What is a checking account?

Woman signs a check in her home office. Image: Woman signs a check in her home office.

In a Nutshell

A checking account can be a convenient, secure option for receiving payments or storing money that you might need soon.

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Checking accounts can make paying bills, receiving deposits and accessing your cash easier.

And checking accounts can be powerful tools. Many allow you to automate some of your finances, helping you stay on budget and meet your financial goals, while providing a safe space to store your cash until you need it.

Why you need a checking account


Checking accounts make banking convenient in the following ways: 

Direct deposits — You can have paychecks automatically deposited in your checking account. Direct deposit eliminates the need to go to the bank to cash or deposit your check every time you get paid.

ATMs — You can access your money anywhere, anytime using automatic teller machines. Keep in mind that you may have to pay a fee if you use an out-of-network ATM, but sometimes banks or credit unions waive those fees.

Bill pay — Many financial institutions let you set up bill pay so that you can pay your bills electronically, directly from your checking account. You can do this by getting online access to your bank account. The benefit: No more worries about forgetting to write a check in time to mail it, or about payments lost or late in the mail. And if you have the option of automatic bill pay, you can set the payment so that it’s automatically paid, meaning you won’t even have to worry about forgetting to go online and pay it.

Debit cards — Debit cards let you access the money in your account by swiping your card and entering a PIN, or personal identification number. This makes it easy to buy what you want or grab your dough on the go.

Safety and protection

Keeping your money stashed under your mattress isn’t necessarily safe. Financial institutions can hold your money. And while opening a bank account means sharing your personal and financial information with a third party, financial institutions should be proactive about protecting your information.

Additionally, many banks are insured by the Federal Deposit Insurance Corporation, and many credit unions are insured by the National Credit Union Association. That means that, if the financial institution fails, the insurer will reimburse you up to a certain amount — up to $250,000 per depositor for each covered account type at each insured institution.

Checking account fees

Even though checking accounts can be convenient, they may come with some costs. Here are some common fees you should be aware of.

Maintenance fees

Many checking accounts will have monthly service or maintenance fees. Some financial institutions will waive your monthly fee if you meet specific criteria, like having a minimum balance or holding more than one account at the bank. Be sure to read the fine print to understand all requirements.

 Overdraft fees

When you have insufficient funds in your account to cover your transactions, you could be charged an overdraft fee.

You may be able to link an additional checking, savings or line of credit to your account to avoid this fee. Note, though, that although you may avoid an overdraft fee this way, some banks may charge a different fee to use this service (this is allowed as long as the bank discloses the fee to you).

Additional fees

Sometimes financial institutions add on additional fees. These fees can include additional statement fees, check ordering fees, money order fees, legal processing fees and more. Read the fine print and understand all fees before opening an account.

Types of checking accounts

When selecting a checking account, you want to compare fees, ATM networks, opening balance restrictions and any additional features that are important to you, like earning interest on your funds. Here are some of the most common types of checking accounts.

Traditional checking

Traditional checking accounts can be found at most brick-and-mortar financial institutions. These are good if you’d like to be able to walk into a branch and get help. The features and fees may vary depending on the bank.

Online checking

If you don’t need access to a physical branch, online checking accounts may be a good option. They often offer higher interest rates on your money, fewer fees and extended ATM networks.

High-interest checking

With a high-interest checking account, you can earn extra money and help your account grow. However, these accounts typically have balance and transaction requirements.

Student checking

Some financial institutions offer student checking accounts, often waiving maintenance fees until you reach a certain age, typically 24.

Bank of America offers a student checking account to students who are enrolled in high school, college, vocational school or a university, and are younger than 24. Bank of America will waive the monthly $12 maintenance fee if the student meets these requirements.

Keep in mind, if the student is under 18, a joint account with a parent or guardian may be required.

Bottom line

If keeping money under the mattress is how you approach banking now, consider opening a checking account for greater convenience and security. But before you open an account, make sure you compare all the features and fees between banks. By researching different accounts, you can find a checking account that best suits your financial needs.