What Is a Checking Account?

Financial Advice


21 min. read

By: FCU Team

What Is a Checking Account?

Checking accounts are typically opened with either a bank or credit union. These accounts give you quick and easy access to your money and keep it secure. Whether you need to make a cash deposit, withdraw money from an ATM or pay bills online, a checking account makes it all possible.

The primary purpose of a checking account is to keep your money secure for the short term. Checking accounts are designed to be transaction accounts that you use for daily purchases, unlike savings accounts, which you can still easily access but have the goal of storing or growing your money over time, often with a higher interest rate than you’ll find on traditional checking accounts. However, some checking accounts are interest-bearing, meaning you can earn money on your deposits, with slightly higher interest rates available if you keep more money in your account.

n this guide, we'll take a deep dive into checking accounts, including their benefits and features, fees and how you can choose the right account to suit your needs.

Types of Checking Accounts

Knowing your options when opening a checking account will help you choose the best account to suit your needs. Many different types of checking accounts are available, from traditional accounts to premium accounts that net you more interest on deposits.

Free Checking Accounts

Traditional checking accounts are perfect for daily banking and everyday purchases. This type of account typically comes with a debit card for purchases in person and online, as well as ATM withdrawals. You may also receive a checkbook when you open your account, so you can write checks to pay for products and services when needed.

Interest-Bearing Accounts

As their name suggests, interest-bearing checking accounts allow you to earn interest on deposits you make. While they don't offer the same high-interest rates as a savings account, interest-bearing accounts can be a good option if you plan to maintain a healthy bank balance and still want access to your money whenever you need it.

Money Market Accounts

One step up from interest-bearing checking accounts, money market accounts offer slightly higher interest rates for those looking to maintain a higher minimum balance. These accounts require you to keep more funds in your account and may also call for monthly service fees, but the potential earnings often outweigh any cons for those wanting a liquid account they can withdraw from at any time.

Business Checking Accounts

If you run your own business, opening a separate business checking account will help you manage business transactions and make tracking expenses and income easier when it comes to tax season. These accounts are designed for businesses of all sizes and give you access to essential tools like online banking, ACH transfers and mobile deposits.

Student or Youth Checking Accounts

Student checking accounts are designed specifically for kids, teenagers and college students. These accounts typically come with a range of benefits that appeal to younger people, including no monthly maintenance fees, no ATM fees and sign-up bonuses. Student and youth accounts are a good way for young people to take their first independent financial steps.

Joint Checking Accounts

Ideal for spouses, or even roommates, joint checking accounts allow two people to have full access to a single account. That means you can deposit, withdraw, see balances and more, which can come in handy when managing household expenses or putting money aside for a specific goal.

Why Open a Checking Account?

Opening a checking account could be one of the best things you do to reach your financial goals and protect your money. Why? Because entrusting your money to a recognized and regulated financial institution offers financial safety, convenient access to your money and peace of mind that your funds will be available when needed.

Your Money Is Safe

A credit union or bank account is the most sensible way to secure your money. Keeping cash at home puts it at risk of theft, loss, flood, fire or damage. By depositing your money at a financial institution, you get instant peace of mind that it is safe and accessible whenever you need it.

Even if you lock your money in a safe, large reserves of cash kept at home could be at risk, and when cash is gone, it’s gone forever. When you open a bank or credit union account, on the other hand, your money is not only protected from physical risk but insured, too.

Banks are protected by FDIC insurance, while credit unions are insured by the National Credit Union Association (NCUA). In the unlikely event that your bank or credit union fails, FDIC and NCUA insurance covers up to $250,000 per person and if a husband and wife (or partners) are on the same account, the amount insured is up to $500,000.

More Flexibility

The primary purpose of a checking account is to keep your money secure while giving you easy access to your money. But there is so much more to a checking account than just depositing and withdrawing money.

Most checking accounts come with a debit card and a companion online banking app, making day-to-day banking tasks much easier. From making in-store payments using your debit card to initiating digital transfers to third parties or one of your other bank accounts, checking accounts today give you flexibility and total control over your finances.

