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 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, and it’s quick and easy to open one. You can typically do so either in-person or online in a few steps, and you’re able 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 the basic features of checking accounts include:
Deposits. You can deposit money in-person at a brick-and-mortar location, through an ATM, or online/through a 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. (However, some accounts require a minimum balance, or you’ll have to pay a monthly service fee — so you’ll want to make sure you don’t go below that minimum.)
ATM/debit cards. This is what you’ll use to withdraw money from an ATM. 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.
Advantages of a checking account
There are a number of advantages to having a checking account, so here are some to consider.
- Accessibility. First, it’s easy to 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 easily 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.
With a checking account, you have easy access to your funds through a variety of ways. And, in most cases, there are no limits on how often you can take money out of your account.
Peace of mind. When you have a checking account, there’s no 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 easily keep track of funds coming in and going out of the account.
Additionally, most banks are protected by the Federal Deposit Insurance Corporation (FDIC). This means your funds are protected by FDIC insurance up to $250,000 in deposits per account owner/ownership category, per insured bank.
Convenience of direct deposit. With a checking account, you can 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, which means your money can grow simply by being in the account. It’s important to keep in mind the possibility that the account won’t earn interest depending on the balance.
Disadvantages 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. One of the major disadvantages of a checking account is the fees you may incur. Some types of checking accounts have a monthly service fee, while others have out-of-network ATM fees or overdraft fees (if you spend more money than what’s in your account). Some accounts require a minimum balance to be kept in the account, and if you go below that balance, you can be charged a monthly service fee.
Minimum deposit. Some accounts require you to make a minimum deposit. 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.
Why should I have a checking account?
After considering the advantages and disadvantages of a checking account, if you choose to apply for a new checking account, you’d be on your way to have your money tracked and spent however you need. A checking account may play an important role when it comes to managing your finances.