Checking Account

Checking Account
A checking account is a bank account that allows customers to deposit and withdraw money by using paper checks, ATMs, and debit cards.

What is a Checking Account?

A checking account is a type of bank account that provides customers with easy access to their money. Unlike a savings account, a checking account allows a high number of withdrawals without penalty. Because of this, it’s usually considered a good option for everyday spending.

How do Checking Accounts work?

After setting up the account with a financial institution and making a deposit, the account holder’s money is securely held. The account holder can deposit and withdraw money in person or at ATMs, and oftentimes online.

With a checking account, the account holder receives a debit card to deposit and withdraw money. The account holder will also receive a checkbook with checks that draw from the account. Most checking accounts can be used to make online transfers and automatic bill payments as well.

Which bank has the best Checking Account?

What’s considered the “best” checking account depends on the particular needs of the account holder. There are a number of factors to weigh, and before signing up, consumers should research different accounts offered by a variety of financial institutions like banks and credit unions.

For most people, one important consideration with checking accounts is bank and ATM availability. Most account holders want to easily make deposits and withdrawals, and finding a financial institution with nearby ATMs and branch locations is critical.

Another consideration is whether the account imposes fees. Though checking accounts are typically free to set up, they come with various terms and conditions. Some fees commonly associated with checking accounts are monthly fees, insufficient funds fees, paper statement fees, online bill-pay fees, and non-network ATM fees.1

Another factor to look at is whether the checking account offers a rewards system. Some checking accounts come with point-based systems that allow account holders to receive points for their purchases. The points can then be used for rewards in the form of gift cards, cash back, merchandise, or airline miles.

Some financial institutions also offer perks like ATM reimbursement, which means they cover the fee for using an ATM that’s not within their system. In addition, some checking accounts cater specifically to certain groups, like students or small-business owners, and offer accounts tailored to their needs.

Why get a Checking Account?

Checking accounts securely hold money and most people find them useful. Checking accounts make payments more convenient, and usually come with online banking capabilities that allow account holders to easily manage track, and transfer funds.

In addition, checking accounts can allow account holders to take advantage of certain perks like direct deposit that may be offered by their employer. With direct deposit, paychecks are sent straight to the employee’s checking account. If the employee has a savings account, a certain percentage of the paycheck can be deposited there as well.

What’s required to open a Checking Account?

When opening a checking account, applicants are required to present the following:

Identification: Most banks require two forms of identification. This may include a driver’s license, state ID, passport, birth certificate, or Social Security card.

Proof of address: Official mail with the address and name of the person applying for the account.

Opening deposit: A typical minimum deposit for a checking account is between $25 and $100.2

What happens when a Checking Account is overdrawn?

While checking accounts typically don’t limit the number of withdrawals that can be made, the account holder is responsible for ensuring that the amount withdrawn doesn’t exceed the amount of money that the account contains.

If the account holder attempts to withdraw more than the account contains, the financial institution may deny the transaction. This could result in a bounced check and a fee assessed by the merchant who received it. However, if the account holder is enrolled in an overdraft protection program, the transaction goes through, even if there isn’t enough money in the account to cover it. The financial institution will then assesses an overdraft fee—most banks charge $353—and the account holder is responsible for repaying the amount that was overdrawn.

References:

  1. Bernardo, Richard. (2015, February 26). “Checking vs. savings accounts: what’s the difference?” Accessed on February 3rd, 2017 from https://wallethub.com/edu/checking-vs-savings-account/10554/.

  2. Bernardo, Richard. (2015, February 15). How to open a checking account: step-by-step guide, tips & more. Accessed on February 3rd, 2017 from https://wallethub.com/edu/how-to-open-a-checking-account/10299/.

  3. “Consumers need protection from excessive overdraft costs.” The Pew Charitable Trusts.
    Accessed on February 3rd, 2017 from http://www.pewtrusts.org/en/research-and-analysis/issue-briefs/2016/12/consumers-need-protection-from-excessive-overdraft-costs.