Aside from being a lesson in accounting, checking accounts teach you the basic principles of managing your money. Here are some other reasons why checking accounts are so important:

• You have a convenient way to pay your bills.
• You are able to monitor your expenses and spending habits.
• You develop a relationship with a financial institution.
• You can use the account as a springboard to other investments, such as by arranging an electronic transfer from your checking account to a mutual fund.
• You build a track record that demonstrates your ability to handle money.

Impact on Credit Rating

The simple checking account can complicate your life if you don’t pay attention. Your credit rating is based in part on how well you’ve handled your checking account. All of the following may be reported:

• Bounced checks (checks returned because there are insufficient funds in your account to cover them)
• Late bill payments
• Missed bill payments

In addition, you’ll have big problems with your landlord or car insurer if you bounce a check or make late payments. Aside from the damage done to your credit rating, passing bad checks can cause you legal problems.

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