More Ways to Pay Your Bills

If you're paying bills using checks or cash, it's time to move your payments online. Checking accounts offer intuitive online banking features, all of which can be managed from your mobile phone, tablet or computer. From paying one-off bills to managing regular payments, all of these payments can be paid directly from your checking account balance. If you have recurring payments that are the same amount every month, you can set these up to be paid automatically on the date of your choice.

Pay Friends and Family Instantly

Whether you're splitting the bill in a restaurant or sending money for a special birthday, a checking account lets you send money to friends and family instantly. That means no more writing checks, no more withdrawing cash and no more swiping cards. Moreover, you can save their account details in your banking app for future payments.

Most bank-to-bank transfers occur instantly or at least on the same day. That's great news when you've just realized it's your nephew's birthday and you haven't bought a gift. Simply whip out your phone and send money instantly to save the day!

A Visible Paper Trail

The risk of paying people and organizations with cash is that the payment may not be filed or tracked correctly. Imagine you paid your $200 telephone bill using cash and your telephone company didn't credit the payment to your account. Where would you stand if you don't have proof of payment? There is a strong chance you'd have to make the payment again.

However, if you make the same payment using your checking account debit card or using online bill pay, all payments are tracked and leave a clear digital paper trail behind. This paper trail can be used as clear proof that a bill has been paid.

Manage Checks and Deposits With Ease

Most employers today prefer to pay by direct deposit into a bank account. It's easier and more secure for both parties. If you don't have a bank account, a direct deposit arrangement won't be possible.

Even cashing a check today can be a challenge if you don't have a checking account. You will often be required to pay a fee to cash a check and may need to provide multiple forms of ID. With a checking account, however, direct deposits are easy and quick, and you'll be able to cash checks without the fees or additional ID checks. You can even deposit a check remotely using the financial institution’s mobile app!

Withdraw Cash from an ATM

While online and debit card payments are the most secure payment methods, there may still be times when you need to use cash. Most checking accounts come with a debit card that can be used for cash withdrawals from an ATM. To avoid paying additional fees, you can withdraw cash when using your debit card to complete a purchase at most grocery and drug stores. Participating businesses will typically have a “cash back” option as you check out so you can check two items off your to-do list at once next time you’re running errands.

Without a checking account, your options for accessing cash are more limited. For this reason, you may need to carry more cash around than you need, which is always a risk. With a debit card, on the other hand, you can withdraw cash wherever there is an ATM and only draw the amount you need.

Take Advantage of Member-Only Benefits

When you open a checking account with a bank or credit union, you may be offered benefits, perks and access to other products. For example, you might be offered a savings account or a low-rate credit card. Of course, the products you are eligible for may depend on your status and further credit checks being carried out.

When choosing a checking account, it's a good idea to weigh the benefits of each institution. Banks and credit unions often have promotional offers, preferential rates available to new customers or members, so it is worth shopping around. But don't be blinded too much by special offers. Also, look into long-term benefits, such as excellent customer service, do they help support your local community, and streamlined mobile app features.

Checking Account Features

When you're looking to open a new checking account at a bank or credit union, there are several key features to look out for, including flexible banking options, low fees, and products that meet life's changing requirements. If you're after a checking account that you will use for a long time, and possibly for the rest of your life, it's worth choosing a product that offers as many benefits and features as possible.

Attractive Interest Rates

Interest-bearing checking accounts can give your everyday balance a little extra boost, especially if you plan to keep a significant amount of money in your account at any time. You might not get wealthy on checking account interest alone, but you could make a little money back on your balance. Look for an interest-bearing checking account with little to no fees to maximize your earnings!

No or Low Fees

You’ll definitely want to prioritize an account with little or no fees for your everyday checking. That means looking for accounts with no monthly fees, no minimum balance fees, no transaction fees, no ATM withdrawal fees and free online banking and bill pay. While the dollar amount of these fees can seem low, they can begin to add up over time. Luckily, plenty of banks and credit unions offer free value checking.

No Minimum Balance Requirements

Some checking accounts impose minimum account balance requirements you’ll want to look out for when opening a new account. If your cash balance often dips into the low hundreds or below, look for banks that don't charge fees or penalties if you go below a certain threshold. Only opt for an account with a bank or credit union that you can afford to manage and maintain.

