What Is a Checking Account?

A checking account is a bank account that allows you to easily access your money. You can make purchases with your debit card, checks, or account information.

Learn more about how checking accounts work.

What is a checking account?

A checking account is a deposit account, which is a bank account that you can use to hold and withdraw money. Checking accounts allow you to easily access your funds in a number of ways.

You can access your money by withdrawing money from an ATM or branch, writing a check, sending an electronic check, setting up an automatic transfer, or using your debit card. Checking accounts are normally used for daily expenses.

How a checking account works

Checking accounts have very few limitations when it comes to accessing your funds. You may have a daily limit on ATM withdrawals, and your debit card may limit the amount you can debit from your account on any given day.

Other than that, you can make purchases and payments using your checking account, as long as you have enough money in your account to cover your purchases.

In compensation for this availability, checking accounts generally do not pay much interest, and many accounts do not pay interest.

Checking accounts may have monthly service fees, but many financial institutions waive these fees if you meet specific requirements.

For example, you may need to maintain a minimum balance or have a certain amount of direct deposit each month to avoid service charges.

Understanding Overdraft Options

These accounts also have over raft fees. In exchange for an overdraft fee, your bank or credit union will charge you for a transaction that exceeds the money in your checking account. Your bank may offer overdraft protection, which you can decide if you want.

With overdraft, you can link another account (such as a savings account) to your checking account and automatically transfer money if you have a negative balance.

Some institutions allow you to overdraft up to a certain limit and then start returning checks and rejecting transactions.

When you use overdraft protection from a bank, an overdraft fee is charged; According to the Consumer Financial Protection Bureau, the average overdraft fee is $ 34.1.

If you decline overdraft protection, all transactions that may exceed your checking account balance will be declined. This avoids charging overdraft fees, but it may mean that you can't complete purchases if you don't control your balance.

Open a checking account

You can open a checking account by going to a bank or credit union agency or by applying online. You will need to provide your Social Security number, personal information such as your address and date of birth, and a valid form of identification to open an account. You may also need to make a minimum initial deposit.

When you open a checking account, the bank also performs a quick background check using a service like ChexSystems.

ChexSystems maintains information on closed bank accounts. If you have been reported to ChexSystems or a similar company for having an account with a long-term negative balance, you will not be allowed to open an account until the negative balance is resolved.

Most banks do not open a checking account for a minor, so if you are under 18 you will need a co-signer on the account.

Banks sometimes offer cash bonuses as incentives to open a checking account, so it's something to look for when buying a new checking account. Generally, you must meet requirements such as maintaining a certain balance.

Savings accounts are designed to store your money. They generally pay a low interest rate, but that rate is more than what you normally see in a checking account.

Savings accounts often limit the number of "convenient" transactions you can make in a given month. Convenient transactions include automatic transfers from savings accounts to other accounts and online and telephone transfers from your savings account.

Financial institutions can also limit the number of withdrawals you can make from a savings account at an ATM or in person.

Savings accounts also limit direct purchases. You can pay bills online using your savings account information, but you cannot use a check or debit card to make purchases using funds directly from a savings account. You must first transfer the money to a checking account.

We hope you enjoy watching this video about Checking Account

Source: The Simple Dollar

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