Checking accounts is a bank account that is used for daily cash deposits and withdrawals. You can access your money with a debit card, through online money transfers or by writing checks. It is also called demand accounts or transactional accounts. Checking accounts are very liquid and can be accessed using checks, automated teller machines (ATM) cards, and electronic debits, among other methods. A checking account different from other bank account. In that it often allows for numerous withdrawals and unlimited deposits, whereas savings accounts sometimes limit both.
Key Features of Checking Account
- A checking account is a deposit account with a bank or other financial firm that allows the holder to make deposits and withdrawals.
- Checking accounts are very liquid, allowing for numerous deposits and withdrawals, as opposed to less-liquid savings or investment accounts.
- The trade off for increased liquidity is that checking accounts don’t offer holders much, if any, interest.
- Money can be deposited at banks and via ATMs, through direct deposit or other electronic transfer; account holders can withdraw funds via banks and ATMs, by writing checks, or using electronic debit or credit cards paired with their accounts.
- It is important to keep track of checking account fees, which are assessed for overdrafts, writing too many checks—and at some banks—allowing the account balance to drop below the required minimum.
Checking Accounts and Banks
Many banking institutions offer checking accounts for smaller fees. Traditionally, majority large commercial banks use checking accounts as loss leaders. A loss leader is a marketing tool in which a company offers a product or several products slightly lower than market value to get the attention of consumers. The goal of most banks is to attract consumers with free or low-cost checking accounts and then entice them to use more profitable offerings such as personal loans, mortgages, and certificates of deposit.
However, as alternative lenders such as fintech companies offer consumers an increasing number of loans, banks may have to revisit this strategy. Banks may decide, for example, to increase fees on checking accounts if they cannot sell enough profitable products to cover their losses.
Types of Checking Account
- Online checking
- Rewards checking or High interest checking
- Student checking or Teen checking
How to choose a checking account
Look for an account that’s going to work hard for you. When selecting a checking account, look for low or no fees, a broad ATM network, low opening balance restrictions and other features that suit your needs. Decent interest rates are also nice to have.
Keep an eye out for sign-up bonuses. Some banks will give you money for opening an account with them. You shouldn’t pick an account based solely on a promotion. But it could help you decide between two otherwise comparable options. Many credit unions and online-only banks offer checking accounts without monthly fees or minimum balance requirements. You may not have access to many branch locations, though.
A checking account is a bank account for everyday expenses. You can have your paycheck deposited directly into it and use it to pay bills, make purchases and withdraw cash.