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What is a Checking Account – Here’s Everything You Need to Know

Checking Account

Checking accounts is one of the most widely used banking tools across the globe. You’re sure to have heard this term before, but may be wondering, what are checking accounts? What is a checking account used for? Is a checking account a debit card? While many people claim checking accounts are easy to understand, they are actually nuanced with many unique types and features. The basic purpose of a checking account is to provide a secure and efficient way to conduct day-to-day financial activities. This includes depositing paychecks, withdrawing cash from ATMs, using debit cards for purchases, and setting up automatic payments for recurring bills like utilities, mortgages, or rent.  Additionally, checking accounts are linked to personal checks, which can be used to exchange large sums of money or for payment to establishments or entities that do not accept credit or debit cards. Checking accounts is designed to be a safe method for accessing your funds on a regular basis. That being said, many checking accounts function differently and may benefit you in different ways.

How Checking Accounts Work

How do checking accounts work? With a standard checking account, users can easily manage the funds in the account that they’ve set up with their financial institution of choice. This means making withdrawals, depositing funds, or spending money directly from their account daily. This is possible through various means, including physical checks, debit cards, online banking, mobile apps, and visiting physical bank/credit union branches. Checking accounts are designed to offer convenience and flexible accessibility. This accessibility makes checking accounts essential for managing short-term financial needs and executing routine financial activities.

Types of Checking Accounts

Checking accounts come in various types to cater to the diverse needs of customers. Each type of account is structured to meet the specific financial requirements of its users, providing necessary tools and benefits to facilitate efficient financial management and operations. Some of the most common types of checking accounts include:

  • Standard checking accounts: Equipped with basic features like checks, electronic payment capabilities, and a standard debit card for everyday financial transactions. These accounts sometimes come with minimum account balance requirements.
  • Business checking accounts: Designed to accommodate higher-volume daily transactions typical of companies and business entities. These accounts often offer features like payroll services and the ability to handle transactions for customers. 

As you can see, not all checking accounts are the same. When searching for the checking account that is right for you, it’s important to search around, weigh your options, and deeply consider how each account’s unique features and requirements will benefit or hinder your financial capabilities. 

Choosing the Right Checking Account

Selecting the most suitable checking account requires careful consideration of several factors. This careful consideration ensures that the checking account you eventually land on aligns with your financial habits and needs. Some of the most important factors to consider include:

  • Convenience: Convenience is paramount. You should consider the proximity of potential banks/credit unions to your home or work, how expansive their networks of ATMs are, and the user-friendliness of their online and mobile banking platforms.
  • Customer service: The quality of a financial institution’s customer service is crucial. You’ll want to evaluate the responsiveness of different banks and credit unions, as a slow-to-react checking account provider could be the difference between protecting your funds and losing your hard-earned cash in the event of financial fraud. 
  • Additional services: Considering the other services and benefits associated with opening a checking account at various banks is key to finding one that will serve your long-term best interests. Be sure to look into saving account options, loans, retirement planning services, and potential investment opportunities that different financial institutions offer.
  • Additional fees: Many banks and credit unions try to hide the additional and recurring fees of opening a checking account. Be sure to compare standard account fees, monthly maintenance fees, transaction fees, overdraft charges, and ATM fees across different banks and credit unions in your area. Opt for an account with fee structures that match your banking behavior. 

Opening a Checking Account

Opening a new checking account doesn’t have to be difficult, if you find a financial institution that puts customers first. Once you’ve done your research and settled on a bank or credit union that works for your financial needs, the first step in setting up a checking account is ensuring you meet all eligibility requirements and have the documents necessary to begin the application process. Eligibility requirements may generally include age, residency, banking history, and minimum funds for initial deposit. Necessary documents usually include Social Security Card, multiple forms of identification (driver’s license, passport, ID card, etc.), and proof of residency. With all of your information and documents in order, you can begin your application process online, in-person at a branch, or over the phone. 

Managing Your Checking Account

Effectively managing your checking account is key to avoiding costly penalties and maintaining your financial health. Some important checking account management tips include: 

