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What is a checking account?

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A checking account is a bank account that’s designed to be the hub of your financial life, and it’s easy to deposit money into these accounts and withdraw funds, as needed.

What is a checking account used for?

Many consumers use checking accounts to pay bills, write checks, make debit card transactions and transfer funds electronically to savings or investment accounts.

Unlike savings accounts, checking accounts don’t limit the number of transactions you can make or charge fees for excessive transactions.

Benefits of checking accounts

Checking accounts keep your money safe and accessible, and they make it easy to automate your money management.

Safety

Using a checking account debit card for purchases can be safer than carrying around large amounts of cash, which can help protect your money should your wallet be lost or stolen.

Checking accounts typically are insured up to $250,000 by the Federal Deposit Insurance Corp. (FDIC) or National Credit Union Administration (NCUA), which means your money is safe, even if your bank fails.

Ease of access

A checking account makes it easy to access your money using a debit or ATM card, checks and online payment features. It can be used for everything from retail purchases to rent or mortgage paytment to automated bill payments.

If you need to pay your friends or family, many checking accounts feature a peer-to-peer transfer service, such as Zelle, that you can use from your smartphone or computer. You can also link your account to other services like Venmo to make quick transfers.

Automation

Checking accounts make it easy to automate money management. You can set up direct deposit so paychecks are automatically credited to your account, eliminating the need to manually deposit your funds each time you get paid.

You can also set up automatic payments so money is deducted to pay your credit card, utilities and other bills on their due dates.

Access to overdraft protection

Overdrafts can occur when you withdraw more money from your account than you actually have in it and your balance dips below zero. The overdraft fees the bank charges you to cover your payment can be expensive. Many checking accounts offer overdraft protection, which automatically transfers funds from your savings account or a line of credit when your checking account is overdrawn. Overdraft protection can help you avoid pricey overdraft fees and allow your payment or debit to go through.

Checking vs. savings accounts

A checking account is fundamental for making day-to-day financial transactions, while a savings account is a good place for funds set aside for emergencies, or financial goals such as a vacation or a new car purchase.

  • Primary use: A checking account is typically used for money you’ll spend, whereas a savings account holds money you’re holding onto.
  • Interest: Many checking accounts earn no annual percentage yield (APY), while those that do often pay a minimal rate. Savings accounts typically earn an APY, and the rate varies by bank.
  • Limits on transfers: While a checking account allows for any amount of transactions, savings accounts limit transfers to six a month in most cases.

Common checking account fees

When shopping around for the right checking account, pay attention to what fees may be charged. While free checking accounts are widely available, many checking accounts do charge fees, and some common ones include:

  1. Monthly maintenance fees: Not all checking accounts have these, and those that do may waive them when you meet certain requirements, such as signing up for direct deposit, maintaining a minimum balance or making a set number of debit-card purchases.
  2. ATM fees: Your bank may provide its own ATMs or give you access to a network of fee-free ATMs like Allpoint or MoneyPass. Using ATMs outside the network could result in fees from your bank as well as the ATM owner. Some banks reimburse up to a set amount of these fees each month, and you can also avoid them by getting cash back from a debit card purchase instead of using an ATM.
  3. Overdraft fees: Withdrawing more money than you have in your checking account can result in an overdraft fee. The average overdraft fee is a hefty $33.58, according to a 2021 Bankrate study. You can avoid these automatic fees by opting out of them with your bank, whereby the bank will return payments as unpaid that overdraw the account. You can also choose overdraft protection or choose a bank that doesn’t charge overdraft fees, such as Capital One or Ally Bank.

Types of checking accounts

Traditional checking

These accounts normally provide checks, a debit or ATM card and online bill payment access. Some charge maintenance fees, which are often easy to avoid by meeting set requirements. Overdraft protection may be provided to cover payments that would otherwise have overdrawn the account.

Interest checking

Interest-bearing checking accounts often allow you to earn a certain APY in exchange for having your paycheck directly deposited or making a minimum number of monthly debit card transactions. The APYs earned by many interest checking accounts, however, are only a fraction of what many high-yield savings accounts earn.

Student checking accounts

Often available to students ages 18-23, these accounts can offer valuable perks to anyone learning to manage their money, such as overdraft forgiveness, free checks, no maintenance fees or the reimbursement of ATM fees.

Senior checking

These accounts may offer benefits attractive to those age 55 or older, such as free checks and money orders, as well as fees that are easy to waive. If you’re looking for these perks, however, you might find them in many traditional checking accounts as well.

Second-chance checking

Anyone who has been denied a traditional checking account based on a history of excessive overdrafts or unpaid overdrawn balances might consider a second-chance checking account. These accounts often impose certain restrictions and fees, yet some allow customers to move to a traditional checking account after handling the second-chance account responsibly for a defined period.

You can find second chance accounts at banks like Wells Fargo, Chime, Varo and LendingClub.

How to open a checking account

Once you’ve shopped around and chosen the best checking account, you can start the process of filling out an application, which typically involves providing some personal information and government-issued ID, like a driver’s license.

If you’re funding your new account from your old checking account, you’ll also need both the routing number and account number for your old account. This information will enable your new bank to transfer funds from your old account to the new one. If you’re opening an account in person, you might be able to make your initial deposit with a check or cash.

Once your account is open and ready to use, take the time to understand its features. Sign up for online banking, download your bank’s app, and set up automated payments and direct deposit.

Review the latest statement from your old bank to ensure you haven’t missed transferring any automated payments from the old account to the new one. Also, update your employer’s payroll manager with your new account information to ensure your direct payroll deposit goes to the correct account. Human resources can usually help make that change.

Once a couple of months have passed with no automatic bill payments from your old account, you should be ready to close it and continue on with only the new checking account.

Bottom line

Be sure to find the right checking account for you, whether it’s one that has a robust ATM network, charges no fees, offers the ability to earn interest and more. Once you find the account that suits your needs, you’ll appreciate the versatility and ease with which it enables you to handle your day-to-day finances.

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Written by
Karen Bennett
Consumer banking reporter
Karen Bennett is a consumer banking reporter at Bankrate. She uses her finance writing background to help readers learn more about savings and checking accounts, CDs, and other financial matters.
Edited by
Wealth editor
Reviewed by
Professor of finance, Creighton University