A checking account is a type of deposit account that can be created at a bank or credit union and allows you to deposit and withdraw money rapidly. This is how they function.
What exactly is a checking account, and how does it function?
A checking account is a type of deposit account that can be created at a bank or credit union and allows you to deposit and withdraw money rapidly. This is how they function.
Checking accounts are essential in many facets of life, from getting your paycheck to moving money to someone else. According to the Federal Reserve’s report on the economic well-being of U.S. households from May 2019 to May 2020, over eight in ten (79%) U.S. people 18 and older have a bank account, such as a checking account.
Checking accounts at a bank or credit union provides the quickest and easiest access to your money from any type of bank account. Below explains how checking accounts function, what fees to expect, how they compare to savings accounts, and how to start a checking account.
What is a checking account?
A checking account is a bank account that allows you to deposit and withdraw funds for everyday transactions. This could entail depositing a check, withdrawing cash with a debit card, or setting up direct deposit for your paychecks.
Checking accounts are among the most liquid bank accounts, which means you have easy access to your money. They frequently enable limitless deposits and withdrawals (depending on the bank, they may have daily maximums ranging from $300 to $5,000).
A checking account’s principal goal is to keep your money in a safe place for the short term, so it’s available when you need it to pay bills and other costs. You can have your paycheck deposited directly into your checking account and then transfer a portion of your earnings to a savings or investment account where it can grow over time. Checking accounts should not be used for long-term goals such as saving for a home because the interest rate is so low, averaging around.04%. However, some banks may provide a range of checking account tiers, so there is always the possibility of earning somewhat higher interest if you retain more money.