Are you looking for a bank account that will help you efficiently manage money? If you need to regularly pay bills and make withdrawals, a checking account is a simple, cost-effective solution.
Whether you’re new to banking or looking for a refresher, the following guide will provide insights into exactly what a checking account is and how it works.
You’ll also find tips for choosing the right type of checking account, learn how to open and manage your account, and get the answers to some frequently asked questions. That way, you can make informed financial decisions.
What Is a Checking Account?
A checking account is a deposit account held at a financial institution, such as a bank or credit union. It allows you to easily deposit, withdraw, and transfer funds. Checking accounts are set up to accept deposits from various sources, such as your paycheck, cash, and account transfers.
Checking accounts also allow you to make withdrawals by writing checks, accessing an ATM, using a debit card, or electronic transfer. Unlike savings accounts, which are designed for longer-term savings and may have limitations on withdrawals, checking accounts are meant for day-to-day financial transactions.
Keeping your money in a checking account is typically safer than carrying cash since it offers protection against theft or loss. When you deposit money into a checking account, you also benefit from the added security provided by banks and credit unions. Most checking accounts in the United States are insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA), protecting account holders against losses in the event of the financial institution’s failure.
Common Checking Account Features
Some of the key benefits commonly found in checking accounts include:
- ATM/Debit card: Checking accounts often come with an ATM or debit card, allowing you to withdraw cash from ATMs, make purchases at point-of-sale terminals, and access your funds electronically.
- Check writing privileges: A checking account gives you the ability to write checks to pay bills, make purchases, or make personal payments.
- Online banking: Online banking lets you easily manage your funds from a computer or mobile device. View your transaction history, pay bills, transfer funds, set up account alerts, and more.
- Direct deposit: Depending on your employer, have salary or wages electronically deposited directly into your checking account, eliminating the need for physical paychecks and ensuring funds are readily available on payday.
- Mobile check deposits: Some checking accounts provide mobile check deposit services, allowing checks to be deposited into your checking account using the mobile app.
- Wire transfers: Checking accounts often allow you to send and receive funds through wire transfers, offering a fast, secure way to send money to individuals or institutions. This feature may sometimes come with a fee.
- Overdraft protection: Accounts with overdraft protection can prevent negative account balances if you spend or withdraw more money than you have available. The bank may cover the overdraft by transferring funds from another account or providing a line of credit.
- Account alerts: Many checking accounts offer account alerts for events such as low balances, large transactions, or deposits. This helps you closely monitor your finances.
Types of Checking Accounts
Many financial institutions offer multiple types of checking accounts, each tailored to meet specific needs and preferences. Here are some of the most common options.
Standard Checking Account
A standard checking account typically includes basic features such as check-writing capabilities, ATM access, and online banking. These accounts are suitable for everyday use, allowing you to deposit money, make payments, and withdraw cash as needed. They may require a small monthly fee or be fee-free if certain conditions are met.
Interest-Bearing Checking Account
An interest-bearing checking account combines the liquidity and accessibility of a traditional checking account with the added benefit of earning interest on your account balance. However, some may require a higher minimum account balance when compared to a standard checking account.
Student Checking Account
Designed with young adults in mind, a student checking account typically has lower or no monthly fees or minimum account balance requirements. Many also offer benefits such as ATM fee reimbursements and mobile banking.
Senior Checking Account
Senior checking accounts cater to retirees and older individuals. They often provide perks like waived monthly fees, interest on account balances, and extra checks.
Business Checking Account
A business checking account has unique features designed specifically for business owners. For example, they may allow multiple authorized signers and offer tools for tracking expenses, facilitating payroll, and separating business and personal finances.
How to Open a Checking Account
Opening a checking account is a straightforward process. While there may be small differences from one financial institution to the next, generally, you’ll follow these steps.
1. Choose a Bank or Credit Union
Compare your options and choose the financial institution most likely to meet your needs. Consider factors such as branch locations, ATM access, fees, and available account features.
2. Gather Required Documents
Generally, you’ll need to provide documentation to prove your identity, Social Security number, and address. You may also need cash or a check for your initial deposit.
3. Choose the Right Type of Checking Account
Review the financial institution’s checking account options and choose the type of account that’s right for you. Consider whether you qualify for certain types of accounts, such as senior or student checking, and other factors including minimum balance requirements and fees.
4. Complete Your Application
Some institutions allow you to open an account online. Others may require a visit to a local branch. When completing an application, you typically need to provide your personal details, contact information, and employment status.
5. Fund Your Account
Make an initial deposit into your new checking account. The amount required varies by institution and account type. However, some, like PNC Bank, require no minimum deposit to open.
Tips for Managing Your Checking Account
Once you’ve established a checking account, it’s important to manage it. The following tips will allow you to oversee your finances, avoid unnecessary fees, and quickly identify any irregularities that arise.
Regularly Review Your Statements
Set aside time each month to review your account statement. Make sure all transactions are accurate and check for unauthorized or suspicious activity. If you’re still using paper checks, balance your checkbook by comparing your records to the statement provided by the bank. These practices help you quickly identify and correct discrepancies.
Monitor Your Account Balance
Keep a close eye on your account balance to prevent overdrafts and avoid potentially costly fees. Use your mobile or online banking access to quickly review your account no matter where you are.
Set Up Account Alerts
If your bank offers account alerts, set up notifications for issues such as low balances, large transactions, or specific types of account activities. Setting up alerts will help you know what’s happening in real time, so you can take care of any issues right away.
Add Overdraft Protection
If your bank offers overdraft protection and you qualify, consider adding it to your account. This service automatically covers any shortfall if your checking account dips below zero due to a transaction or payment. While there is typically a nominal fee for each overdraft, it protects your account from going into the negative and incurring overdraft fees.
Explore Checking Options at PNC Bank
A checking account can help you streamline your money management, making it easy to pay bills, make withdrawals, and transfer funds. With so many different types of checking accounts available, it pays to evaluate your options and choose an account that's likely to meet your needs.
PNC Bank's Virtual Wallet® combines checking and savings accounts, offering a range of benefits such as savings goals, spending categories, and a calendar to track your spending and paydays. It also comes with Low Cash Mode®, giving you added control with features such as intelligent alerts, payment control, and extra time to fund your overdrawn account. If you're looking for a customizable checking solution, PNC Bank's may be the right option for you.
Frequently Asked Questions
What is the main difference between a checking account and a savings account?
Checking accounts are designed for everyday transactions, offering features like check writing and ATM/debit cards. They provide easy access to your money but typically offer low or no interest. Meanwhile, savings accounts are intended for longer-term savings with higher interest rates than checking accounts. Savings accounts may also have restrictions limiting the number of monthly withdrawals.
Is it better to keep money in checking or savings?
When weighing checking vs. savings accounts, the right choice depends on your financial goals. A checking account is a convenient option for holding funds you plan to use for regularly paying bills, taking withdrawals, or making transfers. It's designed for day-to-day transactions and offers convenient access to your money. Since checking accounts pay little or no interest, they're typically not ideal places for holding large sums of money.
If you have money you don’t intend to spend right away, consider a savings account. Those typically pay a higher rate of interest, but may place limits on monthly withdrawals, do not offer check writing, and may not have a debit card (although you may receive an ATM card).
What happens if I overdraw my checking account?
If you spend more money than you have available in your checking account, the bank may charge you an overdraft fee. You’ll also need to repay the negative balance promptly.
Repeatedly overdrawing your checking account or failing to pay overdraft fees could result in your account being closed and being denied a checking account in the future.
You may be able to avoid overdrawing your account by setting up account alerts, regularly monitoring your account balance, and setting up overdraft protection.
