What is a checking account?

A checking account is an integral part of any financial life, whether it's used as a place to stash cash, pay bills or transfer funds. Approximately 95% of U.S. consumers have a checking account, according to Federal Reserve data from 2024, the most recent year for which information is available.

While checking accounts are primarily valued for their accessibility, some earn modest interest, come with a welcome bonus or have other perks.

Here's what you need to know about checking accounts—from how they work and how to open one to what to look for when choosing an account.

A checking account is a type of deposit account designed to be a hub for everyday financial transactions. It usually offers deposits and cash withdrawals via debit card, checks or electronic transfer. A checking account is frequently used to get cash, receive direct deposit and pay bills. It's the most liquid account, meaning you have easy access to your money. They often allow unlimited deposits and withdrawals, though some institutions may have daily maximums.

You can open a checking account at a bank, credit union, or non-bank fintech app like Wealthfront. Your money is insured up to $250,000 per depositor, per institution, by the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA).

,The primary purpose of a checking account is to hold your money securely for the short term, with little or no interest. If you have longer-term financial goals, like saving for a down payment, a high-yield savings account, CD or other interest-bearing vehicle is a better option.

Most people focus on how easily a checking account enables them to access cash, but some accounts come with benefits you might associate with a high-end credit card.

Welcome bonus: Depending on the balance you open your account with, you may qualify for a welcome bonus of anywhere from $200 to $2,000. Make sure the bank meets all your other requirements first, though.

Rewards: Some checking accounts offer cash back, discounts on purchases, refunds on ATM fees and other benefits — without charging an annual fee

Interest: Some checking accounts pay interest, though the amount is often minimal. If you have a minimum balance, though, you might qualify for a high-yield checking account with a better return.

Early deposits: Most banks allow you to receive funds from your paycheck up to two days earlier than a regularly scheduled payday. The service is free and automatic

Find a checking account that works for you

Like most financial products, checking accounts may incur fees. Some are automatic and others are penalties.

Monthly service fee: Many checking accounts charge a fee to maintain your account, up to $15. You may be able to get it waived, however, if you maintain a minimum balance, set up direct deposit or meet other requirements. There are also no-fee checking accounts.

Overdraft fee: If you spend more than your account balance, you may be charged up to $30. Avoid this fee by enrolling in overdraft protection, which will decline transactions or transfer extra funds from a linked savings account.

ATM fees: If you withdraw money from an out-of-network ATM, you can be charged by both your bank and the ATM operator. Try to only use your bank or credit union's ATMs or find a bank that reimburses a certain number of out-of-network ATM fees.

Foreign transaction fees: If you make purchases or withdraw money outside of the U.S., there's often a cost to convert the funds to the local currency. Try to find a debit or credit card from a bank that doesn't charge a foreign transaction fee.

According to a WalletHub analysis of the Federal Reserve's Survey of Consumer Finances, the average checking account balance in the U.S. is about $16,891. That figure can be misleading, though, because a small number of high-balance accounts can pull the average up.

The median checking account balance, around $2,800, better reflects what a typical household actually keeps in its account.

Look at both the benefits and requirements before opening a checking account.

1. Monthly fees: There's no shortage of accounts that don't have a monthly maintenance fee. Some banks will waive it with a minimum balance or a set number of transactions.

2. Opening deposit or balance requirements: Are you comfortable keeping the required amount in the account?

3. APY: While they don't compete with high-yield savings accounts, some checking accounts offer a modest return.

4. ATM access and fees: Does the account come with a debit/ATM card? How large is the bank's ATM network? Does it charge a fee for using an out-of-network ATM and are any of those fees reimbursed?

5. Overdrafts: How much does the bank charge for overdrafts, and what overdraft protection options are available?

6. Bonuses, rewards and benefits: Larger banks often offer cash bonuses for opening a checking account and meeting eligibility requirements. They may also offer ongoing rewards programs or early access to direct-deposit paychecks.

7. Online and mobile banking: Does the bank accept mobile check deposits and have an easy-to-use, useful mobile and web presence? Can you send and receive money via Zelle?

8. Branch access and customer service: If in-person banking is important to you, check the availability of physical branches. Does the bank have weekend and evening customer support?

9. Account security: Make sure the account is protected by FDIC or NCUA insurance, with robust anti-fraud and security features.

Shop for a bank, credit union or fintech company that meets your needs, whether that's no fees, interest-bearing checking, a welcome bonus or something else. It may be worth looking at the other account types it offers, as many institutions offer special benefits to customers with high balances or multiple accounts.

You can usually open a checking account online or at a local branch. To open a non-custodial account, you must usually be 18 or older. You'll provide your name, address, birth date, Social Security number, valid photo ID and other personal information.

The bank may run a soft credit check that shouldn't hurt your credit and you may be required to deposit a minimum amount to open or maintain the account.

Read the terms before completing the process to avoid surprises later.

You can have a checking and a savings account at the same bank, but they serve different purposes and have their own benefits and drawbacks.

• Checking accounts come with a debit card. The debit card you receive allows you to withdraw money from your checking account. Savings accounts don't provide a debit card, though you may be able to use one to access funds if your account is linked to a checking account at the same bank.
• Checking accounts may have unlimited withdrawals. Savings accounts often cap the number or frequency of withdrawals or require you to transfer money to a checking account before you can access it.
• Checking accounts have lower interest rates. Most checking accounts don't accrue interest, and even those that do have very modest rates. If you have a large amount of money or don't expect to touch it for a while, a CD or HYSA is the smarter move.

While a checking account is a basic financial tool, it does have some limitations.