Checking account

What It Means

A checking account is a bank or credit unionCredit unionA not-for-profit financial cooperative owned by its members, offering accounts and loans to people within the field of membership its charter sets. See more account built for money that moves often: pay coming in, and bills, card purchases and cash going out. The FDIC describes it as a transaction account for everyday spending and paying bills, and notes some checking accounts pay interestInterest rateThe yearly percentage a lender charges for borrowing money, not counting fees; the APR adds certain fees to show a fuller cost. See more. You reach the money with a debit card, checks, online transfers and automatic payments.

How It Sounds at Home

• "Rent comes out of checking on the third."
• "Can you move some over from savings into checking?"
• "I pay everything off my debit card."

The Breakdown

A short example. Dana keeps her pay in a checking account that charges a $12 monthly maintenance feeMonthly maintenance feeA charge a bank or credit union takes each month for keeping a checking, savings or money market account open, often waived if you meet set conditions. See more, an example amount, unless a direct depositDirect depositA payment, such as a paycheck or government benefit, sent electronically straight into your bank or credit union account instead of as a paper check. See more arrives that month. Rent and her phone bill leave by automatic payment, groceries go on her debit card, and she takes out cash now and then.

Where it goes wrong.

• She changes jobs, and for two months her pay comes as a paper check while the new payroll sets up direct deposit. Both months, the fee is charged.
• The ATM near work sits outside her bank's network, so each visit costs a fee to the machine's owner and another to her own bank.
• She keeps her savings in the same account, and money meant for a car repair gets spent on everyday things without her noticing.

What to watch for.

• The fee schedule: the monthly fee, what waives it, and what out-of-networkOut-of-networkDescribes a provider that has no contract with your health plan, so the plan pays less or nothing for the care and you may be billed more. See more ATMs cost.
• Automatic payments that land before payday.
• A separate savings accountSavings accountA bank or credit union account for money you're setting aside for later, which earns interest and is insured up to federal limits at insured institutions. See more for money you're setting aside, so it doesn't mix with spending money.
• That the bank is FDIC insured, or the credit union federally insured, before you open the account.

Good to Know

Checking accounts at an FDIC-insured bank are covered up to $250,000 per depositor, per insured bank, for each ownership category, and at a federally insured credit union NCUA share insurance covers up to $250,000. According to the CFPB, a bank or credit union can charge a monthly maintenance fee on a checking account but must show it to you when you open the account, and many skip it if you keep a minimum balanceMinimum balanceThe amount a bank requires you to keep in an account to open it, avoid a monthly fee or earn the stated interest rate, as set out in its disclosure. See more or use direct deposit. ATM feesATM feeA charge for using an ATM, which can come from the machine's owner, from your own bank for using a machine outside its network, or from both. See more come in two parts: under Regulation E (12 CFR 1005.16), the machine's owner must show its fee on the screen or on paper before you're committed, and your own bank has to disclose its out-of-network fee in writing.

Related Terms and Categories

• Savings account

  A bank or credit union account for money you're setting aside for later, which earns interest and is insured up to federal limits at insured institutions.

• Direct deposit

  A payment, such as a paycheck or government benefit, sent electronically straight into your bank or credit union account instead of as a paper check.

• Monthly maintenance fee

  A charge a bank or credit union takes each month for keeping a checking, savings or money market account open, often waived if you meet set conditions.

• Overdraft

  When a payment is bigger than your checking balance and the bank pays it anyway, leaving a negative balance you owe back, usually plus a fee.

• Available balance

  The money in a bank account you can use right now: the posted balance minus pending card purchases and any deposit the bank is still holding.

• Joint account

  A bank or credit union account owned by two or more people, each of whom can usually deposit, withdraw, move money or close it.

Household money and budgeting