What is a Checking Account?

If you have ever put any money in a bank, then chances are you own a checking account. Many people know what checking accounts are at the basic level, but fail to learn what a checking account is at all levels.

To put it simply, a checking account is much like a wallet. You can deposit cash into it, withdraw cash from it, or spend money out of it. There are normally minimum balances associated with most checking accounts. What this means is that you can’t let your balance fall below a certain level, or you might be faced with a penalty. Depending on the type of checking account that you have, you may or may not have a limit on how many transactions you can complete in a week.

Another common concept of checking accounts are overdraft fees. You will receive an overdraft fee if you “bounce” a check. To bounce a check means that you attempt to purchase something that you don’t have enough money for. Many banks charge a flat charge of $35.00 per bounced check.

Having a checking account is a great advantage over having a pocket full of cash. Having a checking account enables you to have quite a bit of money stored away safely, unlike having cash in your pocket. Most banks insure your account up to $100,000, so you can be sure your money is safe.

Another great advantage of having a checking account is the flexibility you have with spending your money. No longer are you limited by how much cash you can carry in your pockets. For years, the only way to spend money out of your checking account was via the traditional paper checks, but times have changed, and so have payment methods. Most banks nowadays offer check cards, which are similar to debit cards. When using a check card, you are limited by the amount of money that you currently have in your checking account. If you need cash for any reason, you can use your check card at any ATM to withdraw cash from your account.

Unlike a savings account, checking accounts do not earn interest, and it is not beneficial to have high amounts of money in the account. Many have a savings account and checking account with the same bank. They keep around $1000 in their checking account and put the rest in a savings account to ensure they receive some interest earnings.

Balancing checking accounts is a fairly simple task, either through your check book or with computer software. Many people utilize their bank’s website to track their available funds in their checking accounts. Not only is tracking funds online fast, it is also more accurate and is updated the second your check clears a transaction.