Checking Account

AAA

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 Money held in a checking account is very liquid, and can be withdrawn using checks, automated cash machines and electronic debits, among other methods.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

INVESTOPEDIA EXPLAINS '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.

VIDEO

Loading the player...
RELATED TERMS
  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    Funds held in an account from which deposited funds can be withdrawn ...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 FAQS
  1. 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 >>
  2. 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 >>
  3. What months of the year typically have the highest float?

    Float creates a temporary distortion in a nation's money supply by counting the same funds twice. This occurs when checks ... Read Full Answer >>
  4. In what ways has technology helped to reduce float?

    Technological advances have reduced float by enabling faster processing of checks. Funds now spend less time waiting for ... Read Full Answer >>
  5. Why does float usually increase at the beginning of the week?

    Float is created by check-processing backlogs in the financial system. Checks await processing from one checking account ... Read Full Answer >>
  6. How does your checking account affect your credit score?

    Your credit report provides a snapshot for prospective lenders, landlords and employers of how you handle credit. For any ... Read Full Answer >>
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

    Expat's Guide To Bank Accounts In The Philippines

    You'll need an ACR I-Card and other documents to open a bank account in the Philippines. Be sure to read the fine print about how much money is insured.
  7. Credit & Loans

    The Pros & Cons Of Personal Loans vs. Credit Cards

    One is not like the other. We help you decide where to borrow money from.
  8. Budgeting

    Should You Pay Your Bills On Autopilot?

    Now that you can sign up to have your bills paid automatically online, it it a smart way to make your life more efficient? A look at the pros and cons.
  9. Entrepreneurship

    Technology, The Biggest Threat For Big Banks

    Technology is the biggest threat to the future of big banks as we know them.
  10. Personal Finance

    4 Tips To Cut Your Monthly Bank Fees

    We asked banking professions to share their biggest tips for tackling bank fees, and hopefully save more even before spring hits.

You May Also Like

Hot Definitions
  1. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  2. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  3. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  4. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  5. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center