Choose your bank wisely.
You should shop around to choose the right bank to handle your checking account. It is important that you think about all your needs and calculate the fees and costs, just as you do when buying any product or service.

When taking steps to set up a checking account, ask yourself these questions:

• How much will you usually keep in your account each month and how many checks will you write? This will help you decide how complicated or simple an account you will need.

• How many fees are you willing to pay, to get more services?

• What time of day do you think you will do most of your banking? Some people like to go during regular banking hours, while others need a bank with weekend and nighttime access.

• Do you want automated teller machines (ATMs) and other electronic services such as online banking? Or would you rather deal in person with a live bank teller? Answering this question will help you decide whether you'd be happier at an institution with lots of bank locations and regular hours or one that focuses more on ATMs and online banking.

Keep your checkbook up-to-date.
If you do not keep your checkbook organized and up-to-date, you could lose track and start bouncing checks. Bounced-check fees can mess up your credit, and sometimes even one bounced check can make it hard to get another checking account. In this section, we show you how to keep your checkbook in order and avoid risking your financial future.

Good news: Some modern innovations to help you stay organized…
Ask your employer about the option to deposit your salary directly into your checking account. You should know that, someday, paper checks you write to pay bills will be replaced by electronic methods.

Here is an overview of different types of checking accounts. When you shop around, however, remember that banks may use different names for these accounts. So, pay attention to the definitions.

• Basic checking — This account is for the customer who uses a checking account to pay bills and cover daily expenses, but does not plan to maintain a high balance. Some basic accounts require direct deposit or a low minimum balance to avoid fees.

• Interest-bearing — Usually requires a minimum balance to open, with an even higher balance to maintain in order to avoid fees. For example, a bank may require just $100 to open an account, but will charge $22 in service fees each month if you do not maintain a $10,000 balance. With some accounts, the higher your balance, the more interest you earn. Interest is paid monthly, when your bank sends you your statement.

• Joint checking — An account owned by two or more people, usually sharing a household and expenses. Each co-owner can access the account. Most types of accounts, whether it's basic checking, savings or money market, allow more than one person to use them.

• Express — Good for people who like to bank by ATM, telephone or personal computer, this account usually allows unlimited check writing, low minimum balance requirements, and low or no monthly fees. The catch is that you pay fees for using a live in-person teller. These accounts are especially popular with students and young customers who are very busy and don't want to spend a lot of time on banking transactions.

• Lifeline — These very basic accounts for low-income consumers are typically products with monthly fees ranging from zero to $6; require a low, if any, minimum deposit and balance; and allow a limited number of checks per month. Many banks, thrifts and credit unions offer such accounts. Lifeline accounts are required by law in Illinois, Massachusetts, Minnesota, New Jersey, New York, Rhode Island and Vermont. In those states, minimum terms, fees and conditions are set by law, not by individual banks.

• Senior/student checking — Many institutions offer special checking deals if you are a student or age 55 or over. The benefits vary from bank to bank, but may include free checks, cashiers and traveler's checks, ATM use, better rates on loans and credit cards, or discounts on everything from travel to prescriptions.

• Money market — This account combines checking with savings and/or investment opportunities to help you pursue higher earnings. Requires high minimum deposit to open -- usually $1,000 to $10,000; higher balances to maintain in order to avoid fees; and has stricter limits on checking transactions than other accounts. Pays more interest than basic checking or savings accounts. This account is for people who can afford to maintain a high balance and do not write more than three to five checks each month.

It's kind of like emptying the trash — if you don't do it regularly things will get messy. Because there are so many things to calculate beyond paper checks, such as ATM transactions and fees, balancing your checking account has gotten harder.

