Since there is no limit to the number of times you can access the money in a checking account, consumers may use the account not only to pay bills and daily expenditures, but also for withdrawing cash via an ATM or bank teller.
You can choose to have your paycheck electronically deposited into your checking account once or twice a month, called direct deposit. You also may be able to set up for recurring payments such as rent, mortgage, auto loans or student loans to be automatically withdrawn from your account.
Many consumers have both a checking and savings account at the same bank or credit union, easily allowing them to move money between the two accounts. Any leftover money from your paycheck each month could be moved from the checking account to a savings account to earn interest or to save for an emergency. However, transfers from your savings to any other account, including checking, may be limited each month, perhaps to six times, depending on bank policies.
As of December 18, 2023, the national average rate for checking accounts was 0.07%, according to the FDIC. The best credit unions typically offer higher APYs.
Key factors to consider when choosing a checking account:
- No monthly maintenance fee, or fee that is easily waived.
- Extensive ATM network.
- Reasonable overdraft fee policy.
There are various checking accounts offered by traditional banks, online banks and credit unions. The most important factor to examine may be the fees. Some banks will charge a monthly maintenance fee. Other banks will only charge a monthly maintenance fee if the account falls below the minimum balance or does not have a regular direct deposit linked to it. While some banks charge nominal fees of a few dollars a month, others charge as much as $15, which can put a crimp into your budget.
There are many ways to open a checking account, whether it is an individual or a joint account. Going to the local branch of a bank or credit union is one method but can take more time. Here’s what you should bring along:
- Government-issued identification, such as a driver’s license or passport.
- Proof of address, such as a utility or cellphone bill.
- Funds to deposit into the account.
Another common method of opening a checking account is to open one online. You can choose this option whether the bank has physical buildings or is an online-only bank.
Before you start to open the account online, have your personal information ready, such as your Social Security number or tax identification number, U.S. residential street address and birthdate.
What You’ll Need to Open a Checking Account
- Government-issued identification, such as a driver’s license or passport.
- Proof of address, such as a utility or cellphone bill.
- Funds to deposit into the account.
While some banks require consumers to deposit a minimum amount of money, others have skipped that requirement and allow you to deposit any amount.
A checking and savings account both hold your money, but there’s a difference between the two. A checking account is used mostly to pay daily expenses and bills and to withdraw cash. A checking account is also useful for depositing your paycheck, whether it is a paper check or a direct deposit from the employer.
A savings account is geared toward building up funds for larger expenses in the future, such as a down payment to buy a car or creating an emergency fund for unexpected expenses like home or auto repairs. Some banks offer competitive interest rates to attract more customers.
Find the Banking Product That’s Right for You
It is possible that when you attempt to open a checking account the bank could turn you down. Banks may not allow potentially risky customers to open an account.
The agency that tracks consumers’ banking activity is called ChexSystems.
- If a bank charges you a fee, such as an overdraft fee, and you fail to pay it, the incident will be flagged in its records. If you have a serious number of incidents of unpaid fees, other banks may turn you down when you try to open an account.
- Too many overdrafts or bounced checks also make you a higher risk to the bank. An overdraft occurs when you attempt to pay for an item or a bill and you do not have sufficient funds in the account.
- Committing any type of fraud, such as opening an account in someone else’s name, will draw a red flag and prevent you from opening another checking account.
- A low credit score could also stop you from opening an account.
If you’re turned down, then you may have to resort to alternative products. One alternative is a prepaid checking account. With a prepaid account, you can only spend what you have, and there is no concern about overdraft protection.
“The only requirement for someone to open an account is that their identity can be validated,” says Wole Coaxum, a co-founder of Mobility Capital Finance, a New York-based banking platform.
Banks and credit unions operate in similar ways. Some consumers prefer to have their checking and savings account at a large national bank because they want access to their ATM and branch network.
Other people prefer to open an account at a credit union if their employer or an organization they belong to is affiliated with one.
Here are some features that favor each kind of institution:
- Offer investment and wealth management products in addition to banking products.
- Usually have more branches.
- May offer more extensive ATM network.
- Provide more robust online features and apps.
- Often offer higher interest rates for savings.
- Often offer lower rates on loans.
- Usually charge fewer fees.
Though an individual credit union may have fewer branches or ATMs than a national or regional bank, some credit unions have formed branch and ATM networks that rival or surpass those of banks.
Whether you open an account at a bank or a credit union may depend on how you conduct your banking, how often you go to a physical branch and if you are seeking a loan from the financial institution in the future.
While traditional banks and online banks operate in the same fashion, here are some key differences:
- You can meet with bankers face-to-face when seeking guidance or asking questions.
- You can deposit or withdraw money from a teller and also receive a cashier’s check.
- You will likely have to talk to customer service on the phone or through an online portal.
- At some online banks, you can’t directly deposit cash. You have to get a cashier’s check in the mail.
- Interest rates on deposit accounts may be higher and fees lower or nonexistent because online banks do not have to allocate money to construct and maintain buildings or hire employees to staff them.
Since the banking market is highly competitive, you should shop around for the best rates, lowest fees and most convenience. You can have a checking or savings account at more than one bank.
A checking account is offered by a bank or credit union and is used by consumers to pay bills and expenses through paper checks, via a debit card or going online. Since there is generally no limit to the number of times you can access the money in the account, many people use them for daily expenses such as buying coffee, paying for parking or purchasing gasoline or groceries.
Most checking accounts are intended to pay for expenses and do not offer interest on your balance, unlike savings or money market accounts.
Checking accounts can have many fees. Always shop around and look for a checking account that has no or lower fees.
