What is a checking account?
Quick insights
- A checking account is a type of bank account designed for everyday banking needs, like withdrawing money from an ATM or using a debit card for errands.
- A few examples of common checking account features include direct deposit, debit card access and bill payment options.
- Checking accounts may have some fees, such as overdraft and maintenance fees, if qualifying activities aren’t met.
What is a checking account?
A checking account is a bank account intended for everyday transactions made with debit cards, checks or cash. It may have some fees depending on how it is used, and provides access to your funds so you can swipe your debit card at the supermarket, write a check to pay your bills or purchase items online.
Let’s walk through how checking accounts work and how they might help you handle everyday financial needs.
Checking account key features
A checking account allows you to deposit and withdraw cash for your everyday expenses via ATMs, bank branches and checks. You can pay your bills online at different times of the month when they’re due, or you may be able to set up automatic payments to occur on the same day each month. A checking account may also allow you to transfer money with wire transfers or with a third-party money transfer service.
You may also be able to deposit funds with a bank teller, at the ATM or with the mobile deposit feature. Plus, by providing your account and routing number to your employer, direct deposit features may be available for your paychecks.
Benefits of a checking account
There are some key elements generally associated with checking accounts, such as:
- Debit card: Checking accounts commonly come with a debit card, which allows you to make purchases in person or online. You may also use a debit card to withdraw cash from an ATM, but there may be a daily withdrawal limit and you can’t take out more than what’s available in your checking account.
- Deposits: Fund your checking account with different deposit options, including direct deposit, a deposit slip at the bank or ATM or with the mobile deposit feature.
- Transfers: You may be able to transfer money to your savings and other linked accounts, as well as make automatic transfers on a regular basis.
- Bill payments: You might also be able to pay your bills online with your checking account, with the option to schedule automatic bill payments for your convenience.
Checking account fees
Depending on the bank and type of account, there may be fees associated with different banking activities, including:
- Overdraft fee: If you spend more than is in your account and the bank covers part of the purchase, you may be subject to an overdraft fee.
- Non-sufficient funds fee: A bank may also charge a non-sufficient funds (NSF) fee if you attempt to make a purchase and don’t have enough funds in your account.
- ATM fee: Withdrawing money from an ATM that is outside your bank’s ATM network may result in an ATM fee.
- Maintenance fee: Banks may charge a monthly fee to keep your account running, but these fees might be waived by maintaining a certain balance or meeting other account criteria.
How to use a checking account
A checking account is generally used for everyday transactions and bill payments. For many account holders, paying bills is their most common use for a checking account. Using automated bill pay features from your checking account may make paying rent, utilities, car payments and other expenses less challenging. It’s also common to use a checking account to make everyday purchases using a debit card.
You may want to keep in mind that a checking account generally won’t earn interest unless you have a premium checking account. Premier checking accounts may come with increased requirements that you must meet to earn interest on the balance, and they may not earn as much interest as a savings account.
Because not all checking accounts earn interest, you may want to consider opening a savings account. Savings accounts earn inteerest on a regular basis, which may be helpful for long-term financial goals.
Checking account vs. savings account
If you use a checking account for your short-term financial priorities, opening a savings account may be helpful for your longer-term financial goals.
While funds in savings accounts are generally not as accessible as checking accounts, they may earn interest that can help you meet financial milestones. Additionally, if you have both accounts, your bank may allow the accounts to be linked together.
Linking the two accounts might make sense for your personal banking needs. You may be able to view your balances on the same statement. Linking accounts may also offer more visibility on the status of the transfer, enable auto-transfers or reduce the transfer timeline.
In summary
A checking account may be helpful in making daily purchases or other everyday banking needs. However, before opening a new checking account, you should understand the specific fees that may come with it. Different banks may offer different fees and perks, so consider researching checking accounts to find one that fits your financial needs.
