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What Is a Checking Account?

Banking, Checking Accounts
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What is a Checking Account?

Whether you make your living flipping burgers at a fast food joint or houses on the real estate market, you need a place to park your income. That’s what makes checking accounts so popular. It’s the bank account you’ll likely use the most, whether for buying groceries, withdrawing cash at an ATM or depositing a paycheck.

Plus, checking accounts give you access to a variety of services that the space beneath your floorboards simply can’t provide. Here’s a closer look at some of those features, as well as how to select the checking account that’s right for you.

The basics

True to their name, checking accounts come with checks, which you can use to make payments. But these days, you’ll use a debit or ATM card more often to access your cash.

Unlike savings accounts and certificates of deposit (CDs), checking accounts don’t place many restrictions on how often you can access your money, which makes them ideal for everyday spending. That said, your bank may place daily and monthly limits on ATM withdrawals. When considering a new account, make sure its caps align with your spending habits.

Checking accounts aren’t known for their interest payments — money a bank will give you for storing your cash — but certain online-only banks and credit unions (and a few brick-and-mortar banks) offer interest-bearing checking accounts with rates as high as 1%.

While you’re at it, keep an eye out for sign-up bonuses. You shouldn’t pick an account based solely on a promotion, but it could help you decide between two otherwise comparable options.   

» MORE: About banks and banking

Fees

Just as there are checking features you should look for, there are some you should avoid. Namely, fees, which are as common as they are frustrating.

Some checking accounts, especially those at large, national banks, charge maintenance fees — as much as $15 a month. These help offset the high cost of maintaining thousands of branch offices, but they also put sizable dents in the wallets of customers who don’t meet banks’ fee-waiver requirements.

That’s what makes digital banks appealing to a growing number of consumers. Many online-only banks, as well as some credit unions and regional banks, offer free checking accounts, as well as reasonable overdraft fees

Finding the best account

Choosing a checking account is like shopping for new shoes. Any old boots in your size could do the trick, but finding a pair that fits just right will make a considerable difference. 

When it comes to checking accounts, that means seeking out low fees, broad ATM networks and other services that suit your individual needs. Here are some of your options:

  • Free checking accounts: Many credit unions and online-only banks offer checking accounts without monthly fees or minimum balance requirements. You may not have access to many branch locations, though. 
  • Online checking accounts: Most banks and credit unions offer checking accounts that allow you to conduct all your account transactions on the Internet. These accounts often offer perks, such as competitive interest rates, mobile check deposit and ATM fee refunds.
  • Rewards checking accounts: If you use your checking account frequently, and are looking for something extra, rewards checking accounts provide benefits, including above-market interest rates, rewards points and ATM fee refunds. As a bonus, some rewards checking accounts are also free, even if you don’t meet the monthly requirements to earn rewards.
  • Teen checking accounts: Teen or youth checking accounts are a great way for budding consumers to test the waters of personal finance. These accounts tend to require a parent or guardian to co-sign, and often come with financial education and other helpful perks.

» MORE: NerdWallet’s best checking accounts and debit cards

Opening an account

Once you’ve selected a new account, opening it is mainly a matter of following the right steps and having a few important documents on hand.

After that, you can start taking full advantage of the account. That may include signing up for direct deposit and scheduling automatic transfers to your savings account to bolster your nest egg. These features and more will make you happy you found a place to park your cash.

Tony Armstrong is a staff writer at NerdWallet, a personal finance website. Email: tony@nerdwallet.com. Twitter: @tonystrongarm.

This article was updated. It was originally published in January 2014.

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