What is a Checking Account?

Checking accounts are a type of banking account used for everyday expenses. They’re good for everyday uses because there isn’t a limit to how often you can access the money in the account. A checking account is not great for building savings though, because they tend to have a very low or no interest rate at all.

When you have a checking account, money can be deposited and taken out fairly easy. When you have money available that you are ready to spend, like paying a bill or making a purchase in a store, you can write a check or use a debit card, rather than using cash. This is what makes checking accounts so convenient to use in an everyday setting. It also removes the need to carry around a large amount of cash. A checking account is used as a way to keep your money readily available, while still keeping it secure and protected.

How is a Checking Account Different than a Savings Account?

A checking account is different from a savings account because a checking account is more accessible. With a savings account there are usually legal limits to the number of monthly withdrawals you can take out of that account. Whereas with checking accounts, they are linked to debit cards that provide easy access to your funds. Another big difference between checking and savings accounts is that saving accounts earn more interest, while checking accounts typically have lower interest rates.

Types of Checking Accounts

There are two main types of checking accounts: regular checking accounts and interest checking accounts. Each type of checking account is designed for varying levels a withdrawal activity.

Regular checking accounts are the type most people are referring to when they talk about checking accounts. This type of checking account typically requires a small minimum balance and offer unlimited withdrawals, so long as there are sufficient funds in the account. If you accidentally spend more money than you have in your checking account, you will most likely be assessed an overdraft fee. Regular checking accounts typically have very low interest rates, as they are meant to be transaction-based accounts, not savings account.

An interest checking account is similar to a savings account because, unlike a regular checking account, you earn decent interest. However, with an interest checking account you're typically required to maintain a high minimum balance to avoid fees and still earn interest. Depending upon the financial institution there may also be limitations in the number of withdrawals you can make per month. This type of checking account is best for someone who needs easy access to their funds but doesn't plan to make many purchases from the account.