A checking account is a bank account that allows easy access to the funds. It is the account that you will use to pay your bills and make most of your financial transactions. If you have a checking account you can access your money by writing a check, setting up an automatic transfer or using your debit card. These transactions are debits to your account. A credit is a deposit.
When you first open your checking account you will need to keep a running balance in order to track the amount that you have in your account. This will prevent you from overdrawing your account. Additionally it is very important to balance your account each month, as this will help you to catch any errors that you or the bank have made. At times your funds may not be immediately available, it is important to understand your bank's policy about making your deposits available.
You will find that most banks offer many options when it comes to checking accounts. You should carefully consider the features that you need the most as you choose your checking account. Pay particular attention to the minimum balance requirements, and choose one that you are comfortable keeping. You do not want to end up with a minimum balance that you cannot maintain and end up owing the bank money each month. Some accounts also limit the number of checks or debit transactions you can have month. Others limit the number of bill pay transactions. You need to be aware of these numbers and make sure that you follow them. If the numbers seem too restrictive, consider moving your account elsewhere.
You should also find out about overdraft protection that your bank may offer. Some banks or credit unions will allow you to link another account to the funds and will transfer money over to cover you when you go into the negative. Other banks will link a line of credit to your checking account and will transfer money into your account to cover you. Others will allow you to overdraw up to a certain limit and then begin returning checks. It is important to realize the type of service your bank offers and all the fees associated with it.
A checking account is insured by the FDIC for up to $100,000. However, if you have that much money, you are likely better off to put the majority into a savings account or another type of investment tool. Your checking account should really only hold the money that you need for your daily transactions during the month. Though some banks do offer interest bearing checking accounts, the rates are usually lower than a savings account.
When you open up a checking account the bank will run a quick background credit check. If you have been reported to ChexSystems or a similar company you will not be allowed to open an account until you clear that up. The bank does not want to risk losing money on you.