Benefits of Opening a Checking Account
6 Min Read | Published: October 3, 2024
This article contains general information and is not intended to provide information that is specific to American Express products and services. Similar products and services offered by different companies will have different features and you should always read about product details before acquiring any financial product.
Learn about the advantages of having a checking account, including convenience, security, and access to financial services. See how a checking account can streamline your banking.
At-A-Glance
- A checking account is an essential financial tool enabling you to manage day-to-day financial activities conveniently.
- A checking account allows you to receive direct deposits, write and cash checks, and get out money from an automated teller machine (ATM).
- Thanks to Federal Deposit Insurance Corporation (FDIC) insurance and debit card personal identification number (PIN) protection, money in a checking account is typically safer than carrying cash.
A checking account is a safe space to manage day-to-day financial activities, including receiving direct deposits, cashing and writing checks, and using a debit card to get cash out. When paired with a savings account, credit cards, and other financial tools, the checking account becomes a critical piece underlying a solid financial management strategy.
In this article, we’ll look at the benefits of opening a checking account, from quick access to funds to online banking features that can help you manage money easier.
Benefits of a Checking Account
There are several benefits of a checking account, including:
Convenient Access to Funds
Thanks to a checking account’s setup and features, moving and accessing money for everyday transactions is simple and convenient. You can use a checking account to write a check, get money at an ATM, or transfer funds to other accounts. Plus, a checking account tends to have higher transaction limits than a savings account. For example, some savings accounts limit monthly transfers to six, while checking accounts typically have no limit. That means you can have money flowing in and out of the account for different needs multiple times throughout the month without worrying about a transaction not going through because you’ve hit the limit.
Direct Deposit
You can have your employer send paychecks via direct deposit into your checking account and receive access to the money more quickly than if you were to deposit a paper check. As an added benefit, some checking accounts will waive monthly fees if you have a qualifying direct deposit.
Online Banking
Depending on the bank you use, you may have access to online banking services via a website or mobile app. Many banks allow you to monitor account activity in real time, quickly deposit checks, schedule bill payments, and more. Online banking features can be a key piece of responsible financial management, so it makes sense to compare financial institutions to see which ones have the features you’ll need to manage your checking account effectively.
Protection
A checking account offers protection through Federal Deposit Insurance Corporation (FDIC) insurance. Any money in your checking account is guaranteed up to $250,000 per depositor per bank with FDIC-insured banks. To ensure the safety of your money, confirm the bank you’re working with is FDIC-insured before you sign up for any financial account.
Safety
By putting your money into a checking account, you’ll no longer need to carry much cash with you, which can be dangerous. Since your debit card requires a personal identification number (PIN), even someone who steals your card may not be able to get away with a transaction before you can contact your bank and have a new one issued
Automatic Bill Pay
A checking account makes it easy to set up payments for recurring bills, so the money automatically comes out of your account on the right day each month. Setting up automated systems for payments can ensure on-time payments and help you avoid late fees.
Overdraft Protection
An overdraft happens when there are insufficient funds in your checking account to cover a transaction, but your bank pays for it anyway. The bank may charge a fee to do so, or in some instances, they may decline the transaction entirely. If your checking account offers overdraft protection, you may be able to link a secondary account, like a savings account, and use those funds to cover the transaction. Taking advantage of overdraft protection can help you avoid declined transactions and overdraft fees.
Potential to Earn Interest
Some banks allow you to earn interest on the balance in your checking account. Before signing up for an interest-bearing checking account, understand how interest works and how much you have the potential to earn. To maximize interest, you may also want to consider a high-yield savings account (HYSA) to supplement your checking account.
Did you know?
Automated payments going into (direct deposits) and coming from (direct payments) a checking account go through the Automated Clearing House (ACH) network. ACH payments and transactions are essentially electronic checks that move money to another account and allow you to send and receive money more quickly and conveniently.
Different Types of Checking Accounts
You’ll want to explore several different types of checking accounts to find the right fit.
- Regular Checking Accounts
A traditional checking account has basic features and functionality. It may have nominal monthly fees, which can be waived if you meet specific criteria, like keeping a certain balance in your account or getting a monthly direct deposit.
- Rewards Checking Accounts
A rewards checking account can help you avoid common fees charged by regular checking accounts, plus it offers chances to get rewarded. You may be able to earn interest on the balance in your account and earn points similar to a credit card for the debit card spending you do.
- Joint Checking Accounts
If you have a partner or someone you want to share financial management with, a joint bank account can give two or more people access. This can make it easy for multiple people to add money and split household bills or teach a child how to manage money responsibly.
The Takeaway
A checking account has numerous benefits, ranging from financial protection to ease of use, and the right checking account can help you to manage your finances. As you explore options, be sure to look for a bank that’s FDIC-insured, and that offers online account management and other features that can make it easier for you to stay in control of your finances.
Brooke Joly is a writer on a mission to unravel the mysteries of personal finance and make them accessible to the everyday reader. When she’s not behind the keyboard, you can find her enjoying the outdoors in Charleston, SC.
All Credit Intel content is written by freelance authors and commissioned and paid for by American Express.
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The material made available for you on this website, Credit Intel, is for informational purposes only and intended for U.S. residents and is not intended to provide legal, tax or financial advice. If you have questions, please consult your own professional legal, tax and financial advisors.
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