Checking Account

Loading the player...

What is a 'Checking Account'

A checking account is 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 Money held in a checking account is very liquid, and can be withdrawn using checks, automated cash machines and electronic debits, among other methods.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".

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.

RELATED TERMS
  1. Savings Account

    A deposit account held at a bank or other financial institution ...
  2. Call Deposit Account

    A bank account for investment funds that offers the advantages ...
  3. Money Market Account

    An interest-bearing account that typically pays a higher interest ...
  4. Bank Deposits

    Money placed into a banking institution for safekeeping. Bank ...
  5. Available Balance

    Balances in checking or on-demand accounts where there is a delay ...
  6. Linked Savings Account

    Any type of bank savings account that is linked by account number ...
Related Articles
  1. Personal Finance

    Explaining Checking Accounts

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

    Demystification Of Bank Accounts

    Find out which type of account suits your specific needs.
  3. Personal Finance

    Understanding Savings Accounts

    A deposit account held at a bank or other financial institution that provides principal security and a modest interest rate.
  4. Personal Finance

    What is a Demand Deposit?

    A demand deposit is any type of account where the money in the account may be withdrawn at any time without prior notice to the financial institution.
  5. Personal Finance

    Best Checking Accounts For Small Businesses

    What you need to know to choose the best checking account for your small business – and where to look.
  6. Personal Finance

    2015's Top Checking Account Promotions

    Open a checking account in 2015 and the bank could give you a cash bonus. Check out these top offers.
  7. Personal Finance

    Best Checking Accounts For Couples

    Being a couple, especially if you both have jobs, can help you qualify for benefits and fee waivers that would be tougher to get on just one salary.
  8. Personal Finance

    Top Premium Checking Accounts of 2015

    Which banks offer the best deals for premium checking accounts – and what do you have to do to qualify for one?
  9. Investing

    Handling High-Yield Savings Accounts

    Is this the savings route for you? Read on to find out what these accounts have to offer.
  10. Personal Finance

    Your First Checking Account

    This owner's manual will show you what to expect from your bank.
RELATED FAQS
  1. How do you calculate payback period using Excel?

    Understand the various fees that can be assessed on a personal or business checking account, and learn methods to avoid being ... Read Answer >>
  2. For what types of accounts are demand deposits available?

    Learn about the different types of accounts designated as demand deposit accounts, such as savings accounts and money market ... Read Answer >>
  3. How liquid are money market accounts?

    Understand the characteristics that distinguish money market accounts from checking, savings account and money market funds ... Read Answer >>
  4. Could I deposit a check I received from Edward Jones, cancelling my IRA account, ...

    I had a SIMPLE Individual Retirement Account through Edward Jones while working for M. Potteiger, Inc. I stopped working ... Read Answer >>
  5. Why would you keep funds in a money market account and not a savings account?

    Read about the differences between money market accounts and savings accounts, and see why a depositor would elect a money ... Read Answer >>
  6. What US banks offer free checking accounts?

    Quit wasting money on monthly fees associated with your checking account and get a free checking account from reputable national ... Read Answer >>
Hot Definitions
  1. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  2. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  3. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  4. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  5. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
  6. Weighted Average Life - WAL

    The average number of years for which each dollar of unpaid principal on a loan or mortgage remains outstanding. Once calculated, ...
Trading Center