What is a checking account?

In this WealthRocket article, we’ll answer the seemingly obvious but not quite clear question: What is a checking account? We’ll also look at how to choose, use, and avoid misusing one.

You’ll also learn that just because it’s a spending product doesn’t mean it can’t save you any money!

A checking account is a financial tool that facilitates monetary transactions and is made available through financial institutions, primarily banks, digital banks, and credit unions.

Transactions include the movement of money outside of the checking account, including point-of-sale transactions, bill payments, electronic fund transfers, and moving funds from a chequing account into another account. They also include cash withdrawals.

Checking accounts can come with a monthly fee and a transaction cap each month. However, free bank accounts with unlimited users are also available, typically, but not always, from online banks.

Traditionally, checking accounts come with a debit card and a checkbook. These tools allow customers to spend money in the absence of physical cash.

You can use a debit card to access your account from an ATM and make purchases in stores. You can use paper checks for sending large sums of money.

Some checking accounts offer overdraft protection options, allowing customers without funds in their accounts to receive funds with an interest rate.

Account-holders can receive payment from their place of employment and electronic transfers into a checking account. Both offer direct deposit options, which automatically deposit the funds into the account.

A checking account is considered one of the most basic financial products and very straightforward to use. However, many checking accounts come with maintenance fees.

You should be very familiar with any checking account fees before using one. Different fees can become quite costly, such as non-sufficient fund fees and transaction limit fees. Some checking accounts also require a minimum balance.

If you find yourself using your checking account very often, it’s probably a safe bet to get a free checking account though it may come with limited services.

Finally, checking accounts come with insurance. In America, checking accounts are insured for up to $250,000 by the Federal Deposit Insurance Corporation (FDIC). In Canada, chequing accounts are insured for up to $100,000 by the Canada Deposit Insurance Corporation (CDIC).

You can open an account online, via telephone, or by visiting a branch online.

Every checking account has something different to offer. That’s why the best checking account for one person might not be the best fit for the next.

It’s important to consider what you’re looking for in a checking account before signing up for one. After all, you’ll likely use the same checking account for many years to come. Since there are many checking accounts available, there is a considerable amount of handful of options to consider.

Here are a few aspects to consider before signing the dotted line.

1. Fees and limits

Fees: the make or break of any purchase. Checking accounts usually charge customers a monthly maintenance fee for use.

Monthly fees on checking accounts tend to come with additional perks and privileges, ranging from branch access to generous transaction limits.

Checking accounts that charge fees on a monthly basis offers different packages. Some offer unlimited features for a flat rate, while others offer lower prices per month for a range of options.

If you find yourself using your debit card often, you may want to consider an unlimited bank account, typically offered by digital banks.

Digital banks offer products that exist entirely online. While they are often a no-cost product, they do not usually offer branch access and come with limited financial tools.

2. ATM networks

An ATM Network is a network of ATMs from the same bank or banks in partnership with each other.

If you find yourself using cash often, it is a good idea to choose a bank located near places you frequent. This can help you avoid service charges when you withdraw money.

Alternatively, it can also help you while traveling, as there are many banks partnered with each other overseas, which will help you save money on service fees.

3. Mobile banking and customer service options

Everything’s online nowadays. Banks are no different. Pretty much every bank provides online banking and telephone access, making money management available from basically anywhere your cellular phone can be used.

Consider whether or not your bank or credit union offers a mobile app. In rare instances, they don’t evaluate their customer services, such as promptness and operation hours.

4. Additional banking products and services

While this article’s focal point is checking accounts, it’s important to consider other options that come with the financial institution of your choice.

Additional products to consider may include savings accounts, credit cards, and other financial tools that can improve your financial health.

People who like all of their finances in one place may find benefit in finding a financial institution with all of their money in one bank. It allows them to monitor their finances and debts closely.