Secure Online and Mobile Banking Services

Security should always be an area of focus when choosing a new bank account. Your bank or credit union should offer you security features that give you complete peace of mind, including fraud detection and two-step authentication.

Whether you choose to manage your bank account solely online or you'd also like to be able to visit a brick-and-mortar establishment, the level of security should be the same. With the right bank or credit union, you can use your mobile phone to arrange online transfers or utilize peer-to-peer payment processing, knowing you can be sure you’re getting the highest standards in service.

Mobile Banking Benefits

Today, we use our mobile phones for everything, from communicating with friends and family to buying groceries online. It stands to reason that the piece of hardware we've come to rely on for so much should also allow us to complete our banking tasks.

Mobile apps give you convenient and reliable access to your checking account 24/7 and let you do everything you can do in person at your local branch. Need to check an account balance? Log into your mobile app. Need to locate the closest ATM? Your mobile app will tell you. Want to log into your checking account using face recognition or your fingerprint? Many banks and credit unions offer secure biometrics that ensure only you can access your account.

Dedicated Customer Service

In today's connected world, where face-to-face meetings are becoming less frequent, it's essential to look for a checking account with an institution that still maintains a high level of customer service. Whether you've noticed some fraudulent activity on your account in the early hours, or you need help with another financial product, you should always have a quick and easy way to speak to someone who can help.

Choose a bank or credit union with a good customer service reputation, especially if you want to make deposits in person or speak to somebody over the phone quickly. Remember, online banking offers 24/7 service, so you won't need to visit your local branch or stand in line if you choose a credit union that offers online access. Many online banking apps also provide online chat features or FAQs that give you a fast and accurate answer to common queries.

Loyalty Perks

If you intend to stay with the same bank for years, it's worth looking for financial institutions that offer incentives and perks for customer loyalty. In addition to opening a checking account, you might also want to open a savings account or retirement account in the future. These accounts offer a higher yield than a checking account and could also offer a range of other perks. The more banking you do with the same organization, the more likely you will be offered promotional products and offers.


Also, look out for banks or credit unions that offer introductory offers and new customer promotions. These bonuses might be in the form of cash rewards or retail coupons. More and more banks and credit unions are increasingly attracting new customers with these offers.

Comparing Checking Accounts

Whether you're looking to open your first checking account or ready to switch from your existing bank, comparing accounts will help you choose an account that addresses your needs today, tomorrow and well into the future. Think about what’s important to you before you sit down to compare accounts. Creating a list of features you want your account to have will help you confidently choose the right product.

Bank or Credit Union?

While a traditional bank may be the first place you consider when opening a new checking account, credit unions offer a wide selection of products with the same or better benefits. From the financial perks and a friendly atmosphere to their competitive rates on loans and low-fee credit cards, credit unions are well worth considering when looking for a new checking account or other financial products. One of the most unique features of credit unions is that they’re owned by members rather than stockholders, so they tend to put more emphasis on serving their communities and family of members.

Physical Location

Would you like to have the option to visit your bank in person? Most big banks have many physical locations that allow you to transact with a bank teller rather than an online banking app. Credit unions typically have fewer branches than big banks but are still easily accessible in person and tend to be local staples in their communities. Online-only banks have no physical locations at all. If you are comfortable doing all your banking online, you may not need a branch nearby. If you like doing business with a financial institution with a robust community presence, a credit union may be the right choice.

Cash Withdrawals and Deposits

While many of the transactions we make today are digital, cash is still king in plenty of circumstances. Many credit unions and online banks offer customers a wide network of ATMs to withdraw money up to their daily limit. For example, if your account provides you with a VISA® debit card, you should be able to use this card in any ATM that accepts VISA®. Charges may apply if you use your debit card in an ATM that your credit union or bank doesn't own. Some ATMs also allow you to deposit cash.

Minimum Balance Requirements

Some checking accounts stipulate that you must keep a certain amount of money in your account to avoid fees. If you regularly run your account balance down to a few dollars, you might consider a checking account with no minimum balance requirements. Credit union accounts are often more forgiving than banks in this regard.

