What Is a Checking Account: A Complete Guide

Checking accounts lie at the center of our financial lives, acting as the primary account where paychecks and other funds come in and where bills and other expenses exit. Like a security checkpoint at an airport, everything passes through no matter where it’s going to or coming from.

Because checking accounts are so important, it’s critical to understand how they work and how to use one to meet your financial needs. Here’s a closer look at checking accounts and how to pick the best one for your financial situation.

How checking accounts work

Checking accounts are transactional accounts intended for frequent use. They’re a good place to receive your payroll direct deposit, deposit checks, make credit card payments, and handle other bills and regular expenses.

You can deposit or withdraw funds anytime during business hours, and some online banks work around the clock. No matter your financial situation, money-related goals, and how many other financial accounts you have, a checking account plays an important role.

Common checking account fees

Many checking accounts don’t charge monthly fees, but some banks charge fees for less common activities or for failing to maintain a specific minimum balance. Here are some of the most common checking account fees you may encounter. Check your account holder agreement to learn about the fees on your specific account.

Overdraft and nonsufficient funds (NSF)

You may be charged an overdraft or nonsufficient funds (NSF) fee if you attempt to spend or withdraw money that would take your account balance below zero. Some banks avoid overdrawing transactions and don’t charge a fee, while others allow you to go below a zero balance with an added charge.

Returned deposit item fee

When you bounce a check, you generally have to pay an overdraft fee. If a check you deposit bounces, the bank may still charge you a fee, even though you are not at fault.

Monthly maintenance fees

Some banks will charge a monthly fee if your account balance drops below a specific minimum or average daily balance. That said, the best checking accounts have no minimum balance requirements or monthly fees.

ATM fees

When you withdraw cash from an ATM not owned by your bank, you may be subject to an ATM fee. Some banks charge fees for out-of-network ATMs, and most ATM owners charge fees when using another bank’s ATM card. However, some banks don’t charge any ATM fees and even reimburse fees charged by other ATMs.

Foreign transaction fees

Many banks charge foreign transaction fees when you use an ATM or debit card outside of the United States. These fees are related to the additional expense of converting to a foreign currency and interacting with an international ATM or payment network.

Paper statement fees

Some banks charge monthly fees if you opt to receive your bank statement in the mail rather than digitally through online banking. You can avoid paper statement fees by opting for online-only statements.

Different types of checking accounts

While checking accounts offer many of the same features, some are designed for a specific purpose. Examples include the following.

• Traditional checking. Traditional checking accounts offer check writing services, unlimited electronic deposits and withdrawals, ATM access, and branch banking, where you can deposit and withdraw cash.
• Online checking. Online checking accounts offer most of the features of a traditional account, except you can’t visit a brick-and-mortar bank branch for in-person transactions. Most online checking accounts charge much fewer fees than accounts from traditional banks.
• Interest-bearing checking. While many checking accounts don’t pay interest, some now include monthly interest based on your account balance, similar to a savings account.
• Student checking. Student checking accounts are low-fee accounts geared toward post-secondary students. Be aware that some student accounts convert into different accounts after several years.

How to choose a checking account

When shopping for a checking account, consider the features you need most and carefully review any account fees.

An online account could be a great option unless you are paid in cash. With lower fees and the ability to bank from your computer or mobile device, a quality online checking account could be an excellent decision.

If you need to deposit cash regularly, you’re likely better off with a traditional checking account from a bank or credit union with branches in your local area.

Examples of best checking accounts

If you want to save time shopping around, the following checking accounts might meet your needs:

Low fees

Chime is an online bank with almost no fees. There are no monthly fees, minimum balance requirements, and no overdraft fees for the first $200 thanks to a feature called “SpotMe.” Chime partners with ATM providers to offer more than 60,000 fee-free ATMs.

In-person banking

Chase Bank is a good option if you prefer to bank in person. Chase operates over 4,700 branches and over 15,000 ATMs nationwide and offers several checking accounts. Monthly fees may apply if you don’t meet minimum balance or activity requirements.

