Checking account

A bank or credit union account for everyday spending that allows frequent deposits and withdrawals by debit card, check, transfer or bill pay.

What it means

A checking account is the hub of most people’s day-to-day finances. Paychecks are deposited into it and bills, purchases and transfers come out of it. Access is easy through debit cards, ATMs, paper checks, online bill pay and payment apps, and there is usually no limit on the number of transactions.

Most checking accounts pay little or no interest. Costs and features vary widely: some charge a monthly fee unless you keep a minimum balance or set up direct deposit, and many charge for overdrafts, out-of-network ATMs or paper statements. Checking deposits are covered by FDIC or NCUA insurance up to the standard limits.

Example

For example, someone might have their paycheck deposited into checking, pay rent and utilities from it automatically, and move a set amount each payday into a savings account.

How it’s used

Receiving direct deposit of pay
Paying bills and everyday purchases
Moving money to savings or investment accounts

Strengths and weaknesses

Strengths

Easy, unlimited access to money
Supports debit cards, checks and bill pay
Federally insured up to standard limits

Weaknesses

Little or no interest earned
Fees for maintenance, overdrafts or ATMs at some institutions
Debit card fraud can tie up your own money while it is investigated

Good to know

Keeping only a month or so of spending in checking and the rest in savings can earn more interest.

Educational information only, not financial, tax or legal advice. Rules, limits and rates change; check the IRS, your lender or plan, or a qualified professional before acting.