Finding out more about checking account

A checking account is usually different from the normal savings account in a couple of ways. While the savings account limits the number of deposits and withdrawals you make to the account, the checking account would usually give the freedom to unlimited deposits and withdrawals.

What are the benefits of a checking account?

A checking account is a transactional account held at financial institutions by customers who need liquidity. Customers can withdraw money at any time from their checking account through checks, automated cash machines etc. However, in return for the liquidity the checking accounts provide less rate of interest than the savings account. Hence it is a tradeoff for those customers who might need to withdraw and deposit quite often and the transactional account isn’t being maintained as a vehicle for investment. Another benefit of the checking account is that they charge minimal or no fee to the customers. These accounts are generally used by banks to entice customers for other forms of business like personal loans and deposits. Checking accounts because of the liquidity they provide are hence popular for setting up of monthly payment routines for mortgages, personal and car loans.

Reporting

Although the onus is really upon the customers to keep track of their funds, the bank will routinely provide their own accounting and reporting statements. One of the disadvantages of not keeping track is the fact that customers might end up paying through checks with higher amounts than what is present in the checking account. In such scenarios customers will not only harm their credit history but might also be subject to penalty and legal action. A better way is to use the automated cash machines that banks provide and use the option to check the balances especially when one is unsure of what is the balance at the checking account.

Alternative for cash

The customers holding a checking account usually have a supply of checks which contain the routing and mailing information. As long as there is money in the checking account one can use the check instead of carrying cash or credit cards around. These checks are processed electronically and the check writer’s bank will be debiting the amount from the check writer’s account. There are also some states where as per rule senior citizens are provided with checking accounts for their own use. One can benefit from checking accounts by maintaining a high balance too, although deposits are a better option is immediate liquidity is not required.