What is a checking account and how does it work?

Learn how to get the most from your checking account.

What is a Checking Account?

A checking account is a secure account in which to keep money for everyday purchases and bills. You give money to your financial institution, which keeps it safe and makes it available to you whenever you need it. You can deposit money in person, by direct deposit, or through a mobile banking app. You can use the deposited money by taking a cash withdrawal, writing a check, or using a debit card.

Different Types of Checking Accounts

All checking accounts are basically about depositing and withdrawing money securely. However, different types come with features that meet differing needs. Some of the options include:

  • Free Checking. These accounts charge no monthly maintenance fees or fees for account activity — putting money in or taking it out of the account. They aren’t as common as they used to be from large banks, but are still available from some community banks and credit unions, including Bethpage. Free checking accounts generally have the features needed for basic cash management, making them an excellent choice for a wide range of customers.
  • Interest Checking. These accounts actually pay account holders, who can earn interest on money they keep in checking. This type of account generally has minimum balance requirements. In other words, to earn interest, account holders must keep a minimum amount of money in the account.
  • Joint Checking. When two people want to share the deposit and withdrawal privileges of a checking account, they can open a joint account. These accounts can be useful for couples, parents helping teenagers manage money, and adult children helping aging parents with their finances.
  • Business Checking. This type of account is designed for businesses and generally offers access to features companies find useful for managing their cash. These can include credit card options, online banking, merchant card processing, business savings, and remote deposit capture.

Benefits of a Checking Account

The main benefit of a checking account is easy access to deposited funds. Other types of financial accounts, such as savings accounts, have a limit on the number of deposits and withdrawals. Checking accounts do not, making them the best option for day-to-day needs.

With a checking account, account holders can:

  • Visit a branch to deposit or withdraw money
  • Use ATMs at financial institutions, stores, etc. to deposit or withdraw money
  • Write checks for purchases
  • Use a checking account debit card for onsite or online purchases
  • Pay bills online through the account
  • Link to apps to send money to friends and family
  • Set up recurring automatic payments for regular bills

Some people use credit cards for daily spending instead of their checking account. These people essentially pay for all their purchases all at one time, at the end of the month, by paying their credit card bill. If the bill is paid off in full each month, no interest charges are added. However, if people succumb to the temptation to charge more than they can pay within the month or not pay it off completely, this option can get costly quickly. The advantage to using a checking account for daily purchases is that it’s easier to stay within budget.

Checking Account Features

Here are a few key features checking accounts can offer:

ATM/Debit Cards

Account holders can use debit cards with Visa or Mastercard logos to conveniently pay for everyday expenses. These differ from credit cards because the money comes out of the account when the purchase is made. Debit card users don’t have the option of paying balances off later. Basically, using a debit card is much like writing a check, but quicker.

All debit cards can also be used to deposit or withdraw money through an ATM machine. This is basically the only function of debit cards that do not have a Visa or Mastercard logo. Card holders choose a personal identification number (PIN) when they open their accounts, which is used for ATM activities and many purchases. Using ATMs that belong to an account holders network is usually free, but there are often fees for using ATMs outside that network.

Overdraft protection

People can mistakenly write checks or swipe their debit card for amounts that are higher than what is available in their checking accounts at the time. This is known as an overdraft. The purchase may be declined. If it is put through, it will trigger an overdraft fee from the bank. Overdraft fees can be costly; the alternative is overdraft protection.

Overdraft protection is an optional feature of checking accounts that lets debit card holders continue to use their cards for purchases or ATM withdrawals for a fee, even when there isn’t enough money in the account. This helps eliminate the inconvenience and embarrassment of having transactions unexpectedly declined, and protection fees are lower than overdraft fees. The bank generally takes the money from another source of funds, an account linked to the checking account such as a savings account, and protection is limited to the amount in that linked account.

Personal checks

Personal checks enable account holders to pay for purchases on-site, send money to other people or entities through the mail, and get cash at many financial institutions. It is fairly simple to write out a check, working from top to bottom.

  1. The customer’s personal name and address are pre-printed on their checks in the top left corner. A space to write the date is in the top right corner.
  2. Below these, write the name of the person or entity receiving the money on the line after “Pay to the order of.”
  3. Next to the payee, write the amount of the check in numerals — for example, “45.66.” On the line below, write out the same dollar amount in letters — “Forty-five and 66/00” — in front of the printed word “dollars.”
  4. Below that line, in the bottom left corner, a line labeled “For” can hold the purpose of the check or any other relevant information. The line in the lower right corner is for the account holder’s signature, required on every personal check.

A series of numbers is printed at the very bottom of every check. These include the ABA/Routing Number, which assigns the check to a particular bank; the account number, which assigns it to a particular account; and the check number, which assigns it to a particular transaction. These are all used to process the check properly.

Cashier's checks

A cashier’s check is a type of official check issued by a financial institution. Unlike personal checks, the payment of cashier’s checks is guaranteed by the bank itself. A customer gives money to the bank and the bank then pays the cashier’s check out of its own funds. The bank’s guarantee makes cashier’s checks much less risky to accept than personal checks, so they are sometimes required for large purchases. To get a cashier’s check, a customer must visit a branch of their bank in person.

Online banking

Online banking is an important convenience feature in checking accounts today. It enables account holders to view their accounts in real-time, print out account information, pay bills, and make wire transfers from their home computers or — with the addition of an app for mobile banking — from anywhere on a smartphone or tablet. Mobile apps even let customers deposit checks from their phones.

Banking with Bethpage Federal Credit Union

With a checking account from Bethpage, you get the convenience of banking wherever you want plus benefits that are hard to find anywhere else:

  • An exceptional member experience
  • Easy online account opening with instant decision
  • 30,000 surcharge-free ATMs nationwide
  • 5,000+ shared branch locations
  • 24/7 Mobile Banking with Mobile Check Deposit
  • Great options — Bonus Checking (free plus interest-earning), Student Checking, Free Business Checking

Ready to get started with a new Bethpage checking account? Come in and talk to us at one of our branches or go online and apply right now!