By Aniket Bose.
What is a Checking Account?
A checking account is a deposit account that is held at financial institutions allowing its users to make withdrawals and deposits. They are also known as demand accounts or transitional accounts; checking accounts are very liquid compared to other accounts, and can be accessed through the use of checks, automated teller machines, electronic debits, etc. A checking account is different from various other accounts a bank offers because often they allow numerous withdrawals and unlimited deposits, whereas other accounts may limit their users from both withdrawing and depositing.
Practical Uses
Checking accounts can consist of commercial or business accounts, student accounts, joint accounts, and many others.. Commercial accounts are most commonly used by businesses and are also the property of the business. The business’ officers and managers have signing authority on the business’ commercial account as authorized by the business’ governing documents. There are some banks that offer college students a unique checking account that will be free for them until they graduate. A joint checking account is where two or more people, typically couples, are able to write checks on the same account. Checking accounts typically do not offer their users with high-interest rates and some of them don’t even offer any interest rate. For checking accounts with large balances, banks provide those users with a service known as a “sweep” for their account. This involves the withdrawal of most of the excess cash in the account and investing it in overnight interest-bearing funds. At the start of the next business day, the funds are deposited back into the checking account along with the interest it accumulated overnight.
How to Use a Checking Account?
Consumers can set up their checking accounts at bank branches or even online. For account holders to deposit funds, they can use the services from ATMs, direct deposits, and over the counter deposits. For consumers to have access to their funds, they can write checks, use ATMs or even use electronic debit/credit cards connected to their checking account. There have been advances in electronic banking which has allowed checking accounts to be much more convenient for consumers to use. Customers now have the ability to pay their bills via electronic transfers, thus eliminating the necessity to always write and deliver paper checks. They can also set up automatic payments from their checking account of routinely monthly expenses like grocery and electricity bills. Consumers also have the opportunity now to use their smartphone apps for making deposits, transactions, or transfers.
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