What Is a Checking Account? A Detailed Guide

Written By
Julija A.
July 05,2023

Savings, retirement, and student bank accounts - there are plenty of different options you’ll need to consider throughout your lifetime. One of those accounts is a checking account, which is typically used to manage your daily transactions.

This type of account doesn’t limit how many transactions you make daily, which is why it is the best choice for your day-to-day spending, as opposed to savings or other types of accounts.

That is, in essence, the answer to the question: “What is a checking account?” However, since you’re likely to use this account every day, we’ll get into more detail to help you understand it and make the best choice when selecting one.

First of all, we’re going to cover why you need one; then we’ll check out some common definitions of checking accounts, as well as their various types and purposes. Of course, if you have a business, you’ll need a business checking account, so we’ll cover that too. 

There are some universal expectations of what a good checking account should offer, and you should use those as guidelines to help you choose a checking account for your needs. Ultimately, we’ll walk you through the process of opening an account with your chosen provider. 

What Is the Purpose of a Checking Account?

In short, the primary purpose of this account is to store your money in the short term and make it easily accessible when you need it to complete transactions. These transactions could include paying your bills, buying groceries, or any other day-to-day expenses.

You can have your salary sent directly to your checking account, then move it around as you deem fit. 

Whether or not this is the right move depends on the specific checking account you’re interested in. Read on as we explain all you need to know in detail.

Types of Checking Accounts

There’s a surprising variety of checking accounts, and choosing an appropriate one is half the work. So, let’s take a closer look to find the right type of checking account for you.

Regular Checking Accounts

A regular checking account is exactly what you’d expect it to be: your standard, everyday account. With it, you can make purchases and deposits, use ATMs, pay your bills, and generally use it as you would use a good debit card

These accounts typically come with a monthly fee, which can be waived if you use your account responsibly and don’t spend more than you’ve deposited. They typically don’t come with interest on your balance, but there may be exceptions. 

Even so, if you’re looking to earn by leaving money in your account, you should opt for another solution. Earning interest by not using the money contradicts the main purpose of a checking account - you should consider opening a high-interest savings account as a companion to your checking account. 

Premium Checking Accounts

Premium checking accounts are a good solution for people looking to hold a larger balance in their checking accounts. These have a higher minimum balance requirement than your regular checking account, and therefore come with certain benefits. 

For example, if you have a large balance in your account, you might get free checks, ATM fee reimbursement, or a little bit of interest. Some banks consider these accounts when you’re applying for a loan, mortgage, or other financial service, and they could help you get a better deal with the bank.

Still, this solution is not always the best choice among checking account offers, especially when you compare it to the various other accounts you could open and use. It’s perfect if you make large and regular deposits. If you don’t, some other options will serve you better, and you might be able to get even better deals at a different institution.

When it comes to this type of account, even if you can effortlessly match the minimum balance requirement, you should keep an eye on other options.

Free Checking Accounts

Maintaining checking accounts typically involves a fee. The most important of all free checking account features is, obviously, that there are no fees to worry about. There is also no minimum balance required, but this doesn’t mean the account is entirely free - you’ll still have to pay ATM fees, overdraft fees, and other fees that are standard with any bank account.

These accounts also don’t typically offer interest payments, but this may vary depending on the features. 

Interest-Bearing Checking Accounts

Even though you won’t usually be using a checking account to earn interest, some options allow you to do so. Some accounts will pay you a flat fee regardless of your balance, while others may pay it depending on the balance in your checking bank account. 

On rare occasions, the interest these accounts pay can match the ones you would get with a savings account, which combines the best of both worlds - you get unlimited transactions and earn money on your balance. 

Keep in mind and these accounts can also come with some very high fees, so make sure you check the fine print before signing up. If the fees are too high, you might be better off with a free checking account instead. 

Lifeline Accounts

Lifeline accounts, also known as low-balance checking accounts, are primarily created for people who want to use banking services but cannot maintain a high balance on their accounts. 