Other Financial Services

Once you open a checking account with a bank or credit union and become a customer, you will have access to a wide range of accounts and products, such as savings accounts, loans, money market accounts and mortgages. Some banks and credit unions offer preferential rates and discounts to existing account holders. So if your plans for the future include buying a home or planning for retirement, you should also look into the other financial services they offer before opening a checking account. Approval of additional financial products may be dependent on your credit status.

Interest-Earning Potential

As mentioned, regular checking accounts typically net you little or no interest. However, some banks and credit unions offer interest-bearing or high-yield checking accounts. Some conditions may be associated with these higher-interest accounts, such as using online banking, maintaining a minimum balance or having a certain number of direct deposits.

Student Accounts

A student checking account could be a good option if you're a high school or college student. These accounts are designed for students and offer unique features, such as no minimum balance requirements, low or no fees, and cash signup bonuses. Opening an account could also make accessing products such as student loans easier.

Understanding and Avoiding Checking Account Fees

Many checking accounts impose fees. Charges may be applied when your account balance drops below the required minimum, or you might incur a fee when you make certain transactions. Over time, these fees can add up, but the good news is that you can prevent most of them. Standard checking account fees to be mindful of include ATM, overdraft, and monthly service fees. Your bank or credit union should be completely transparent about these fees when you open your account, and there should be no nasty surprises. Read on to learn more about these fees and how to avoid paying them.

Overdraft and Non-Sufficient Funds Fees

f your account becomes overdrawn—meaning you use more funds than you had available in your balance—you might incur non-sufficient funds (NSF) fees. For example, a fee may be imposed if your bank denies a payment from a third party or the cashing of a check because there isn't enough money to cover the amount. Here are some ways you can avoid overdraft and NSF fees:
  • Check your balance regularly. Keeping a close eye on your bank balance can help avoid overdrafts and NSF fees. You can do this through your banking app or by checking your account balance at any ATM. Also, keep track of any recurring payments and the dates they come out of your account.
  • Set up low-balance notifications. Many accounts let you set up text alerts or emails when your checking account balance falls below a certain amount. Some also send a text when your account has entered the overdraft, giving you a chance to deposit or transfer more money on the same day before you are charged a fee.
  • Look for accounts with overdraft protection. Accounts with overdraft protection link to a savings account or another line of credit to cover overdrafts. You may need to pay a fee for this service, but it will often be a lower charge than an overdraft fee.
  • Link to a personal line of credit. You can link your checking account to a personal line of credit so that if your account is overdrawn, you can borrow against that established line of credit. It’s important to remember that a line of credit accrues interest, so you may have to pay an interest on the borrowed balance.

ATM Fees

You could be charged a fee if you use an ATM outside your bank or credit union's network. The total charge may include a fee from your financial institution and a surcharge from the owner of the ATM. You will usually be notified about any potential fees through the ATM's display and given the option to cancel the request or proceed. Take these steps to avoid ATM fees:
  • Find your nearest in-network ATM. Your mobile banking app should tell you where your nearest in-network ATM is located.
  • Ask for cashback at the register. Many grocery stores, drugstores and other retailers offer cashback, which can be a great alternative when no fee-free ATM is nearby.

Monthly Maintenance Charges

Many accounts include monthly maintenance charges or service fees. Banks and credit unions will often waive this fee if you maintain a minimum balance or fulfill other requirements, such as having a direct deposit. Always check the small print before opening a checking account so you don't get caught by monthly fees. Here are some ways you can avoid monthly charges:
  • Choose a checking account with no service fees. Many banks and credit unions offer checking accounts with no service fees.
  • Maintain a minimum balance. Some banks and credit unions will waive monthly fees if you maintain a minimum balance.
  • Use your debit card. Some banks and credit unions will waive monthly fees if you use your debit card a certain number of times during the monthly statement cycle.
  • Use direct deposit into your account. Some financial institutions waive monthly fees if you have a direct deposit to your account every monthly statement cycle. The easiest way to do this is to have your paycheck deposited into your account.

Checking Accounts and Credit Scores

While your checking account information doesn't appear on your credit report or affect your credit score, it can still play an important role when you apply for credit. Lenders may use information about your checking account, savings account and other assets when deciding whether to lend you money.

