your computer.
Email Notifications Receive an email message that tells you when your statement is available, and your Visa bill has been posted.
Secure You won't need to be concerned about lost or stolen mail.
Checking accounts come in a limitless variety at different financial institutions. And free checking is very hard to find these days. In general, consider the following when shopping for a checking account.
Monthly fees Many accounts charge you a service fee every month. Others waive the fee if you maintain a minimum balance. Don't even consider a fee-based account unless the fee can be waived and you are willing to meet the conditions to do so. A free checking account is even better if it has the features and benefits you want.
Per-check charges Some banks will charge a fee for every check you write. Some will give you a limited number free each month. There are so many better accounts out there, you should never use a checking account with per-check fees.
Minimum balances Some checking accounts have a minimum balance to open the account, avoid monthly fees, or qualify for interest or dividends. Minimums can vary greatly and the minimum may need to be in a different account. DCU's FREE Checking Account has no minimum. When you shop, make sure you compare the size of the minimum, the size of the fees for falling below, and value of the benefits received for staying above.
ATM fees Today, many people use ATMs to access their checking accounts though with a debit card, there is very little need for cash anymore. Look for an account that allows you to use ATMs free no matter who owns them. That will be hard to find at a bank. ATM fees for using other institutions' ATMs continue to rise at most banks. Surcharges keep rising, too. If you have Free Checking with Plus or Relationship benefits at DCU you'll pay no fees to DCU for ATM transactions. Plus you'll get up to $10.00 per month if you have Plus benefits or $25.00 per month if you have Relationship benefits in non-DCU ATM surcharges reimbursed.
Access The more free ways you can get to your money, the better. Look for free Internet access, free phone access, and free access to service people who can assist you with questions or problems by phone, email, or in person.
You can open a checking account at DCU online, in person at a branch, or by mail.