A bank account that allows easy access to your fund is called a checking account. Purchases can be made by using your debit card, checks, or account info.
Let’s learn more about how a checking account works.
What Is a Checking account?
A checking account is a bank deposit account that you can use to save and withdraw cash. Checking accounts allow easy access to your funds in many ways.
Your cash can be accessed through ATM or branch withdrawals, writing a check, sending out an e-check, setting up an automated transfer, or by the use of your debit card. These accounts are usually used for everyday spendings.
How does a Checking account works?
When it comes to accessing your funds, checking accounts has a couple of limitations. You might have a day-to-day ATM withdrawal limit, and your debit card might restrict the amount you can withdraw from your account on a particular day.
Aside from that, you can make payments and purchases by using your account as long as there’s enough cash in your account to cover the purchases.
As a compromise for this schedule, some checking accounts generally do not pay much in interest while others don’t pay any interest at all.
Checking accounts might have a month-to-month service charge, however, these fees are waived by most financial institutions provided you meet certain requirements.
For instance, your account may need to have some amount of direct deposit or maintain a certain amount of balance every month in order to escape the service charges.
Learning the overdraft options
Overdraft fees also apply to these accounts. Your bank or credit union covers a transaction that is more than the money in your account in exchange for an overdraft fee.
You can also decide to opt-in for overdraft protection if your bank offers it.
You may be able to link another account t your checking account such as a savings account, with overdraft protection, and automatically transfer money over if there’s a negative balance in your account.
Some banks and institutions will also allow you to overdraft up to a certain amount before they start rejecting your cheques and declining the transactions.
You are charged an overdraft fee when you use a bank’s overdraft protection according to the consumer financial protection bureau, a typical overdraft charge is $34.
Any transaction that is more than the balance in your account will be declined if you’ve also decline overdraft protection from your bank. This may mean you won’t be able to make purchases that are more than your account balance, but it also prevents you from being charged an overdraft fee.
How To Open A Checking Account
A checking account can be opened by going to a bank or cooperative credit union branch or by registering online.
Your personal information like full names, address, date of birth, a valid form of identification (ID) and your social security number will need to be provided in order for you to be able to open an account.
Some banks may also require you to make a minimum opening deposit.
The bank will likewise run a fast background check using a service like ChexSystems when you open up a checking account. ChexSystems keep information about closed checking account. If you have actually been reported to ChexSystems or a comparable business for having an account with a negative balance for a long time, you might not be permitted to open an account up until the negative balance is paid off.
You may not be able to open a checking account if you are less than 18 years old except you have a co-signer on the account, this is because most banks won’t open a checking account for a minor.
Savings Account vs. Checking Account
|Savings Account||Checking Account|
|Limited number of withdrawals per month||Few limits on withdrawals|
|Pays low interest rates||Pays little or no interest|
|Can make direct payments with your account information, subject to your withdrawal limits||Can make direct payments with checks, debit cards and account information.|
Some banks also give incentives in cash bonuses for opening a checking account, so you should look for that when you are shopping for a new checking account. You may need to maintain a certain balance or meet some criteria.
There is always a limit on the amount of “convenient” transactions you can make on a savings account in a given month. The ability to transfer automatically from your savings account t another account, online transfer and phone transfer out of your savings account is what is referred to as a “convenient” transaction.
There could also be a limit on your ATM withdrawal or in person.
Savings accounts likewise restrict direct purchases. You may have the ability to pay bills online by using your savings account information, however, you can’t use a debit card or a check to make purchases using funds straight from a savings account. You will need to move the cash to a checking account before that can be done.
- A checking account allows easy access to your cash. Your debit card, checks, or account information can be used to make purchases.
- Low or no interest is generated by a checking account. Also, their service fee is often be waived by meeting a certain amount of balance or deposit requirements.
- Your bank will cover any amount that is more than your available balance if you opt-in for overdraft protection, but you will also be charged for this service.
- An account can be opened online or by going to their branch. Your social security number, government-issued ID will be needed.
- Savings accounts generate higher interest but less access to your funds.