Checking accounts offer one of the easiest ways to store and access your hard-earned money safely. Even though check writing may seem antiquated in an age of digital wallets and online banking, there's a lot more value to a checking account than paper checks — starting with a place to deposit your paycheck.
Whether you're looking to open your first checking account or your first in a long time, you'll have no shortage of choices. Read on to learn more about the benefits of a checking account and how to pick the one that best suits your lifestyle.
Do I need a checking account?
Think of a checking account as the centerpiece of your financial life — a place to keep money for the short term to pay bills or to use for everyday expenses. Unlike a savings account, a checking account is designed to be transactional so you can move money in and out as needed using a debit card, checks or online payments.
Opening a checking account doesn't require a large deposit. For example, some banks will let you get started with a minimum of $25. Unlike most savings accounts, your checking account may not earn interest, or, if it does, it'll typically be a lower percentage rate. So a checking account might not earn much interest, but that's OK since that's not its main purpose.
Checking account benefits
The benefits of checking accounts go beyond keeping your money secure.
- Many employers offer or even require direct deposit, which saves you a trip to the bank or ATM to deposit your check.
- Get easy access to your money.
- Set up online bill payments.
- Link your checking account to online payment services, such as Venmo® or PayPal®.
Regardless of whether you open a checking account at a bank or credit union, you can have peace of mind knowing that your money is generally insured up to a certain limit set by the Federal Deposit Insurance Corp. (FDIC) or the National Credit Union Association (NCUA) — even if the participating bank or credit union closes.
When you select a checking account, consider a bank that offers complimentary budgeting and money management tools. These services are designed to help you track spending and take control of your finances.
Using a checking account
For many users, checking accounts are especially valuable because they're easy to use and offer options to access your money, including:
- Paper checks for payments.
- Debit card for cash withdrawals.
- Debit card for purchases.
- Automatic bill pay for regular payments automatically deducted from your account, such as utilities or credit cards.
- Online bill pay for on-demand payments to individuals and businesses.
- Wire transfers for sending money from bank to bank.
You can make in-store and online purchases with your phone or digital device by adding your debit card to a digital wallet. Think about apps such as Apple Pay®, Google Pay® or Samsung Pay®. In addition to their convenience, digital wallets add an extra level of security against data breaches because they don't expose your card numbers to retailers.
By connecting your checking account to mobile payment apps such as Zelle® and Cash App®, you can easily transfer funds between friends, family members and small merchants. Just be sure never to send money to someone you don't know.
Remember: Any purchases made using your debit card — or a digital wallet connected to your debit card — are immediately deducted from your checking account.
Checking account types
So far, we've referred to checking accounts as a general term. However, as you start to research banks' offers, you'll discover that not all checking accounts are the same. Some are bare-bones products, while others earn interest and offer rewards. Here are a few of the more common checking account types:
Free checking
As the name suggests, this type of account has no monthly service fees, and may not have a minimum balance requirement. Note, even "free" checking accounts will have fees associated with various activities or services, such as wire transfers, overdrafts or nonsufficient fund fees.
Rewards checking
These accounts may offer incentives for setting up direct deposits, maintaining a specific balance, or for using your debit card for a specific number of transactions. Rewards can vary from waiving a monthly service fee to cash back.
Student checking
Most banks offer an entry-level checking account for teens and college students. These low- or no-fee accounts are designed to help young people gain financial independence.
As your financial needs evolve, banks and financial services companies are also innovating and adapting to their customers. Even after you've selected an account, contact your bank regularly to see if a new account might be better for you.
Choosing your bank
The first decision you'll make when opening a checking account is finding the right bank to fit your needs. Then, you should be ready to make choices on what type of checking account is best for you.
Not long ago, consumers had only a handful of choices — small, local banks with a few branches, or giant, national banks with branches in several, if not all, states.
For many consumers, online banks make sense because, while they may lack physical locations, they offer increased flexibility and competitive interest rates on checking and savings accounts. For service members who move on a regular basis, the flexibility to take their bank with them wherever they go can be critical to their financial health.
Keep in mind that while you can always switch banks, it can become more complicated the longer you keep your account in one bank. This is true if you link your account to direct deposits or automatic payments or other withdrawals. When you move to a different bank, you'll need to change those transactions to the new account.
Understanding the fees
Sometimes a "free" checking account is anything but. That's why you need to examine the fine print to avoid surprises on your monthly statements. Here are some of the most common fees banks charge on checking accounts:
Monthly maintenance fees
This is a service charge for keeping your account open, but it can sometimes be waived if you meet criteria such as setting up direct deposit, keeping a specific balance or making a certain number of transactions.
Minimum balance fees
Accounts with specific minimum balance requirements will be charged if the balance dips below that amount.
Account inactivity fees
Some banks charge a fee if, after a certain amount of time, the account has no transactions.
Wire transfer fees
When you wire money from your bank to another, the money is sent and received usually on the same day. Your bank may charge a fee for the service.
ATM fees and surcharges
Using your bank's ATMs for cash withdrawals is typically free. When you use another bank's ATM you may see fees and surcharges.
Non-sufficient funds or overdraft fees
If you spend more than your account balance, the bank will normally charge you a penalty. You may be able to avoid these fees by enrolling in the bank's overdraft protection program, which transfers extra funds from your linked account, if you have one, to cover the check amount. Read this article to learn more about how to avoid overdrafts.