This type of personal checking account comes with certain restrictions. For example, some of these accounts don’t allow you to write checks at all, leaving you to rely on online or debit card payments. Some have limits on the number of transactions you can make per month, and most don’t allow overdrafts.

Second-Chance Checking Accounts

Second-chance checking accounts are typically the only choice for people who’ve had banks close their checking accounts due to an unpaid negative balance. These come with high fees and a bunch of limitations.

For example, monthly fees can go up to $20, and overdrafts typically aren’t allowed. However, if you manage to maintain this account in good standing over an agreed period, you should become eligible for a regular checking account. 

What Is a Joint Checking Account? 

Joint accounts are an excellent solution for when two or more people need access to a single account for various reasons. This can include siblings sharing one account, couples who are starting a life together, or even business partners. The purpose of a joint account is that anyone named on the account can access the funds deposited into it. 

It’s an excellent solution for when two people share expenses, such as rent, mortgage payments, and bills. However, one of the most practical uses of such an account is when adults set up a joint statement with their children. This can be a great way of teaching children how to handle their everyday banking without any of the risk. 

What Is a Student Checking Account? 

Some consider student checking accounts to be the first step toward financial responsibility. Students who decide to open this type of account can reap many benefits, the biggest of them being the ability to keep track of their spending and balances. This type of account also comes with both a debit card and mobile banking, which are exceptionally convenient. 

Ultimately, statistics show that many students struggle with student debt. Getting paid directly into your checking account will allow you to effortlessly manage your finances, allowing you to better plan your budget and pay off your debt sooner.  

What Is a Business Checking Account? 

If you were to check any business account at any bank, you’d notice that it typically includes both business savings and business checking accounts. The latter allows a business owner to write checks, use a business debit card, and transfer money electronically.

The fees are usually the same as for personal checking accounts, although some banks offer small business owners free accounts.

There are multiple benefits to having a separate business checking account. First of all, it allows for effortless bookkeeping, as you don’t have to figure out which expenses are personal and which are business-related. This is a major reason why every business should have an active checking account.

Having a separate business account keeps your transactions from being audited if your company is, and it also allows you to effortlessly complete your taxes. It can also be crucial for strengthening your brand, as you want your invoices to represent a company, not a hobbyist.

Having separate accounts also keeps your businesses safe from potential identity theft and allows you to accept credit card payments.

Another thing that comes included with a business checking account is a business debit card, something every business will find invaluable if it has employees who need to make purchases using company money. 

What Is the Difference Between a Savings Account and a Checking Account? 

There are a couple of differences to take into account when deciding whether you need a savings account or a checking one. The main factor here is why you need the account in the first place, so let's see the three most common differences between the two. 

Number of Daily Transactions

If you’re looking to cover your daily expenses, you should opt for a checking account. These typically don’t have a withdrawal limit, and there aren’t many restrictions on how often you can withdraw funds from a checking account, which is not the case with most savings accounts.

Interest Rates

On the other side of this checking vs savings account battle, if you plan to keep the money in your account so you can earn some interest, then a savings account is a better bet. While there are some checking accounts that offer interest rates, they’re usually not that great. Check the interest rates on offer and pick the one that will bring you the most money in the long run. 

Debit Card 

Checking accounts typically come with a debit (or ATM) card, which is extremely convenient, especially if you aren’t into carrying cash with you and prefer swiping a card instead. Savings accounts have a range of purposes, but they don’t normally come with a card you can use.

What to Look for to Find the Right Checking Account

As we’ve gone through all the varieties of checking accounts, let’s male a checklist of things to consider before you sign up for a particular account. 

Check the Information on Fees and Minimum Balance

You might not be able to find an account with no fees or other requirements, so it’s important to know how much you’ll have to pay every month. Make sure to compare all of your options and choose the one with the lowest fees and minimum balance when you decide to open a checking account.   

Check ATM Availability

ATM fees can stack up, especially if you often use a competing bank’s ATM for convenience. You should check whether the financial institution you want to open an account with has enough ATMs that aren’t too far out of your way so that you don’t have to pay expensive ATM fees. 

Are There Interesting Interest Rates?

