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What Is A Checking Account & Why You Need One
Money SmartsFebruary 13, 2020
Checking Account Definition
A checking account is a transactional account that's held by a bank or credit union. You deposit your funds into the account and your financial institution allows you to make withdrawals and deposits.
A checking account by definition of being transactional is designed for frequent transactions. You'll typically have access to your funds through a debit card, checks, ATM, or by going to the bank branch in person.
Some common reasons for using a checking account include handling your daily spending needs, making online transactions, and paying your bills online or over the phone.
There are various types of checking accounts you can open, including a personal checking account, high yield checking account, student checking account, business checking account, and more. You must select an option that meets your specific needs.
Why Open A Checking Account?
Some of the reasons why you should open a checking account have already been touched on, but here's a more detailed breakdown of the benefits of using a checking account to store and manage your money.
Your money is protected
One of the primary reasons to open a checking account is to keep your money safe. When you open an account with a bank or credit union that's insured by the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Association (NCUA), respectively, your money is protected in the event of a financial mishap.
The FDIC and NCUA will protect your funds up to $250,000 per account. If you choose not to use a checking account and instead relied on a cash-based system, you wouldn't get this level of financial protection.
Conveniently access your funds
Along with keeping your money protected, you can conveniently and easily access money that's stored in a checking account. There are several ways to do so.
Most banks and credit unions offer individual locations and branches. Even those that aren't available in your area or are only online sometimes have sister branches you can visit to conduct financial business.
You can use an ATM to make deposits and withdrawals conveniently. Your financial institution might have an ATM or offer you the ability to access those within their network at a free or reduced rate.
Most accounts will also provide you with a debit card and checks so you can easily make purchases as needed.
Finally, when you set up a direct deposit through your employer, you gain access to your money quickly. Doing so allows you to easily access your funds without worrying about depositing a check and waiting for it to clear or cashing it and having to keep track of large amounts of money.
Online and mobile banking
Another convenience offered through a checking account is the ability to manage your finances through online and mobile banking.
When you complete your financial transactions online, you can view your balances and activities at your convenience 24/7, transfer funds between different accounts, and more.
Mobile banking is also an option available on a mobile app that allows you to complete many of your financial transactions from your phone or other mobile devices.
With online banking, you can work with banks you might not have previously considered that are only online or not in your area. Now, more than ever, it's easier for you to bank anywhere and still receive the level of service you need and desire.
Deciding Why You Should Open A Checking Account
Are you still on the fence about why you need to open a checking account?
Review these additional resources for more information on the benefits of opening a checking account.