What Is a Checking Account?

How a checking account works

At its most basic, a checking account is a type of bank account that lets you make deposits and withdrawals with relative ease.

Once you put money in your checking account, you could access your funds in a variety of ways: by using a debit card, initiating an online transfer, or writing a check.

Because you could access your money almost whenever you want, checking accounts are considered liquid accounts. But the liquidity or ease of access to your money also means that checking accounts - unlike savings accounts - typically don’t offer interest (though some do).

However, like other types of deposit accounts, such as savings accounts and CDs, a checking account is FDIC-insured as long as you open an account at a FDIC member bank. This means that your deposits are protected up to a certain dollar amount. 

The standard insurance is $250,000 per depositor, per insured bank, for each account ownership category.

What is a checking account used for?

Here are a few ways you could use a checking account:

• Pay bills and make everyday purchases.
• Get cash at an ATM by using your debit card.
• Automate your finances by setting up recurring transfers or autopay.
• Write checks.

A checking account can also be used to receive money from others. For instance, instead of having to physically deposit your paychecks, you could sign up for direct deposit (if this is an option at your job). You could then have your paychecks be electronically deposited into your checking account.

A checking account can also be helpful if you use a payment processing or money transfer app. Many apps allow you to link your checking account and then use the app to facilitate certain digital transactions. 

Types of checking accounts

Not all checking accounts are the same. You usually have different types to choose from - for instance: 

• Basic checking
• Premium checking
• Interest checking
• Student checking
• Business checking

Each account will have different features, fees, deposit requirements, and withdrawal limits. That's why if you're looking to open an account, it's a good idea to do a little comparison shopping to find an account that fits your needs.

Common checking account fees

Checking accounts often come with fees. But you may be able to avoid or waive some of them if your account meets certain qualifying activities (e.g., maintaining a minimum daily or monthly balance). Fees and waivers vary from bank to bank. Always review your account agreement carefully to understand the rules. 

Here are three common fees you may come across with your account:

Monthly maintenance fee. This is a fee to maintain your checking account at the bank. Some banks may waive this monthly fee if your account meets certain requirements – like having a certain amount of direct deposits or other qualifying activities each month. When shopping for a checking account, don’t hesitate to ask about fee waivers. 

Minimum balance fee. Some banks may expect you to maintain a certain account balance. And if you fall below the minimum, the bank could charge you a service fee. 

Overdraft fee. Sometimes you may accidentally spend more than you have in your checking account. When your account balance drops below zero, it means you have an overdraft. Overdraft fees can be quite high – often around $35. If you want some peace of mind, you may want to consider signing up for overdraft protection if that’s an option at your bank. 

Opening a checking account

When it comes time to choose a checking account, think about what features you’d like to have. Are you looking for an account with low or no fees? One that earns interest? A big ATM network or convenient branch locations?

There are many providers to choose from, so figure out what features are most important to you and see whether the fees make sense for the services you’re getting. And when you’re ready, you can either open a checking account online or go to the bank in person. 

You’ll usually need to provide some basic personal information like a valid ID, mailing address, date of birth, Social Security number, etc. Some banks may also want you to make a minimum opening deposit. Be sure to review your account agreement to avoid any unwanted surprises when it comes to fees or other limitations.