High yield

Quontic Bank offers its High Interest Checking account, with interest rates that are superior to most banks. To earn the top rate, you’ll need to make at least 10 monthly debit card transactions of $10 or more. Its Cash Rewards Checking features 1% cash back up to $50 monthly. Accounts have no monthly fees or overdraft fees.

ATM fee reimbursements

CIT Bank, a part of First-Citizens Bank & Trust Company, offers an online checking account called “eChecking.” If you regularly need cash, you’ll enjoy up to $30 in monthly ATM fee reimbursements for fees charged by other banks. Account holders also have access to the Zelle network and other common online banking tools. CIT Bank pays a modest interest rate, which varies depending on your balance.

Traditional checking

First Citizens Bank has three checking account options with robust online features and branches in 21 states. The free checking account has no monthly fees if you opt for paperless statements. Premier and Prestige checking accounts offer perks with other accounts but charge monthly fees unless you meet certain minimum requirements.

Kids

Axos Bank offers several online checking accounts. First Checking is a standout choice for kids. Young people ages 13 to 17 are eligible, and the account features monthly interest payments, no monthly fees, no overdraft fees, and up to $12 in monthly ATM reimbursements for out-of-network ATM transactions.

How to open a checking account

Opening a checking account is easy if you have all of your personal contact information handy. In most cases you’ll need to provide information, including your full legal name, address, phone number, and Social Security number.

You can open many accounts via a bank's website or mobile app in less than 10 minutes. Many banks review an applicant’s credit history when approving new checking accounts.

How many checking accounts can I have?

While some banks may limit the number of checking accounts at that specific bank, there’s no limit to the number of checking accounts you can hold. If you want multiple checking accounts at multiple banks, there’s no rule or law against doing so. However, it is important to keep close track of all accounts to spot potential problems quickly.

Is a debit card a checking account?

Debit cards are typically not stand-alone checking accounts. In most cases, your checking account comes with a debit card, which allows you to access ATMs or make purchases directly from your account balance. Some debit card accounts are available as stand-alone products, with many features found in checking accounts.

Checking vs. savings accounts

Checking and savings accounts are often available from the same bank, but they are used differently. While checking accounts are good for daily transactions, bill payments, and more, savings accounts generally have limited features.

Savings accounts offer monthly interest payments to the account holder but are often limited to six monthly withdrawals and don’t have check-writing abilities. Those six monthly withdrawals can be for any amount up to the account balance, but additional withdrawals can lead to fees or account closure.

Possible reasons for being denied a checking account

If you have a spotty banking history, a bank may be concerned about entering a new relationship with you. Just as credit card and loan histories are reported on your credit report and reflected in your credit score, information from your banking history may be reported on your ChexSystems report.

ChexSystems tracks account openings and closings, overdrafts, and other potentially derogatory information. You may be denied a checking account if you have a bad credit history or a lengthy list of negative information on your ChexSystems report.

TIME Stamp: A checking account is central to your financial life

A checking account is one of the most important financial accounts you can have. It’s the financial nerve center where funds enter and exit your personal finances. Picking the best checking account for your personal goals and needs can help you avoid fees and stay on track to meeting your financial goals.

Frequently asked questions (FAQs)

Do checking account activities impact your credit score?

Checking account activities don’t appear on your traditional credit report or influence your credit score. Negative banking information is kept by a separate credit reporting agency called ChexSystems. Credit reports focus on information from loan accounts, such as credit cards, car, student, and mortgage loans.

What is the best interest rate offered on a checking account?

Checking account interest rates change regularly. If you want the best rate, look for a high-yield checking account and note the bank’s requirements to earn the top interest rate. Alternatively, consider a high-yield savings account to get the most from your bank account balance.

Where is the account number on a check?

You can find the routing number, account number, and check number encoded at the bottom left of the check. The account number, usually anywhere from eight to 12 digits, is the middle number printed between two symbols. The left number is a nine-digit number representing the bank’s routing number, and the number on the far right is the check number.