• Review your monthly bank statement. It seems like a "no-brainer," but how many of us have thrown that envelope in a stack of papers and ignored it? Stop! Take a close look and compare the statement to your check register. Make sure that neither you nor the bank, have made any errors. Check off everything recorded in your checkbook by comparing it to the details on your bank statement. Check off everything that matches. Then, if you have forgotten to log something in your checkbook — now is the time to do it. If you have questions about any of the details on your statement, contact your bank to get them answered. The end result should be that your checkbook and your bank statements are in agreement about your balance. Everything has been double-checked and accounted for.

• Take advantage of technology. You don't have to wait for the monthly statement to arrive to find out what is going on with your account. Many banks have 800 numbers you can call to find out your balance, what checks have cleared and the fees you have been charged. Balance inquiries can also be made at ATMs, or you may be able to access account information over the Internet. The information is usually updated every business day, so it's more current than monthly statements. Be careful, though — some accounts at some institutions are not updated daily.

• Keep up with fees. Do you know what your bank is charging you to write more than a certain number of checks, fall below your minimum balance requirement, visit the ATM or a teller, place a stop payment or bounce a check? Reading the inserts that come with your account statement can help you keep on top of changes in bank charges.

• Record fees and all transactions immediately. If you have a debit card, it takes more discipline to keep up with what you are spending. If you aren't the type to write down every debit card purchase at the time you buy something, keep your receipts in one place. Put them between the pages in your check register or in a designated envelope, and then update your checkbook every few days. Or, start keeping track of your transactions on the back of an ATM receipt and wrap it around your debit card. Every time you reach for your card, you will be reminded to jot down the amount.

• Choose an overseer of your joint account. Somebody needs to do it. If you share an account, make sure one of you has the responsibility of keeping up with it. Try to agree on where you will keep receipts and what checks will be written each month.

• Use cash for the little stuff. Balancing your account becomes easier —especially with joint accounts — if you minimize transactions by taking out enough cash each week for lunch, gas, the dry cleaner and other daily expenses.

• Get checks with carbon copies. A good way to keep track if you write a lot of checks.

• Have your canceled checks sent to you in your statement each month. The opposite of this is "check safekeeping," which means the bank keeps copies of canceled checks but will provide either the original check or a photocopy upon request.

• Use overdraft protection. Some banks give you the option of linking your checking account to another account, such as savings, and will automatically make the transfer if you don't have enough money to cover a transaction.

• Go with direct deposit. Having your paycheck or federal payments such as Social Security deposited electronically avoids mail delays and lost or stolen checks — all of which can help you avoid bounced checks.

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• If you buy checks from your bank, be aware that the cost is automatically charged to your account, which may leave you coming up short without realizing it. And some banks charge up to $24 a box for those little 3-by-6-inch pieces of paper. To avoid that, consider using an outside check or financial printer where you can usually get a box of checks for $5 or less.

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• Round off your transactions to the next dollar. Whenever you write a check or make a debit card purchase, record it as the next highest dollar figure instead of to the penny. For example, if you spent $30.15 at the dry cleaner, record it as $31. This can help you avoid overdrafts, cover account fees and may even leave you with a few extra dollars at the end of the month.

Each year, the U.S. Treasury Department replaces more than 800,000 checks that have been lost, stolen or damaged during delivery, according to the FDIC. The federal government now issues Social Security, veterans benefit checks and other federal payments through direct deposit, also known as electronic deposit, although you may still receive federal payments by check. In addition, many employers now offer direct deposit of paychecks.

The benefits of direct deposit

• There are no checks to be lost or stolen.

• Payments reach your account the day the check is issued — even if you are out of town, sick or unable to get to your financial institution.

• Many banks offer free or lower-cost checking for customers with direct deposit because it saves them the cost of processing paper checks.

• Direct deposit can help you avoid bouncing checks because the deposit is direct and on time.

• It can save you trips to the bank and help you avoid long lines at tellers or ATMs.

• The federal government and many employers will deposit your check a day early if the regular payday falls on a holiday.

Setting up direct deposit
Establishing direct deposit of your paycheck requires you to go through your employer, who will have the paperwork needed to set it up.

