Checking account can be simply defined as a transactional account at a financial institution through which deposits and withdrawals can be carried out. Funds held in a checking account are liquid, and may be easily withdrawn with the help of checks, electronic debits and automated cash machines.
A checking account has its peculiarities compared to other types of bank accounts. The thing is that it allows for unlimited deposits and numerous withdrawals, while a savings account has limits for such transactions. Actually, checking accounts include student accounts, business accounts, joint accounts as well as numerous other accounts having similar features.
Due to high liquidity, generally checking accounts offer low interest rates. However if kept at a chartered bank institution will be FDIC guaranteed about $100,000 per personal depositor.
Other names for a checking account are transactional account and demand account.
Financial institutions (credit unions, loans and savings, banks) provide a checking account to their clients. Checking accounts are used to deposit funds and withdraw money from a protected account. In fact, different banks offer different terms of using a checking account, however on the whole a checking account owner can use personal checks instead of cash to repay the debts. The holders can use ATM cards or electronic debit cards to perform money withdrawals.
As a matter of fact, every bank provides the service of checking account for the clients. Some set a minimum amount for the first deposit before creating an account, together with verifiable proof of address and identification. Low-income applicants like students can choose no-frills account as they do not charge any fees for using personal checks. Other banks may set a rather high balance limit to benefit from interests every month.
The checking account owner is supplied with official checks containing the important mailing and routing information. Checks can be treated by the recipient in the same way as cash to perform the transaction.
Holders of checking accounts are responsible for controlling their funds, although the bank will issue the accounting statements regularly. Checks should represent actual sum of funds kept in the checking account. If the amount written in a check exceeds the balance, different fees and sometimes legal actions are imposed on the check writer. Some banks protect their holders performing the payments and informing the check writer about the overdraft.
There are several different ways offered by banks to the owners of a checking account to control their balances. Debits and credits information is mailed to the customers every month in the form of printed statements. It is possible to check the current balance using ATM machines; online accounts provide updated information on processed and outstanding checks in real time. In fact this data is similar to the notes in a special journal often named a check register.
Provided that the account owner maintains financial records properly, a checking account is a very efficient and safe method to deposit funds from various income sources and to pay bills. A checking account is perfect for paying routine debts like utility bills, credit card bills and mortgage payments.