Checking Account


DEFINITION of 'Checking Account'

A transactional deposit account held at a financial institution that allows for withdrawals and deposits. Money held in a checking account is very liquid, and can be withdrawn using checks, automated cash machines and electronic debits, among other methods.

A checking account differs from other bank accounts in that it often allows for numerous withdrawals and unlimited deposits, whereas savings accounts sometimes limit both. Checking accounts can include business accounts, student accounts and joint accounts along with many other types of accounts which offer similar features.

In exchange for the liquidity, checking accounts typically do not offer a high interest rate, but if held at a chartered banking institution will be FDIC guaranteed up to $100,000 per individual depositor.

A checking account may also be called a "demand account" or "transactional account".


Loading the player...

BREAKING DOWN 'Checking Account'

Checking accounts are offered by most banking institutions for a minimal fee or no fee at all. Thanks to advances in electronic banking, many people can now use checking accounts to set up automatic payment of routine monthly expenses with a one-time setup.

For the large commercial banks, checking accounts are considered loss leaders because they have become highly commoditized (hence the low fees for their use). The goal of most banks is to entice the customer to use more profitable features such as personal loans, mortgages and certificates of deposit (CDs).

Because money held in checking accounts is so liquid, aggregate balances nationwide are used in the calculation of the M1 money supply.

  1. Money Market Account

    An interest-bearing account that typically pays a higher interest ...
  2. Call Deposit Account

    A bank account for investment funds that offers the advantages ...
  3. Cash Card

    A cash card can be any card that you can insert into an ATM or ...
  4. Savings Account

    A deposit account held at a bank or other financial institution ...
  5. Demand Deposit

    Funds held in an account from which deposited funds can be withdrawn ...
  6. Sweep Account

    A bank account that automatically transfers amounts that exceed ...
Related Articles
  1. Savings

    Explaining Checking Accounts

    A checking account is an account at a financial institution, usually a bank, that allows for deposits and withdrawals.
  2. Savings

    Are Your Bank Deposits Insured?

    Learn how the FDIC is helping to keep your money in your pockets.
  3. Options & Futures

    Getting To Know The Money Market

    If you need liquidity and safety on a sum of money, don't forgo potential interest by keeping the funds as cash.
  4. Insurance

    Your First Checking Account

    This owner's manual will show you what to expect from your bank.
  5. Savings

    All About Banking

    This tutorial will tell you everything you need to know about how checking and savings accounts work.
  6. Savings

    What is a Bounced Check?

    Bounced check is a slang term to describe a check that cannot be processed because its writer has insufficient funds.
  7. Economics

    What is Fractional Reserve Banking?

    Fractional reserve banking is the banking system most countries use today.
  8. Personal Finance

    5 Useless Financial Products That Will Disappear Soon

    Bank deposit slip: what's that? Everyday tools of our financial life that went from indispensable to obsolete.
  9. Personal Finance

    Understanding Endorsements

    In financial terminology, endorsement has a couple of different meanings.
  10. Stock Analysis

    JP Morgan Chase & Co. Vs. Bank of America Stock

    Examine two of the big four U.S. money center banks, Bank of America Corporation and JPMorgan Chase & Company, by comparing important equity evaluation metrics.
  1. How can I cancel a bank draft that I have purchased?

    It is not commonly possible to cancel or stop payment on a bank draft since it, in effect, represents a transaction that ... Read Full Answer >>
  2. How do you calculate payback period using Excel?

    Each financial institution offers similar products for its banking customers, including savings accounts, certificates of ... Read Full Answer >>
  3. What should you bring to a bank to open a checking account?

    Opening a checking account is a fairly simple process. You choose a bank, show up, fill out some paperwork, provide some ... Read Full Answer >>
  4. What US banks offer free checking accounts?

    Many large banks across America, including Capital One, Charles Schwab, Ally and FNBO Bank, offer free checking accounts ... Read Full Answer >>
  5. How does a bank determine what my discretionary income is when making a loan decision?

    Discretionary income is the money left over from your gross income each month after taking out taxes and paying for necessities. ... Read Full Answer >>
  6. For what types of accounts are demand deposits available?

    There are essentially three types of accounts available as demand deposits: checking accounts, savings accounts and money ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Purchasing Power

    The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing ...
  2. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  3. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  4. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  5. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  6. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!