Your employer will want your Social Security number and a voided check from your checkbook containing your bank's routing number (a number assigned by the Federal Reserve to identify your bank) and your account number.

The routing number is the first set of numbers on the bottom left of your check. The routing number is followed by your account number and the number of the check itself.

It usually takes at least two weeks for direct deposit to kick in for the first time. After it does, instead of your regular paycheck, you will receive a voucher from your employer stating how much was deposited to your account. The voucher will look similar to a real check, with all the same information on taxes, benefits and other deductions, that were on your paper paycheck.

Arranging direct deposit of most federal paychecks may be done over the phone or at your local federal building. The agency — whether it's Social Security, Veterans Administration or some other branch — will need your checking account number and your bank's routing number. You will get a follow-up letter confirming the change in your method of payment.

You will not, however, get a voided check or voucher each month. Federal payees must call their banks to verify direct deposit of their checks.

Any financial institution is going to ask you to prove you are who you say your are — before you open an account. So, be prepared to provide:

• A photo ID such as a driver's license, passport or student ID.
• Your Social Security number.
• Address verification. Have an official utility bill with your current address handy.
• Your signature on a card or form that will be kept on file by your bank.

Many banks will let you start an account over the phone, and then they will verify your information with a credit agency. But plan to visit your new bank in person to provide a picture ID and signature, to finalize the account set-up.

RULES FOR OPENING A CHECKING ACCOUNT

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For your first 30 days as a checking account customer, your money goes into a bank's vaults a whole lot faster than you can get it out. That's because lengthy "hold" policies on checks deposited by new customers make it tough for people to get their hands on their own money.

It may be hard on people who have just moved into a town, but it's perfectly legal. Federal regulations establish how long banks can hold your checks, but they give wide latitude and lots of exceptions to banks handling new accounts. As long as it's sticking to those federal regulations, your bank is in control. You can't withdraw cash or write checks on that money until it says so.

• Squeaky wheels get cash
The only good news: Squeaky wheels get the cash. You may be able to get an override on a hold if you ask the right questions to the right branch employee.

Many folks may need to. It can be awfully tough to pay your bills on time if your payroll check is being held for a couple of weeks.

• Federal law allows tougher policies
Federal law allows banks to have tougher availability policies for new customers.

Often, new checking account customers cannot access their cash as quickly as established customers can.

The rules for accounts older than 30 days are set by the Expedited Funds Availability Act. It says a bank must clear funds from a local check — a check drawn from a bank in the same federal check processing region as the depositor's bank — no later than the two business days after the check is deposited.

Money from non-local checks, which are drawn from banks outside the federal processing region of the depositor's bank, must be made available to customers no later than five business days after the day of the deposit.

For new customers, folks who have had a checking account with a bank for less than 30 days, those rules go out the window.

• Policies vary for different banks and different states
Some banks hold local and non-local checks for seven business days. Others hold them for 10 business days. Also, keep in mind that banks may vary availability policies from state to state or in different areas of those states.

New customers can get their hands on deposits from certain checks through special next-day availability requirements. These checks include cashier's, certified, teller's, traveler's and state and local government checks. The first $5,000 of these kinds of deposits will be available to customers on the next business day.

This goes for new customers as well, under some conditions. The checks must be made payable to you and you must make the deposit in person. Your bank may also require that you use a special deposit slip. Be sure to ask.

Anyone may receive a copy of a bank's funds availability policies by stepping up to a teller and asking. Be prepared. These booklets, while full of valuable information, are not fun to read. Some spots can be difficult to decipher. If you have questions, ask.

• Cash and electronic deposits easiest to access
The rules concerning cash and electronic deposits, such as wire transfers and direct deposits, are the easiest to understand. Federal regulations require banks to make all money from these types of deposits available on the next business day. This goes for new customers, too. Some banks allow same-day withdrawals.

