What is a checking account and how does it work?

When you're looking at various bank accounts and products to choose which one is right for you, it's important to understand how they're different. A checking account, for example, offers certain benefits that savings accounts don't. But what is a checking account, exactly? Here's what you need to know.

What is a checking account used for?

With a checking account, also known as a demand deposit account, you can deposit money with your bank that you can later withdraw or use checks or a debit card to pay others. It can give you a secure place to store your cash and other payments made to you, and you can easily access and spend this money when needed. When you have an account at an FDIC-affiliated institution, your money is insured up to $250,000.

You can open a checking account in person or online. Once you've put money in the account, you can usually use it to make purchases and payments right away.

Why should you have a checking account?

Checking accounts can provide a convenient and secure way to store your money. They're also considered an important part of proving your financial health as a checking account gives you a documented track record of responsibly managing your cash and can help with budgeting. Some of the top reasons to have a checking account include:

• Can allow direct deposit of your paychecks, providing near-instant access to funds
• Eliminates the need to carry or store a lot of cash, ensuring your money's safety and security
• Helps you account for your income and expenses via bank-prepared statements and online banking
• Gives you the ability to easily handle electronic transfers to and from your account on a day-to-day basis

Common checking account features

While different financial institutions have different offerings, checking accounts generally have some standard services and common optional ones. Checking accounts can allow you to:

• Write checks to pay others
• Use a debit card, which allows you to make electronic and online transactions
• Withdraw or deposit funds at an ATM
• Access your account online or via a mobile app¹, where you can check your current balance, transfer money, review recent transactions and otherwise manage your account
• Set up recurring payments from your checking account such as automatic bill pay
• Transfer available funds between accounts at the same institution or to an account elsewhere
• Name co-owners who can also access the account or beneficiaries who will get your money if you pass away

Many checking accounts may have associated fees for certain activities. In most cases, however, you can avoid stacking up a lot of charges.

Maintenance fees

Some accounts have monthly maintenance fees. In some cases, you may be able to waive this fee by keeping a certain amount of money in the account. Sometimes, maintenance fees only apply if you aren't regularly using your account. You may be able to avoid these fees by setting up a recurring direct deposit or making a few debit card purchases.

Overdraft fees

An overdraft charge happens when you spend more money than what's available in your bank account. In these cases, the bank may charge two fees: one for overextending your account balance and one for having to decline a transaction or return a check. These fees can usually be avoided by getting overdraft protection, which automatically transfers funds from another account or line of credit to cover the difference.

ATM fees

Your debit card allows you to access your money and perform certain transactions at ATMs. Usually, you won't be charged a fee when you use an ATM that's owned by your bank or in its network. You can use other ATMs, but the transaction may cost you a few extra dollars to pay the out-of-network ATM fees. Aim to use your bank's ATMs whenever possible.

Checking accounts vs. savings accounts

Generally, checking accounts are used for incoming and outgoing transactions while savings accounts are used for holding and growing money. To make this distinction clear, most checking accounts don't offer interest while savings accounts do. Here are other differences between checking and savings accounts.

Getting started with a checking account

Now that you know what a checking account is used for, the features it offers and how to navigate the fees, you're ready to take off on your financial journey. You'll have a way to securely store cash that you can access quickly or spend directly, and you can take advantage of having a system to track your income and expenses. Plus, you can start simplifying your personal finances with money management tools like direct deposit, recurring bill payments and mobile banking.

If you're ready to take the next steps, consider reaching out to the account experts at Citizens to explore which checking account is right for you. Citizens has several checking accounts with features including Citizens Peace of Mind®², Citizens Paid Early™³ and Citizens Checkup® plus easy account access via our Citizens mobile banking app.