With a checking account, you can deposit money, make transfers, write checks, withdraw cash, pay bills and take care of other banking transactions either in person at a branch, an ATM or online. There are several different types of checking accounts available to fit your needs, and most allow you to make unlimited transactions, while some even offer extra benefits, perks and convenience.
There are a number of everyday benefits to having a checking account. You can typically open a checking account in-person at a branch or online. Many financial institutions allow you to use your account right away to store and spend money.
Checking account basics
Essentially, a checking account is used for day-to-day transactions. Checking accounts are held through a financial institution, like a traditional bank, online bank or credit union. With a regular checking account, you can deposit and withdraw money (either through the bank or an ATM), write checks, pay bills and make purchases using a debit card.
There are several different types of checking accounts, but checking account basics include:
Deposits. You can deposit cash and checks in person at a physical location or through an ATM. Additionally you can deposit checks online through a bank’s mobile app. You can also transfer funds from a different bank account or set up direct deposit from an employer.
Withdrawals. You can withdraw money through an ATM or in-person. For some accounts, there is no limit to how often you can withdraw money, or how much of your money you can take out at one time. There could be limits on the amount of withdrawals depending on the type of account or the method used to make the withdrawal, such as ATM limits.
ATM/debit cards. With a debit card, you can make purchases and transactions at a store or online and can withdraw money from an ATM. Typically, you’ll receive your debit card 7-14 business days after opening your account, and once activated, it’s ready to use.
Checks. With most (but not all) checking accounts, you can write checks as a form of payment from the funds in your account.
Pros & cons of a checking account
There are a number of advantages to having a traditional checking account. Here are some to consider.
Accessibility. With a checking account, you have access to your funds through a variety of ways. You can withdraw funds in-person or at an ATM using your debit card. Or, you can access your funds for purchases by paying with your debit card or checks. You can transfer funds in and out of your account online or through a mobile app. And, you can set up automatic payments through your account to auto-pay bills each month.
Peace of mind. When you have a checking account, there’s less of a need to carry around all your cash or keep it in a shoebox in your closet. Storing cash at home poses many risks, including lost to theft, fires or other natural disasters. Plus, it can be easy to lose track of how much you’re spending. With a checking account, you can keep track of funds coming in and going out of the account.
Most checking accounts held by traditional banks have Federal Deposit Insurance Corporation (FDIC) coverage so the money is insured up to the maximum amount allowed by law.
Convenience of direct deposit. Many financial institutions enable you to set up direct deposit of your paycheck with your employer. You don’t have to wait for a paper check, and instead can have your paycheck automatically deposited into your account each pay period.
Plus, instead of having to go to the bank to deposit a traditional check, with direct deposit your funds are immediately available to use.
Potential interest. Certain types of checking accounts earn interest, depending on the balance. With this type of checking account your money can grow simply by being in the account. It’s important to keep in mind that most checking accounts do not earn interest.
Cons of a checking account
While it’s a good idea to have a checking account to store your funds, there are some potential downsides.
Not likely to earn interest. Some checking accounts are interest-bearing, but most are not. This is because the funds in a checking account are typically treated like cash and are used for everyday transactions, not intended to sit for long periods of time. If growing your funds is important, you may want to consider opening a savings account in addition to your checking account.
Potential fees. Most checking accounts have fees that you may incur. Some checking accounts have monthly service and other fees that may include out of network ATM fees or overdraft fees (if you spend more money than what is in your account). Some checking accounts have monthly service fees, which may or may not be waived.
Minimum deposit. Some accounts require you to make a minimum deposit to open. This could be a downside to a checking account because you’ll have to make your first deposit right away.
Withdrawal limits. Depending on the bank and type of account, you may have ATM withdrawal limits or daily debit purchase limits. However, it can be a downside if you need more cash on hand or to make a larger purchase with your debit card.
In summary, there are pros and cons of a checking account. A checking account may play an important role when it comes to managing your finances.