Checking Account

Financial Dictionary -> Banking -> Checking Account

A checking account is one of the transactional accounts offered by banks, credit union and financial institutions. Opening a checking account means a customer has contacted one of these institutions with the intention of depositing money in an account by which he can write checks against. Such an account provides access to funds on demand, although often funds deposited on one day are not available until the following day, as is the case with many banks. Generally, when a customer has an account with a credit union, the funds are available immediately.

Some checking accounts earn interest; some access a monthly fee; some require a minimum balance and if the balance drops beneath that, a fee will be incurred. Monthly bank statements showing transactions (deposits and withdrawals) on the account are mailed or emailed to the account holder. Most times a debit card is issued. Debit cards can be used at ATMs to withdraw funds in the checking account if they are available. They may also be used for purchases. Account holders may make payments or receive payments by cash, money orders, checks, fund transfers, pre-authorized debits, debit or credit cards or an account-to-account transfer. One of the main differences between a checking account and a savings account is that you cannot write a check from the savings account.

For the customer's convenience, all branches of the bank where he holds his checking account is available for in-house transactions. Some checking account transactions may be done by telephone as well. Others are web-based and offer the customer the privilege to view bank statements, perform transactions, make payments, etc. This is especially convenient after normal banking hours or when it is inconvenient to visit a branch of the financial institution.

A feature that customers often prefer in a checking account is overdraft protection. An overdraft occurs when a debit is made to the checking account and there are not sufficient funds. However, with overdraft protection, the checking account is secure and does not incur an insufficient funds charge or return a check. The bank deposits an amount of money to cover the overdraft which is effectively a loan to the customer that must be repaid.

When opening a checking account be sure to check which features are available, if there are monthly fees, if a debit card is available, and where other branches of the financial institution are located. You may be asked to provide an identification card such as a driver's license when opening a checking account, plus employment information.