What is a Checking Account? And How Do They Work?

Written by Kim PinnelliReviewed by Nathan Brown, CFP®Updated: 24th Oct 2022
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If you’re looking for a bank account with easy access to your money, you need a checking account. But no two accounts are created equal.

Learn what to look for and what to avoid in checking accounts in this quick guide.

What is a Checking Account?

A checking account is a deposit account that allows you to deposit and withdraw as often as you want. Unlike savings accounts, there aren’t monthly limits to the number of withdrawals you can make.

You have several ways to access your funds, and some checking accounts even earn small amounts of interest.

>> More: Best Checking Accounts

How Do Checking Accounts work?

Checking accounts are much easier to handle than savings accounts. The only limits (typically) are the number or amount of ATM or debit transactions you can do in a day.

You can write checks, withdraw funds at the ATM, and use your ATM/debit card to make purchases. Many checking accounts have monthly service fees but provide ways to waive it, including a certain deposit amount or certain size direct deposit.

Most checking accounts don’t pay interest, but if you’re lucky, you may find one that pays minimal interest if you meet the balance requirements.

What Is a Checking Account Used For?

Checking accounts are used for short-term money ‘storage.’ It’s money you use for your daily expenses, bills, and regular spending.

It’s best to only keep money in there that you need for bills or spending and keep any money meant for emergency funds, financial goals, or other financial reasons in accounts that provide a greater return on your investment.

How to Open a Checking Account (Step-by-Step)

It’s easy to open a checking account, whether you open one in person at a brick-and-mortar bank or online. Here are the simple steps.

#1. Research Your Options

Do a quick search online, and you’ll come up with hundreds of checking accounts, even if you search ‘checking accounts near me.’

Look at your top options and narrow them down with the following factors.

#2. Take Note of Fees

Look closely at the fees. Many banks charge monthly maintenance fees, and they’re not cheap! Some are as high as $25 a month.

Usually, you can waive the fee if you meet a certain balance threshold, but always read the fine print – no two banks are the same.

Look at other fees too. Do they charge overdraft fees, teller fees, ATM fees, or any other fees that would add up? Ideally, look for a checking account with no fees, except for overdraft, since that’s hard to get around.

#3. Online Capability

Most banks today are online, but always check. Ask what capabilities you have with the bank online. Can you pay bills? Transfer funds? Check your balance 24/7?

Figure out what features you’ll use and find a bank that offers at least those features.

#4. Mobile Friendly

If you like to bank on-the-go, look for a bank that offers mobile banking. If you choose an online-only bank, this is usually a given, but not always.

Mobile banking allows you to make deposits from your phone, transfer funds, and check balances.

#5. Strong Customer Service

There’s nothing worse than being frustrated with a bank’s customer service or not getting a hold of them.

Look for banks that offer around the clock customer service or at least extended hours beyond normal bank hours.

#6. Sign-Up Bonuses

Many banks offer a sign-up bonus for opening an account. Some offer it just for opening the account; others require a certain deposit size or a minimum number of transactions to earn the bonus.

>> More: Best Online Banks

Types of Checking Accounts

  • Online: If you don’t mind banking online only and not going to a physical branch, you may get lower (or no) fees and/or higher interest rates than other checking accounts.
  • Standard: Most standard checking accounts don’t have any special features but don’t usually charge fees and don’t pay much (if any) interest.
  • Premium: If you have a large amount of money to deposit, you may get better interest rates and fewer fees on a premium checking account.
  • Rewards: Some checking accounts offer rewards, such as cashback or points when you use the included debit card.
  • Student: Students in high school or college may qualify for a free checking account from most banks. They usually don’t have minimum balance requirements or charge ATM fees.
  • Second Chance: If you have bad credit and/or lost a checking account in the past, a second chance checking account is your first step back into the banking world. They have low deposit requirements but almost always have a monthly fee.
  • Bad Credit: If you can’t get a checking account anywhere else, look for bad credit checking accounts. You won’t get any ‘frills’, but you’ll have the chance to rebuild your credit.
  • Business: If you run a business, you’ll want to keep your business finances separate from your personal finances. They usually have higher limits on spending and withdrawals.
  • Senior: Many banks offer seniors over 65-years old free or low-cost checking accounts but with few ‘perks.’

Checking Account Features

Monthly Maintenance Fees

Most checking accounts charge a fee to use the account. The fee ranges from $5 – $25 per month, but many banks offer the option to waive the fee if you meet the minimum deposit requirement or have a certain number or monetary amount of direct deposits.

Overdraft Fees

If you withdraw more than your account balance, your bank may cover it but charge you an overdraft fee.

Some banks allow you to opt-out of overdrafts to avoid the $35 per overdraft fee. Just know that your transaction will be declined if you do this.

>> More: Best Checking Accounts with No Overdraft Fees 

Withdrawal Limits

Each bank has different daily withdrawal limits. You aren’t limited by the number of withdrawals or transactions like a savings account, but they may limit the dollar amount you withdraw each day.

Earned Interest (APY)

Some (not all) checking accounts pay a little interest. On average, expect a 0.01% APY, and you may need to hit a certain balance for it to kick in.

Checking Accounts vs Savings Accounts: What Is the Difference?

A checking account is meant for daily spending. Banks don’t expect you to keep the money in the account – they know it’s for spending.

A savings account, on the other hand, is meant to have a balance. Banks rely on it, which is why they pay higher interest rates for them.

Savings accounts also have a maximum of six withdrawals in a cycle. This doesn’t vary by bank, as it’s a Federal Reserve Board regulation.

What Do You Need to Open a Checking Account?

To open a checking account, you must prove your identity, date of birth, and social security number. A state-issued ID, social security card, and/or birth certificate are enough to verify your identity and open a checking account.

Is a Checking Account a Debit Card?

A checking account is technically an account you can write checks from, but most do come with a debit card for ease of use.

Is a Checking Account the Same as a Debit Account?

Your checking account serves as a debit account too. You can write checks or withdraw money using your debit card either at an ATM or at the checkout.

Are Checking Accounts Safe?

As long as your checking account is at an FDIC-insured bank, it’s safe. All depositors are insured up to $250,000 per category. If the bank fails, you will not lose your money.

Bottom Line: What is a Checking Account?

Everyone needs a checking account, but you shouldn’t overpay for it. Find the account that suits your needs and that possibly even pays interest.

Pay close attention to the fees and avoid monthly maintenance fees if you can keep more money in your account.

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Kim Pinnelli
Kim Pinnelli

Kim Pinnelli is a Senior Writer, Editor, & Product Analyst with a Bachelor’s Degree in Finance from the University of Illinois at Chicago. She has been a professional financial writer for over 15 years, and has appeared in a myriad of industry leading financial media outlets. Leveraging her personal experience, Kim is committed to helping people take charge of their personal finances and make simple financial decisions.