If you are applying for a loan or mortgage, you will usually need to provide copies of your checking account statements to prove your earnings and how well you manage your account. Credit card lenders may also request your income documentation before they qualify you for a credit card.

Credit Consequences of a Poorly Managed Account

If you have unpaid bank fees or an unpaid overdraft on your checking account, this information could be passed on to a collection agency which would then pursue you for the debt. Delinquent accounts are also often reported to an information clearinghouse called ChexSystems — a national database that lenders use before deciding whether to grant you a new line of credit, such as a loan or mortgage.

Why a Checking Account Is Good for Your Score

Keeping your checking account in good standing can help you to obtain credit in the future. From making payments on time to keeping your bank account out of the red, there are many ways you can give yourself more chances of approval in the future.

It is a good idea to regularly check your standing with ChexSystems so that you can see what lenders see before applying for credit. You can do this for free once a year by requesting a copy of your report through the ChexSystems website.

How to Open a Checking Account

The good news is that almost anybody can open a checking account. It's a fairly simple process, but you must ensure you have the proper documentation ready to go. Most banks and credit unions will require the following documents:
  • A government-issued ID, such as your driving license or a valid passport.
  • Your social security number or individual taxpayer identification number.
  • A document with your current home address on it, such as a utility bill.

In many cases, if you bring along the right documentation, you will be able to walk away with a fully functioning checking account on the same day. Your bank will provide you with a unique account number, a debit card and details of how to log into online banking if it’s available.

Looking to switch checking account providers but don't want the hassle of transferring third-party payment details from one account to another? Many banks and credit unions can do this for you, providing a seamless checking account transfer service.

Special Considerations

Student Accounts

If you want to open a student account, your bank or credit union may ask to see proof that you are enrolled in a qualified school. Make sure you bring your student ID with you so that you can open a student account and access all of the benefits these accounts have to offer.

Joint Accounts

If you are opening a joint account, both parties will need to be present. The additional account holder will need to assume the same liability for the account, such as paying fees, maintaining balances, etc. For this reason, they will also need to bring along the documents required for opening an account.

Power of Attorney

A Power of Attorney (POA) is a legal document that permits another nominated person to carry out specific transactions on behalf of the account holder. For example, if you lost mental capacity due to illness, that nominated person would be able to manage your finances for you and protect your money. If you need to have special signing authority on your checking account, you will need to present a valid power of attorney (POA) at the time of opening the account.

Access to Additional Services

If you're a new checking account customer, your new bank or credit union may give you access to other services right away. For example, they may offer you a credit card, personal line of credit or savings account. Of course, you are not obligated to take up any of these offers on the spot. If you are not looking to take out a credit card or open a savings account right now, this is something you can do at a later date.

Being Denied a Checking Account

Being denied a checking account can be a surprising and frustrating experience in equal amounts. A refused application can occur for a number of reasons, such as an inability to prove your identity or negative things in your banking history. The good news is that you can find out why you were denied and take steps to be sure you’ll be approved next time.

When assessing your application, banks and credit unions often refer to ChexSystems, a banking reporting agency that holds information about your past banking history. The bank or credit union must let you know why they have rejected your application for a checking account. Once you know where your application failed, you can take action to fix the problem.

Check, Repair and Move Forward

You can check your ChexSystems report yourself to find out what the anomaly was. From bounced checks and unpaid negative balances to ATM abuse and too many recent applications, there are many items that can be flagged on your ChexSystems report. Fortunately, there are checking accounts available that are designed especially for those with a poor banking history. While these accounts may not give you access to features like higher interest rates, they do give you the chance to repair your banking history.

Why Choose Florida Credit Union For Your Checking Account?

No matter what type of checking account you need, we have you covered at Florida Credit Union. From free checking accounts with online banking capabilities to interest-bearing accounts with competitive rates, we offer a wide selection of products under one roof. We're member-focused, community-proud, insured by the National Credit Union Administration (NCUA) and we're ready to help you to get the most from your checking account every day. What's more, you'll find us ready to serve you personally throughout north and central Florida and in every corner of the country through our mobile app. You can open an account and become a member online or pay us a visit in one of our many locations.