Understanding the Benefits of a Checking Account

A checking account is more than just a place to keep your money. It can also be a powerful tool for managing your finances. Here are some of the biggest advantages of checking accounts.

Convenient access to your money

With a checking account, your money is always within reach. When you open one up, you’ll receive a debit card and checkbook to access your money. You can use your debit card for the following transactions:

• Making purchases
• Withdraw cash from ATMs
• Transferring funds online

In short, a checking account makes paying for things and getting cash simple and fast.

Getting paid sooner with direct deposit

Setting up direct deposit means your employer can send your paycheck straight to your account. You won’t have to wait for a paper check to arrive in the mail or clear in your account after you deposit it.

Some banks offer early direct deposit, giving you access to your money a couple of days ahead of schedule.

Keeping your money safe

Keeping cash under your mattress isn’t a safe way to store your money. Depositing it into a checking account at an FDIC-insured bank or an NCUA-insured credit union is far more secure.

FDIC and NCUA insurance are government-backed benefits that protect your money up to $250,000. This means your funds are safe in the unlikely event of a bank failure.¹

Easy tracking of your spending

Your checking account provides a clear record of your deposits and withdrawals. You can easily see where your money is going, which is a huge help when you’re trying to stick to a budget or save for a goal.

Option for automatic bill payments

You can connect your checking account to external accounts for automatic bill payments, such as a monthly mortgage or credit card statement. This lets you “set it and forget it,” so you’ll stay up-to-date on your bills without having to manually schedule payments each month.

Some creditors also offer an interest rate discount when you enable autopay from a checking account.

While checking accounts are useful, they can have a few potential drawbacks. Fortunately, many of these can be avoided if you meet certain requirements.

Account fees

Some traditional checking accounts come with monthly maintenance fees or charges for using out-of-network ATMs. These can add up, but the good news is that some accounts don’t charge fees, and others waive the fees if you maintain a minimum balance.

Plus, some banks will reimburse ATM fees up to a certain amount each month. If you’re on the hunt for a new bank, look for one that has low or no fees.

Overdraft fees

Some banks charge overdraft fees if your checking account balance dips below zero. Maybe you swipe your debit card for more than you have in your account, or an automatic bill payment gets charged before you’ve received your paycheck. Some banks charge hefty overdraft fees that may cost around $35 per transaction.²

Depending on the bank, you may have the chance to opt into overdraft protection. This lets you link a savings account or line of credit to your checking account, so funds are automatically transferred to your checking account in the event of a shortfall.

Minimum balance requirements

Certain checking accounts require you to keep a minimum amount of money in them to avoid a monthly fee. If your balance dips below that threshold, you could be charged.

Some banks, however, don’t have these minimum balance requirements. Always check the account details before you sign up.

Low or no interest earnings

Most standard checking accounts don’t pay much, if any, interest on your balance. They’re designed for spending, not for growing your money.

Some banks offer high-yield checking accounts, but they may have more requirements or charge higher fees than traditional checking accounts. If earning interest on your balance is a priority, you may be better off looking for a high-yield savings account.

Not all checking accounts are the same. Here’s a quick look at a few common types of checking accounts to help you find your perfect match:

• Traditional checking: Offered by most banks and credit unions, these are your basic, no-frills accounts for everyday banking. They generally come with a debit card and checks, and allow you to set up direct deposit.
• Online-only checking: These accounts are managed entirely online or through a mobile app. Online banks may charge lower fees than traditional banks, so they can be a good option if you’re comfortable banking online or from your phone.
• Joint checking: Shared by two or more people, joint checking accounts are designed for couples or families who manage household expenses together.
• Kids and teen checking: Designed for young people, these accounts often have parental controls and low or no fees to help teach good money habits from a young age.
• Student checking: These accounts are designed for high school or college students. They often don’t charge fees and have low or no minimum balance requirements.

A checking account can be a foundational piece of your financial life. It gives you a secure place to manage your income and expenses, making everything from paying rent to buying groceries more convenient.

Once you understand the benefits and are aware of potential fees, learn about the different types of checking accounts that can help you manage your money and work toward your financial goals.