What Is A Checking Account?

What is a checking account? A checking account allows a person or business to transfer money conveniently without the need for cash. Checks are negotiable documents written by the account owner giving instructions to the bank to pay money to a third party.

"A checking account allows a person or business to transfer money conveniently without the need for cash. Checks are negotiable documents written by the account owner giving instructions to the bank to pay money to a third party," says Sharon Lee, the Executive Vice President and Director of Client Services of American National Bank, who has thirty years in the banking industry


A basic definition of a checking account is an account where the person listed can write checks against the money in it. It is better to use a checking account in a bank than stuffing your money in a mattress. The FDIC or Federal Deposit Insurance Corporation insures checking accounts in financial institutions. Therefore, if something happens to your money while it is in a checking account with an accredited bank, you can recover it. When you order paper checks for your account, you usually receive a small book with it called the register. The register is designed so you can record deposits and withdrawals, along with who the check was written to and the date of the transaction.




The balance is the amount of money currently in your account. It does not reflect any checks or other transactions that have not cleared the account. Once a check goes through your account, it then becomes a cleared check. If the check has not cleared, it is referred to as an outstanding check. When you deposit a check, your signature on the back is called the endorsement. Reconciling your account is the process of making sure your checking register agrees with the bank's records.

Most basic checking accounts do not earn interest on the money in them and have a limit on how many transactions can occur against the account on a monthly basis. There are also lifeline accounts, which are great options for people with low income or who do not have a permanent address. A joint checking account has more than one person on it. All persons listed can access the account. Banks offer special checking accounts for students and senior citizens, each with special options.

Some types of checking accounts are interest bearing. These accounts earn interest on the money and require a minimum amount to open one. A high balance is required to avoid any fees. Interest is paid usually at the end of each billing statement cycle, with the more in the account, the more money you earn. A higher version of this type of checking account is called a money market account. It combines checking, savings and investment vehicles. A high deposit is required along with maintaining a high balance. Checks are very limited against this type of account, maybe around three to five a month. This checking account earns a much higher rate of interest than others do.

Some checking accounts are designed for people on the move, usually students and young professionals. These are 'express' accounts. People use ATM and debit cards, telephone services and Internet banking to access them. The low balance, low or no monthly fees and unlimited check writing is offset by the charge to use an actual teller in person. "Money can also be transferred electronically without the need for paper by means of ATM, debit card, POS transactions, online banking, or bill pay," said Sharon Lee.

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