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What is a Checking Account?

Someone with a checking account must make sure the account is balanced.
Customers can typically withdraw or deposit money into a checking account at the drive-thru.
With a checking account, individual drafts can be used as a form of payment.
Someone with a checking account can make cash withdrawals at an ATM.
Some retirees and senior citizens open a joint checking account with a child or other close relative.
Many banks allow checking account holders to access their funds with a debit or ATM card.
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  • Written By: Michael Pollick
  • Edited By: Lindsay D.
  • Last Modified Date: 15 September 2014
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A checking account is a service provided by financial institutions (banks, savings and loans, credit unions, etc.) which allows individuals and businesses to deposit money and withdraw funds from a federally-protected account. The terms of this type of account may vary from bank to bank, but in general, the holder of such an account can use personal checks in place of cash to pay debts. He or she can also use electronic debit cards or ATM cards to access individual accounts or make cash withdrawals.

Virtually every bank offers some form of checking account service for their customers. Some may require a minimal initial deposit before establishing a new account, along with proof of identification and address. A student or other low-income applicant may opt for a no-frills account which does not charge fees for the use of personal checks and other services. Others may benefit from interest payments by maintaining a high minimum balance each month. Some states are required by law to provide a lifeline option for senior citizens and low-income customers. This type of account waives many of the fees banks may charge, such as monthly service fees for low balances and surcharges for ATM usage.

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A typical checking account is handled through careful posting of deposits and withdrawals. The account holder has a supply of official checks which contain all of the essential routing and mailing information. When a check is filled out correctly, the recipient treats it the same as cash and completes the transaction. After this check has been deposited into the recipient's own bank account, a bank worker files the check electronically and the check writer's bank receives the cancelled check and amount to be debited (withdrawn) from the check writer's account. This process continues for every check written against an individual account.

Owners of a checking account are ultimately responsible for keeping track of their available funds, even though the bank will routinely issue its own accounting statements. Checks must represent an actual amount of money contained in the account itself. If a check is written for an amount higher than the available balance, the check writer faces numerous fees and possible legal action. The recipient of the bad check can demand immediate cash payment for the original debt as well as a substantial fee for the returned check. Some banks will protect account holders by making the proper payments and notifying the check writer that an overdraft has taken place. Most often the bank will recoup their losses through substantial service charges, so it pays to avoid writing checks when the balance is unknown.

Most banks have several different methods which allow checking account customers to check their balances and reconcile their records. Printed monthly statements of debits and credits (deposits) are mailed to individual account holders. ATM machines offer an option to check the current balance, while online or phone-in accounts can provide real time updates on which checks have been processed and which are still outstanding. This information can be compared with the entries recorded in a journal called a check register.

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Discuss this Article

anon175150
Post 16

yeah, i think it's a good idea for students because they learn how to save money in the long term.

nhumai
Post 15

Can we use a checking account to receive a bank instrument as bank guaranty/stand by letter of credit or a letter of credit?

Because someone told me a checking account cannot receive a bank instrument.

Highly appreciate any response and thank you so very much.

anon116697
Post 13

Tugboats: So true! Great advice.

anon87162
Post 12

So are there any monthly or yearly fees or inactive fees for a checking account and what would you recommend - this or a savings account? I don't mind carrying the money with me; it's just that there are more benefits with a checking account.

anon86736
Post 11

If a married couple has a joint checking account, with the understanding originally that the account would be used for household expenses, maintenance, etc., and now the account has grown into really too high a balance and one party wishes to maintain the current balance, including the refund check on taxes, and the other party wishes to bring it down to a more reasonable balance and use the money for individual investments, how can this be handled without creating a divorce? Martha. Any attorneys have any free advice here?

anon84210
Post 10

thanks for your help. We learned a lot!

anon70030
Post 7

It was really helpful with my checking account. now I know what to do.

anon68072
Post 6

nice. I like reading your post. It gives me a lot of information about checking accounts.

anon62517
Post 5

thank you for the information. rajkiran

anon47453
Post 4

Thank you for the information.

anon18166
Post 3

is it possible to have 2 estate checking accounts for the same person?

tugboats
Post 1

It's a really good idea for high school students to start having their own checking account when they're around 16 because they can learn about financial responsibility and budgeting. Whatever you do though, don't bail them out! If they overdraw their account, they've got to live with the consequences. Otherwise they are likely to learn bad habits that could stay with them for a long time.

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