- Maintenance fees. Some banks charge a maintenance fee each month for keeping your account open. These fees typically range from $5 to $20. Common ways to skip this fee are to link a direct deposit such as your paycheck to your checking account or maintain a minimum balance.
- Checks. Though banks generally do not charge you a fee for writing a check, you will have to pay to order physical checks. Ordering through your bank may cost about $20 per 100 checks. However, you also can get checks elsewhere, such as retailers, for about half as much.
- Overdraft fees. An overdraft fee occurs when you attempt to pay for an item or a bill and you do not have sufficient funds in the account. If the bank allows the transaction to go through, it usually will charge about $30 to $38 per overdraft, so multiple overdrafts can become quite costly. When it comes to using your debit card, banks normally will let you opt in or opt out of overdraft service. If you opt out, you won’t be charged fees, but your transaction won’t go through if you don’t have the funds to cover a purchase or withdrawal.
Another option is overdraft protection that links your main checking account with another account – another checking or maybe a savings account – from which the bank will transfer funds in order to cover your transaction. You will also pay for this service, but it’s usually less than half of an overdraft fee.
- ATM fees. Most banks want you to use their ATMs or one from their network when you need to withdraw cash. If you use another network, you are likely to incur a fee of $3 or $5. Some banks either do not charge this fee or will reimburse you for the fee within certain guidelines.
Many banks now offer checking accounts without any fees, especially banks that are only online and do not have physical branches.
A step-by-step guide for closing your checking account:
- Open a new account. Assuming you still have money in the account you’re closing, it will be easier if you have a place to transfer or deposit those funds already in place.
- Be sure no transactions are still pending. You don’t want a payment or deposit unable to be completed because the account is closed when they finally clear.
- Change your account information for auto-pay and direct deposit. If you’ve set up automatic bill payments or your paycheck is directly deposited, make sure those businesses or your employer have the up-to-date account.
- Inform your bank you are closing the account and get written confirmation. If your checking account is with a traditional bank, it’s best to do this in person at a branch and receive documentation. If your checking account is with an online bank, be certain you get digital confirmation of the account’s closing.
Funds in your bank checking account are insured by the Federal Deposit Insurance Corp. and similarly protected in federal credit unions by the National Credit Union Administration. Individuals are insured for their deposit accounts – checking, savings, money market and CDs – up to a combined total of $250,000. This takes care of protecting your money against a bank failure, but what about other kinds of protection?
If your debit card is lost or stolen, you should call your bank or credit union immediately and report the incident. This will help you avoid being liable for any unauthorized charges made by a thief.
Most banks will cancel your previous debit card and send you another one with a new number. Log into your account frequently after the theft or loss occurs and monitor it to see if there are any transactions you don’t recognize and inform your bank as soon as possible.
The Fair Credit Billing Act and the Electronic Fund Transfer Act protect consumers against fraudulent charges on a debit card within parameters. If you contact your bank within two business days and the fraudulent charges have already occured, your maximum liability is $50. Within 60 days after the bank mails your statement, the maximum liability is $500. If you wait more than 60 days after you receive the next statement, you are responsible for the entire amount of unauthorized charges.
One major concern for consumers is if your account or debit card number is stolen by hackers.
These days, checking accounts are a fairly safe bet when it comes to protecting your deposits from technical attacks by cybercriminals, says Nathan Wenzler, senior director of cybersecurity at Moss Adams, a Seattle-based accounting, consulting and wealth management firm.
“What we commonly see in movies where a hacker breaks in and stealthily transfers all of the money a bank holds into an offshore account isn’t very realistic, as most banks are heavily regulated and have put in fairly strong technical controls,” he says. “Most people can rest assured that their money is safe from a direct hacking assault launched from the outside.”
The concern lies with many forms of online attacks that are successful at siphoning money from individual checking accounts. These kinds of attacks can range from identity theft that allows a hacker to pretend to be the legitimate owner of your account to the use of phishing emails to gain access to your system and then your banking credentials to steal the funds right from your accounts.
Unauthorized use of your debit card is also becoming common, says Chris Morales, head of security analytics at Vectra, a San Jose, California-based provider of automated threat management solutions.
“I worry even more about credit card skimmers at the gas pump,” he says. “Yes, I check every single gas pump before I ever stick a card in the slot. That is the easiest way for someone to grab a credit card or debit card details. This is information a thief would then use to make online purchases, which in the case of a debit card would withdraw money directly from a bank account.”
Criminals can also gain access to your checking account through your mobile phone, says Joseph Carson, chief security scientist at Thycotic, a Washington, D.C.-based provider of privileged account management solutions.
“Storing money in a checking account is completely OK, but the methods on which you make transactions is what increases the risks, such as mobile and internet banking,” he says. “If cybercriminals obtain access to your checking account as a result of poorly secured mobile phones, websites or via phishing scams, you could quickly have your account emptied and owe money to the bank. It is much safer to use a credit card to make online purchases … (which) limits direct access to your money.”
You will first need to gather all of your documentation, such as a photo of your driver’s license or passport or other government-issued ID, U.S. mailing address and phone number. You should then be able to locate an “apply now” button on the bank’s website, which will you take you to the online application. This is where you’ll provide your personal and contact information (including mailing address, phone number, date of birth and email), and your Social Security number or tax ID number. When you have your account, make sure you fund it if a minimum opening deposit is required.
Your checking account plays a vital role in your personal finances, so it is important to choose the right one for your needs. We score more than 200 accounts on a range of factors, from annual percentage yield to account fees to ATM availability, to determine our Best Checking Accounts.
See our full methodology.