Remember federal regulations dictate the longest possible period that a bank may keep your money away from you. A bank may choose to have looser policies.

• Take your questions to the top
That's why it's a good idea to take your questions to the top. Ask for the head teller or the branch manager. Be persistent.

Federal regulations may allow banks to make it tougher on new customers, but you can minimize the problems if you know the rules and ask the right questions. Here's what to look for:

• Look first
Be sure to study a bank's availability policy before opening a checking account. To receive a copy of a bank's policy, ask a teller. Some banks also post their policies on their web site.

• Local and non-local checks
Study the availability policies for "local" and "non-local" checks carefully. A local check is a check drawn from a bank in the same federal check-processing region as the depositor's bank. Find out what checks your bank considers "local" by looking at the routing numbers on checks. Details will be outlined in a bank's brochure.

Look to see if that all-important paycheck is a local or non-local check. New accounts customers — people who have had a checking account with a bank for fewer than 30 days — may have to wait a couple of weeks to access their paychecks. One way to avoid this fate is to sign up for direct deposit. If your employer doesn't offer this, ask the bank to waive the hold on your paycheck.

• Next-day checks
New account customers will be able to get their hands on money from these kinds of checks fast. They include cashier's, certified, teller's, traveler's, and state and local government checks. The first $5,000 of these deposits will be available on the next business day as long as the checks are made payable to you and you make the deposit in person. Your bank may also require that you use a special deposit slip.

• Cash and electronic payments
Federal regulations require banks to make all money from these types of deposits available to customers on the next business day. This includes new customers. Some banks allow same-day withdrawals. According to federal regulations, an account is considered "new" during the first 30 calendar days after you open it. After that, you should be able to get to your money just like any other bank customer. People opening a second checking account at a bank should speak up. A checking account cannot be considered "new" and be subject to new account availability restrictions if a customer has had another account at the bank for at least 30 days, according to federal regulations.

There's a lot more to checking than balancing your checkbook, and many people have trouble even doing that. If you want to be organized and informed, you need to learn the lingo of the checking world. We've picked the top 10 checking account definitions to help get you up to speed.

ATM surcharge — Fee charged for a non-account holder to use a bank-owned ATM. Example: You have an account at Bank A but use Bank B's ATM. Bank B will charge you a surcharge. Make sure to review what your bank charges you to use another bank's ATM system. You may have to pay a surcharge to Bank B plus a non-bank owned ATM charge to Bank A.

Debit card — A payment card that is linked directly to a customer's bank account. Some cards require a personal identification number. Others require a customer's signature. A PIN-based or direct debit card removes a purchase price from a customer's checking account almost right away. A signature-based or deferred debit card has a Visa or MasterCard logo and removes the purchase price from a customer's bank account in a few days.

Electronic funds transfer — The transfer of money between accounts by consumer electronic systems, such as automated teller machines (ATMs) and electronic payment of bills.

Interest checking account — Liquid account, providing FDIC insurance to $100,000 per person, that permits unlimited check-writing and typically pays interest.

Lifeline account — A very basic account for low-income customers, which is mandated by law in some states. These accounts are typically checking and savings products that have little or no monthly fees, require little if any minimum deposit and balance, and allow a set number of checks each month.

Money market account — A bank account that restricts the type and number of certain withdrawals and earns interest similar to that paid by money market funds.

Negotiable Order of Withdrawal account — Liquid account, providing FDIC insurance to $100,000 per person, that permits unlimited check-writing and typically pays interest. Also known as a NOW account.

Overdraft — The amount that a check exceeds the available balance in the payer's account; also insufficient funds.

Returned or "bounced" check charge — Also referred to as an NSF or non-sufficient funds fee. The amount of money charged to an account holder whose account has insufficient funds available to pay the check, which is returned to the party who cashed it unpaid.

Service charge — Fees charged to customers for specific services or as a penalty for not meeting certain requirements, such as insufficient funds in a checking account.

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