What is a Checking Account?

What is a Checking Account?

It’s not an overstatement to say that banking plays a considerable role in our financial life today. Looking 100 years or even 50 years back, the picture would be quite the opposite. Of course, banking existed during those times, but had a much different level of accessibility.

Not to dive too deep into banking history, it would suffice to say that banking appeared with the first currency minted. Temples in India, China, Egypt, Babylon, Greece, and the Roman Empire (to mention just a few) kept and loaned money. Banking has come a long way from temples. Online banking is now the norm, and seems to be one of the greatest developments in the financial world. With the number of smartphone users growing, digital banking may well replace traditional brick-and-mortar banking institutions in the near future. The number of digital banking users in the US is expected to reach a staggering 217 million people by 2025 or about 80% of the targeted population.

Taking all these facts into consideration, it would seem relevant to cover the basics of financial literacy. If we talk about the basics, checking accounts is the first thing that springs to mind. In this article we’ll cover the following points:

1. What is a checking account?

2. What does a checking account provide?

3. Types of checking accounts and fees

4. Checking account vs savings account

What is a checking account?

A checking account or a demand/transactional account is a deposit account that serves to cover every day expenses and transactions. Checking accounts help to keep your money safe until you need to access it for making purchases or paying bills. This type of account is preferable for frequent deposits and withdrawals. Banks issue a debit card paired with your checking account, which allows you to access money using an ATM, and make payments in brick-and-mortar shops. Online or digital banking apps allow you to make online purchases and manage your account through your mobile device.

What does a checking account provide?


The main feature that a checking account has is liquidity, which means the ease of getting cash through numerous withdrawals as well as countless deposits. Liquidity describes the essence of checking accounts and comes at a price of low interest rates, if any at all. The money can be accessed through an ATM, financial institutions, by writing checks, and using electronic transfers, to mention a few. The details are to be checked with your bank.


Money is much safer at the bank than it is in your purse, especially if you travel. Losing your debit card doesn’t mean losing your money. It just means that you need to contact your bank, block the card and then request the issue of a new debit card. Online banking boasts a lot of security features nowadays.

Covering everyday purchases and controlling spending

Whether you make online or offline purchases, your debit card is the easiest way to cover them. You will only need to remember the PIN and enter it when asked. If you open a checking account, it makes it much easier to control your spending by checking the balance online or with the help of an ATM. In fact, many online banking apps provide statistics based on how you spend the money. This feature comes in handy if you want to analyze your expenses. 

Automatic bill payment

Using mobile banking can help to pay your bills from the comfort of your home or office.  Once you enter the details and accounts of all your payees and see them in one place, it’s easy to manage all your periodic payments with just a click of a button or even without it – you can adjust the settings to have them paid automatically. Some applications will even send you alert messages to remind you about the payment to be covered.

Receiving paychecks

Opening a checking account makes it possible to get paychecks from your employer through direct deposit, which eliminates the necessity of going to the bank every time you get paid. 

Types of checking accounts and fees

Knowing what types of checking accounts exist and assessing your financial situation can help you choose and open the right checking account. But before going through the existing types of checking accounts, you should define your priorities. In other words, it’s wise to ask yourself a question: what should a checking account do for me? 

Traditional checking accounts

This type of account allows you to write checks and use a debit card for offline and online purchases as well as withdraw money at ATMs. The requirement to open such an account may be to maintain a minimum balance or sign up for other financial services. Meeting these requirements may even waive a monthly maintenance fee. Traditional checking accounts can be connected to other types of accounts in your bank or other financial institutions.

Premium checking accounts

Premium comes with additional benefits like interest on deposits, bonuses at the price of requiring a higher initial deposit or having a higher monthly maintenance fee. According to Forbes Advisor, the average monthly fee of some major US banks is about $25. Whether the benefits are worth the money in today’s financial environment is up to you. 

Student checking accounts

Designed specifically for teenagers and college students, this type of account in many cases comes with such benefits as no ATM fees, no monthly maintenance fees, and sign-up bonuses. It might be a good way to make your first independent financial steps. 

Senior checking accounts

Not unlike student checking accounts, this type of account is designed for the age group 55+ and provides the benefits desired by this age group: free checking, free money orders, lower monthly fees (depending on the bank, some would have higher monthly fees than traditional checking accounts), interest rates, etc.

Interest-bearing accounts

As prompted by the name, interest-bearing accounts allow you to earn dividends on your deposit at the cost of meeting some requirements. Such checking accounts are in some ways similar to savings accounts.

Rewards checking accounts

Some checking accounts offer special rewards like debit card cash back, or reward points. It’s always important to read the fine print, which will detail the requirements you have to meet in order to earn these rewards.

Business checking accounts

Business checking accounts together with accounting automation software are designed to help a business run smoothly. This type of account may charge extra for transactions over a certain limit. Business checking accounts may serve various purposes like payroll or operating expenses.

Checkless checking accounts

Checking accounts that do not offer the ability to write checks are called checkless and are a great choice for those who rely on debit cards alone. Such accounts don’t have overdraft fees in most cases. 

Second-chance checking accounts

This banking option is aimed at the clients who had some problems with their banking history before. It’s the second chance to maintain good standing with a bank. Such accounts would have monthly service fees and a limited number of services.

When choosing the right account, it’s vital to be aware of all the fees that may come in order to avoid this debacle: I don’t know how much is in my bank account and at this point I’m afraid to look.

Some of the fees were mentioned in the types of accounts, but here is a quick list of the most typical fees for checking accounts:

  • Monthly maintenance fees
  • Out-of-network ATM fees
  • Overdraft fees
  • Wire transfer
  • Insufficient funds fees
  • Early account closing fees

Checking account vs savings account

When it comes to comparing checking accounts and savings accounts, they serve different purposes and therefore function differently. One significant point here is that a checking account gives you an easy, fast, every-day access to the money you plan to spend, while a savings account is designed for saving and for earning interest. The table below shows a comparison of the accounts. It would also be relevant to mention a third type of account – clearing account, which serves as a temporary buffer for costs and amounts that should be transferred to another account.

Type of accountFinancial goalDoes it earn interest?Financial planningLimitations 
Checking accountCoverseveryday expenses (bills, purchases)Yes and no(depending on the type of account and the bank)Short-termUnlimited number of transactions
Savings accountAims at savings goals(college, retirement, building a house)YesLong-termLimited number of transactions during each statement period

Bottom line

The main takeaway here is: when you decide to open your checking account, it’s wise to consider your financial goals, average monthly balance, account fees and your banking habits, because choosing the right account to manage your personal or business funds is a solid basis for your financial security and success. 

Irina Seagull

Irina Seagull

Irina is a SEO copywriter. She has a degree in Linguistics, 15 years of teaching experience and 3 years of experience in managing a team of 15 in a small business. Irina believes that a good structure and logic as well as in-depth research should be the attributes of every blog post.

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