Checking account how does it work

The primary purpose of a checking account is to hold your money in a secure place for the short term, so it's available when you need it to pay your bills and other expenses. You can have your paycheck sent to your checking account known as direct deposit and then move a portion your earnings to a savings or investment account where it can grow over time. Checking accounts shouldn't be used for long-term goals, such as saving for a house, since you earn a low interest rate, averaging about.

However, some banks may provide a variety of tiers for their checking accounts so there is always the chance to earn slightly more interest if you keep more money in your account.

Like most financial products, checking accounts often charge fees. Here are two of the most common and how to avoid them :. Don't miss: 7 common fees of checking accounts and how to avoid them.

While checking and savings accounts are both types of bank accounts, they serve different purposes and the actions you can take with each vary. Here are some key differences:. After you've chosen a checking account, it's relatively simple to open. You can sign up online or visit a local branch. You'll need to provide personal information, such as your name, address and birthday, plus your social security number.

In some cases, the bank may run a credit check, but it will likely be a soft pull that doesn't hurt your credit. You can double check the terms before opening an account to verify this. The type of account available to you will vary based on the financial institution you choose to bank with. Deposit initial funds, if required by your chosen financial institution. This process and its requirements may vary by the type of account you choose to open, so be sure to connect with your banker to learn what to expect from your bank.

Whether you can open a checking account online depends on the bank, credit union or other financial institution. Some banks may allow you to complete the entire process online, allowing you to scan and upload your supporting documentation and provide your signature electronically.

Other banks may allow you to start applying for an account online, but ask that you visit a local branch to set up a checking account.

Some institutions offer specialized services to ensure your information is secure. These services can use a passive approach where others offer both passive and active monitoring services. No matter how you open the new account, you can feel secure knowing most banks have your best interest in mind and will ensure a convenient and secure process.

Our Relationship Managers are ready to tailor financial solutions to suit your individual needs. Our Relationship Managers are ready to tailor financial situations to suit your individual needs. If you'd prefer to have us reach out to you, complete the online form and we will be in touch.

This information is governed by our Terms and Conditions of Use. By clicking Continue, you will be entering a third-party website. First Republic is not responsible for the content, links, privacy policy or security policy of this website. Checking account definition Banks offer checking accounts, a type of deposit account, to individuals who are looking to make frequent withdrawals and deposits.

Understanding how checking accounts work Checking accounts allow you to easily complete day-to-day transactions, including depositing and withdrawing funds. Checking account benefits Checking accounts offer a range of advantages for sending and receiving money.

With a checking account, you can: Use your debit card for ATM withdrawals Use your debit card for daily purchases Set up automatic bill payments Send and receive money between banks via automated clearing house ACH transfers and wire transfers Set up direct deposits to receive payments automatically Write personal checks to cover expenses Checking account features Some checking accounts offer additional features that make sending and receiving payments even more convenient.

As you research potential banking partners, consider whether they offer checking accounts with added features, such as: Online and mobile banking, so you can check your balance anywhere Overdraft protection to shield against bounced checks—and the stress that comes with them Interest or high-interest checking accounts that allow you to earn interest on the balance in your checking account Transfers between accounts Customer service for help and support in managing your money to meet your financial goals Other rewards or bonuses, such as incentives or fee waivers for students or seniors The features available with your checking account vary by bank and the type of account you have.

Checking account fees Many financial institutions may have requirements and charge fees associated with checking accounts. Checking account vs. Some key differences include: Checking account Savings account Financial planning Designed for short-term financial planning, to cover day-to-day deposits and withdrawals Designed for longer-term financial goals, and long-term storage of money Financial use Used to pay bills, make purchases and receive deposits Used to meet various savings goals, such as building an emergency fund or saving for retirement Transaction limitations Allows several or unlimited transactions monthly without added fees Can have a limited number of withdrawals allowed from accounts during each statement period without added transaction fees Interest May or may not earn interest Earns interest.

Get Started Today Our Relationship Managers are ready to tailor financial solutions to suit your individual needs. Call Call Our Relationship Managers are ready to tailor financial situations to suit your individual needs. Have us contact you If you'd prefer to have us reach out to you, complete the online form and we will be in touch.

These features and more will make you happy you found a place to park — and make use of — your cash. Common fees associated with checking accounts. How to choose a checking account.

How to open and set up a checking account. Show More. What is a checking account used for? Level up your checking. Looking for some options? Discover and compare accounts with NerdWallet's best checking accounts. A savings account is a place where you can store money securely while earning interest. Learn More. LendingClub High-Yield Savings. APY 0. Discover Bank Online Savings. Cash management accounts are typically offered by non-bank financial institutions.

Wealthfront Cash Account. CDs certificate of deposit are a type of savings account with a fixed rate and term, and usually have higher interest rates than regular savings accounts. Capital One CD. APY 1. Chime Spending Account. One Spend. Citi Priority Checking. LendingClub Rewards Checking. Money market accounts pay rates similar to savings accounts and have some checking features.

Quontic Money Market Account.