Checking accounts typically don’t have interest rates, but that varies from account to account. We made it clear that interest rates aren’t typically a part of the deal when we answered the question “what is a checking account?” But there are exceptions to that rule. You should check whether the accounts you’re interested in come with an interest rate, and if so, choose the one that offers the highest.

Banks Aren’t Your Only Option

Credit unions, online banks, and non-bank financial service providers can also set you up for a checking account. Online providers don’t have the same expenses as banks, so they can offer better deals to their customers.

Accounts at an online bank typically don’t have fees, or if they do, they’re very low, which is a part of the definition of a checking account online. Credit unions usually offer higher interest rates than what you’d find with traditional banks. 

Sign-Up Bonuses

Lastly, if you’re choosing between two offers that appear exactly the same, check whether one of those has a sign-up bonus. This isn’t really the best metric on which to base your decision, but if you’re comparing two otherwise identical offers, a good welcome offer can tip the scale one way or another. 

Ultimately, you’re looking for an account that will make your life easier, and reading the fine print will certainly help prevent unpleasant surprises.  

What Is Required When Opening a Checking Account? 

You can open a checking account either online or by visiting your nearest branch. You’ll likely be asked for your personal information, from your name and address to your Social Security number. In some cases, the bank may also run a credit check. It will likely be a soft pull, but if you’re worried about your credit, make sure to double-check the terms in advance. 

Some banks also require you to deposit some money to open the account. This can range anywhere from a single dollar to $50, which you can deposit in cash, check, or via an online transfer. Ultimately, you can use the opportunity to open an online savings account, too.

Are There Any Fees Involved?

As we’ve mentioned several times, like any other account, a checking account, by definition, usually comes with fees. Here’s a quick list of some of the most common costs involved with it.

Monthly Service Fee

Almost all major banks will charge you monthly for maintaining your account, with a couple of exceptions. This monthly fee may be as high as $15, but it can be subject to changes. If you manage to meet specific requirements with some accounts, banks will likely be willing to waive the fee. 

Overdraft Fee

The second significant set of fees you could experience are bank charges when you overdraw your account. These can go up to $30, which is considerable. If you’re worried about these fees, make sure to enroll in overdraft protection. This will decline transactions that your account can’t afford, saving your balance from dipping below zero. 

The Bottom Line

Now that we’ve managed to define a checking account, it’s easy to see that this banking option can play an important role in helping you manage your finances properly.

Understanding all of its definitions and quirks is the key to making a responsible and proper financial decision, so we hope that you can go ahead and choose the account that will help you reach your financial goals.


Is a checking account a debit card?


The original premise of a checking account was that it allowed you to write checks. However, as this payment method has become outdated, these types of bank accounts now usually come with a debit card, which allows you to make straightforward transactions. 

What is a checking account used for?


A checking account is typically used to cover your daily expenses, as it doesn’t come with a limit on the number or value of transactions you make. Typically, you’d use your checking account to purchase gas, pay the bills, order takeout, and make other similar transactions. 

How much money should I keep in my checking account?


Financial experts agree that having at least a month’s worth of spending dollars in your checking account is a good idea, but the exact number depends on the type of account you’re using. 

How does a checking account work?


Checking accounts are the easiest to understand because they are, at the same time, the most liquid accounts. You fill your checking account up by making deposits, then you make withdrawals when you need to.

What is the difference between savings and checking accounts?


The main difference between these two types of accounts lies in their purpose. You use a savings account to save and earn money by making more deposits than withdrawals, therefore accumulating interest on your deposits. On the other hand, the answer to “What is a checking account?” revolves around day-to-day spending and convenience.

About author

Albert Einstein is said to have identified compound interest as mankind’s greatest invention. That story’s probably apocryphal, but it conveys a deep truth about the power of fiscal policy to change the world along with our daily lives. Civilization became possible only when Sumerians of the Bronze Age invented money. Today, economic issues influence every aspect of daily life. My job at Fortunly is an opportunity to analyze government policies and banking practices, sharing the results of my research in articles that can help you make better, smarter decisions for yourself and your family.

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