What is a Checking Account?

Checking is a service provided by banks, savings and loans, and credit unions. When you need to store your money safely you need an account.

Checking allows an individual or a business to make bank transactions (such as depositing money or withdrawing funds) from a federally insured bank account.

The specific terms of a given account will depend on the policies of the bank the account is held by, but in general accounts are all the same.

All checking accounts offer the holder of the account personal checks printed by the bank and personalized with the account holder's details - these checks can be used in place of cash for payment, although these days more and more businesses won't take personal checks.

The new alternative to checks is the electronic debit or ATM card. The holder of the account can use a card to access their individual account, take out cash withdrawals, make payments, make bank transfers, and even buy stamps and other convenience type items, all depending on what is offered by your bank's ATMs.

A checking account is basically a way to keep your money safe and have constant access to it.

How Do You Open a Checking Account?

All banks offers some form of checking service. The checking account is the generic "bank account" that banks depend on. Sometimes you need to have a checking account with a bank before they allow you to open a money market account, a CD, or any other specialty bank account with them.

Before you go to open a checking account, you should be aware that some banks will make you put down a deposit before you become a customer of their bank and open your new account. A few other things you'll need to have with you when you open an account - proof of address, proof of identification, and a social security card. Any government-issued ID (such as a passport, driver's license, state ID, etc) will work as proof of identification, and you can "prove" your address by showing a power bill, a pay stub, or some other official letter or bill with your name and your address printed on it.

Special Types of Checking

Some banks offer special forms of checking for customers who have specific needs.

Customers with poor credit, credit issues, or low income such as students or people with little credit history should look for very basic checking accounts (sometimes called "no frills accounts") which don't charge fees for certain features. In exchange for fee-free account access, your account will be limited in terms of interest earned and the amount of withdrawals you're allowed to make.

If a customer is interested in earning a higher interest rate, certain accounts do pay a greater interest rate if a customer keeps a specific minimum balance. In exchange for keeping $2,500 in my checking account each month, my interest rate goes up almost a full point.

There are other kinds of specialty accounts - so called "life line checking accounts" exist. These are basically checking accounts for older citizens or other customers whose monthly income is not from a traditional job. These checking accounts don't charge fees like monthly service fees for low balances or surcharges for ATM use.

Depending on what kind of customer you are and what kind of account you're looking for, different types of accounts exist. Contact banks nearby to find out about their special programs..

Maintaining Your Checking Account

Keeping track of a checking account can seem difficult if you've never done it before. When you pay with a check it can be difficult to keep track of that money, as it is not automatically deducted from your account balance. It is easy to get in dire financial straits this way if you don't maintain your account.

When you boil it down, a checking account is a series of deposits and withdrawals. To maintain your checking account you have to keep a physical record of your checks, debit card use, and any deposits coming in to make sure that you keep a positive balance. If the bank closes your checking account and sends your balance due to a collection agency for failure to maintain positive standing, this is called "defaulting" and will leave a terrible smudge on your credit score and your future ability to borrow or open an account.

If you want to keep your account positive, you need to understand how a check works. When a person writes a check in exchange for goods or services the recipient of the check treats it like a cash payment and completes the transaction. After that check is deposited into the recipient's bank account, a bank employee files the check electronically and the check writer's bank works out the amount to be withdrawn from the check writer's account -- this is called "processing" the check. This happens every time a check is written and deposited against an account.

How to Keep Track of Your Checking Account

Most banks offer a variety of ways for their customers to keep an eye on their checking balance. Not only should you keep your own tally of deposits and withdrawals, but you can use any number of systems offered by your bank to make sure your and their records are correct.

The most common methods of keeping your balance in check is keeping your bank's printed monthly statements of debits and credits. These paper statements are mailed to you monthly, or available online all the time. ATM machines even offer an option to check an account balance, and many banks have phone-in centers where you can use an "automated teller" for certain financial updates and transactions.

You should closely compare your own list of checks you've written with the list of checks that have already been deposited to determine how much money is actually available in your account balance.

As long as you are a responsible account holder and you maintains good records of your transactions, you should be able to keep a minimum balance in your account and avoid penalties.

A checking account is just about the safest and easiest way of paying bills and dealing in money. Everything from direct deposit of your payroll check to using PayPal to shop online requires a checking account. Sure, savings accounts are good for adding interest, but a checking account allows you to make everyday transactions like paying rent and bills or purchasing everyday items.

What Is a Checking Account? Find out now.