The purpose of a checking account is to provide a very liquid, simple, convenient, and secure way to manage funds coming in (deposits) and those going out (withdrawals). One or more checking accounts can be opened for personal and business use. Online 24/7 online access from a desktop or mobile gadget is usually available at no cost. The safety of those funds, if the transactions are done in a chartered banking institution, is guaranteed by the Federal Deposit Insurance Corporation (FDIC). The maximum FDIC protection is $100,000 per depositor.
Unlike savings and money market accounts, checking accounts have no limits on the number of monthly deposits and withdrawals. That is why they are considered so liquid. However, they can be linked to those two other accounts, along with a line of credit. That is a common practice to prevent overdraft charges. Those links, as well as others, also facilitate ways to save automatically. For example, monthly deposits from checking can be authorized for college funding programs, retirement plans, and savings accounts.
Depending on the type of checking account, transactions can be conducted in-person via a teller, paper checks, ATMs, electronic transfer, direct deposit, debit cards, and the continuing developments in mobile payment systems. Increasingly, depositors are having income due them such as salary from an employer, Social Security payment, and rent from tenants deposited electronically into their checking account. The money is available immediately. This eliminates the standard time gap involved in “clearing” paper checks. Likewise, many with checking accounts are authorizing automatic electronic funds transfers from checking to pay regular bills, ranging from utilities to auto insurance.
Currently there many different kinds of checking accounts. Choosing the one right for personal and business needs can represent substantial savings in managing money. That selection process demands shopping around, reading the fine print, and keeping up-to-date in changes in the bank’s terms and conditions. Those reading the fine print will notice that there are usually disclaimers that the financial institution can modify its policies and procedures at any time.
There are those who are comfortable with only online and phone access to their banks. The best option for them may be applying for checking accounts at Internet banks. In that way they can eliminate fees and perhaps even earn interest. Since Internet or online banks do not have a brick-and-mortar presence, they can provide free services and perks.
However, no-fee services can also be available in several other ways. One is through keeping all financial accounts at one bank. Frequently checking will be included free. Also maintaining at least one other account such as savings could also generate fee waivers. It is also possible to open a checking account in a brick-and-mortar bank, agreeing to only online and phone transactions, and receiving free maintenance. Now you know the purpose of a checking account, so check out the high-interest checking accounts at Bank5 Connect!