What is a checking account?

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Checking account definition

A checking account is a type of bank account that allows the account owner to make deposits and withdrawals. People can quickly spend money or pay bills from their checking accounts using debit cards, writing a check or via an electronic fund transfer.

What a checking account is used for

Checking accounts are designed to be the hub of your financial life, and they allow you to easily move your money in and out of the account. You can deposit your paycheck to your checking account every pay cycle and pay most of your bills out of the account.

Unlike savings accounts, checking accounts are “transactional accounts” and don’t limit the number of transactions that you can make or charge fees for excessive transactions.

Putting your money in a checking account is safer than keeping it at home or carrying large amounts of cash. Additionally, insured banks and credit unions cover bank accounts up to a limit of $250,000 per account owner, so you’ll get your money back even if your bank fails. Look for banks that are insured by the Federal Deposit Insurance Corp. (FDIC) or credit unions that are insured by the National Credit Union Administration (NCUA).

Benefits of checking accounts

There are many benefits to opening a checking account.


Checking accounts keep your money safe. If you’re carrying cash and wind up losing your wallet, then you’re out of luck. If your money is in a checking account and you lose your wallet, you only lose the cash you had on hand. All you have to do is contact your bank to get a new debit card or credit card.

Checking accounts also receive up to $250,000 in insurance from the FDIC or NCUA, which means your money is safe, even if your bank closes.

Ease of access

One of the primary goals of a checking account is to make it easy for you to access your money. They do this through a combination of debit cards, checks and online payment features.

When you’re out shopping, all you have to do to pay for goods is swipe your debit card or write a check to make a payment from your checking account. No cash is required. If you do want to make a cash payment, you can use your card to make a withdrawal from an ATM.

For larger purchases, such as your monthly rent, you can write a check against your account’s balance. That makes it easy to spend large sums without having to carry large quantities of cash.

Finally, you can use your bank’s online bill payment system or set up automatic direct debits with the billing companies to easily make payments online.

If you need to pay your friends, many checking accounts come with Zelle, a peer-to-peer transfer service you can use from your phone. You can also link your account to other services like Venmo to make quick transfers.


Automating your finances is a great way to make managing your money easier and less stressful. If you don’t have to think about paying your bills, you don’t have to worry about missing due dates or sending the wrong amount. This also saves you time.

Checking accounts make it easy to automate your money management. You can set up direct deposit so your paychecks arrive in your account automatically, rather than you having to visit your bank to make a deposit every time you get paid.

You can also set up automatic payments so that your credit card, utility, and other bills get paid automatically on their due dates.

Access to overdrafts

Overdrafts, which occur when you withdraw more money from your account than you actually have in it and your balance dips below zero, are a double-edged sword. The overdraft fees the bank charges you to cover your payment can be expensive. And they hit you when you already have little money in your checking account. Still, it can be nice to have the option to spend just a bit more than you have in your account if you find yourself in a pinch and truly need to do so.

Ideally, you should set up overdraft protection, which transfers funds from your savings account or a line of credit when you overdraft your checking account.

Cons of checking accounts

Checking accounts aren’t without their drawbacks, which you should keep in mind.

Poor interest rates

Checking accounts typically pay very low interest rates compared to savings accounts, which means your balance won’t grow over time. In fact, many checking accounts don’t pay any interest at all.


Checking accounts aren’t always free. Some accounts charge monthly maintenance fees which the bank deducts directly from your account. Usually, there are ways to avoid these fees, such as maintaining a minimum balance or making a sufficient number of debit transactions.

There are also other fees, such as fees for ordering checks and overdraft fees. Looking at the fee structure and making sure you won’t pay your bank for giving it the privilege of holding your money is an important part of choosing the best checking account.

Difficult to switch accounts

Once people open a checking account, they tend to keep it for the long term. Switching can be a hassle, especially if you’ve set up direct deposit and several automatic bill payments from your account.

If you do want to switch, you’ll usually want to keep the old account open for a while after you make the change, just to make sure you don’t miss any bill payment or get a paycheck sent to the wrong account.

ATM limits

One of the reasons you want to have a checking account is so you can easily access your money. However, many banks limit the amount of cash you can withdraw at a time or in a single day through ATMs. If you need to make a large cash purchase, you’ll have to visit the bank to make a withdrawal in-person or space your withdrawals over a few days.

Opening a new checking account

Once you’ve shopped around and chosen the bank you want to use for your checking account, you can start the process of opening the account.

The first step in the process is filling out an application. This 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 let your new bank transfer the 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 new account is open and ready to use, take the time to get comfortable with the account. Sign up for online banking and download your bank’s app. Also set up the automation that you want, such as bill payments and direct deposit.

A good way to do this is to look at the last few statements you’ve received from your old bank. Keep an eye out for bill payments debited from the account and make sure to transfer those automatic payments to the new account. Don’t forget to talk to your employer about changing your direct payroll deposit. HR can usually help make that change.

Once you’ve gone a couple of months 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.

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