Checking accounts, also known as demand or current accounts, are the most liquid of deposit accounts. Once you deposit your money, it’s extremely easy to get it back out, should the need arise.
How checking accounts work
You can deposit money into your checking account by taking cash or a check into your financial institution. Most of these institutions will also let you deposit checks online, with a mobile app or at an ATM. You may also be able to set up direct deposit with your employer, meaning your paycheck will automatically be added to your checking account on payday.
Most checking accounts come with unlimited withdrawals. You can withdraw money at a branch or an ATM, or by using your debit card to request cash at some retailer checkouts. You can use the money in your account by paying a merchant with your card or by entering your account information online in select situations, such as making a payment toward a monthly loan or credit card bill.
Checking accounts are best for…
Everyone could benefit from having a checking account. It’s an easy place to store your money, and it’s also easy to get your money out without any penalty fee. Checking accounts are safe, too: Money stored in most standard checking accounts is insured up to $250,000 by the FDIC or NCUA.
The biggest threat to your money in a checking account is inflation. Checking account interest rates are extremely low, so these accounts are not good places to save your money for the long term.
Fees and fine print
While many financial institutions offer free checking accounts, some may charge monthly maintenance fees, Some may drop the fee if you maintain a balance over a set amount or if you have a direct deposit occurring at least once a month. When looking for a checking account, ask about maintenance fees and what you can do to avoid them.
Other potential fees you should know about:
- For overdraft
- For returned checks
- For using out-of-network ATMs
How to compare checking accounts
Because interest rates are so low on checking accounts, Ken Tumin, founder and editor of our subsidiary DepositAccounts.com, recommends looking at other factors when running a comparison.
“The account’s features are the No. 1 issue,” he says. “Make sure it has features that you need. For example, many internet banks don’t offer paper checks. If you need them, you may want to look to brick-and-mortar options. If you’re an active smartphone user, make sure mobile features like remote check deposit are available.”
He also advises considering potential fees as you comparison-shop.