  • Regularly monitor your balance: Keeping a close eye on your available funds will prevent overdrafts, which can result in substantial fees. Regular monitoring also helps you understand your spending habits, aiding in budgeting and long-term financial planning.
  • Track your transactions: Recording or reviewing all your transactions, including checks, debit card purchases, and online payments, will help you manage your budget. Diligently tracking your transactions will help you quickly identify any unauthorized transactions or errors, allowing for timely disputes.
  • Set up account alerts: Most banks offer customizable alerts that notify you about specific activities in your account. You can personalize these alerts to message your phone whenever your balance falls below a certain amount, when large transactions occur, or when a direct deposit is made. These alerts can be crucial for managing your finances effectively, providing real-time updates that help avoid overdrafts, and detecting fraudulent activity as soon as it happens. 
  • Utilize online and mobile banking: Taking full advantage of your bank’s online and mobile banking services will help streamline routine financial activity. These platforms provide an easy way to check balances, transfer funds, pay bills, and deposit checks without visiting a branch, making account management more convenient and efficient.
  • Understand your account’s fee structure: Always be aware of any potential fees associated with your checking account, including monthly maintenance, ATM, and overdraft fees. Knowing these can help you take steps to avoid them, such as maintaining a minimum balance or opting for overdraft protection services. If you frequently travel abroad, research your bank’s international fees to avoid costly withdrawals in other countries. 

Common Checking Account Services

Checking accounts come with various services designed to provide you with convenience, security, and accessibility. Some of the most commonly offered services seen with checking accounts include:

Direct Deposit

This service allows your employer to directly deposit your recurring paychecks into your checking account. This saves you the hassle of having to go to the bank every two weeks to deposit your physical check. Setting up this service generally involves providing your bank account details to your employer or the agency issuing payments, and granting them access to electronically transfer your paycheck, government benefits, or other regular payments directly into your account. This method is highly efficient and secure, reducing the risk of lost checks and theft, while simultaneously allowing for earlier access to funds than traditional check deposits. Direct deposit ensures easy and timely receival of funds, making it a preferable choice for managing your income and benefits efficiently.

Online Bill Pay

This service allows you to link your checking account directly to your monthly bills and recurring expenses. Bills like your monthly water, garbage, gas, and electricity fees can be set up to automatically withdraw payment from your checking account, saving you time, drastically reducing the risk of late payments, and allowing you to keep track of your bills in one centralized location. Autopay can be activated on your credit cards as well, allowing you to automatically pay the minimum amount due each month. This is crucial for people looking to build their credit score and meet approval requirements for loans. 

Mobile Banking

Mobile banking is the way of the future. While there are definitely advantages to the customer service provided in physical bank or credit union branches, mobile banking eradicates the need to leave the comfort of your home to manage your bank account. With mobile banking, you can use your smartphone to check your balances, transfer funds between accounts, make mobile deposits of physical checks, and pay bills. You can even use your mobile banking app to quickly freeze your account if fraud or theft has occurred. Mobile banking apps are designed to be highly secure and safe, ensuring that your money and sensitive information are always protected. Many mobile banking apps are moving towards a two-factor authentication method of security, which makes hacking and cyber-theft immensely more difficult. 

Overdraft Protection

Overdraft protection is a service banks and credit unions offer to prevent transactions from being declined due to insufficient funds in your checking account. It works by automatically transferring money from a linked account to cover the shortage of funds when you make a transaction that exceeds your checking account balance. This can include any type of transaction, such as a check, debit card purchase, or online payment.


Easily accessible ATMs are one of the most important services for people who want access to cash. Having to travel a long distance to utilize an ATM that doesn’t charge a fee defeats the convenience that ATMs are meant to provide. ATMs are primarily used for withdrawing cash, but can also be used to make deposits and check your account balances. Banks and credit unions that have established and vast networks of ATMs are oftentimes more attractive than other institutions that have limited or sparse ATM options. It’s important that you have access to cash when you need it, and not with the hefty service fees that come with ATMs outside of your bank’s network. 

Understanding Overdrafts

Overdrafts occur when you make a transaction that exceeds the available funds in your checking account, leading to a negative balance. Common causes include failing to track your account balance closely, timing mismatches between outgoing payments and incoming deposits, and unexpected or recurring automatic payments that are larger than anticipated. Overdrafts can have significant financial consequences due to overdraft fees, which can be substantial per transaction, quickly adding up, amassing debt, and creating a financial burden. 

To avoid overdrafts, you can utilize several strategies: 

  • Closely monitor your account balances and transactions. Know when deposits are made and when bills are due to avoid any lapses. 
  • Set up low-balance alerts through your mobile banking app. This will give you real-time updates on the state of your funds, allowing you to cut back on spending accordingly. 
  • Opt out of overdraft protection options. These options are great to avoid declined transactions but often lead to substantial fees and debt.
  • Maintain a buffer or cushion in your checking account to cover unexpected expenses. This way, especially in emergencies, you won’t need to worry about overdrafting.

Checking Accounts and Credit Scores

Checking accounts themselves do not directly impact your credit score, as routine activities such as deposits, withdrawals, and transfers are not reported to credit bureaus. However, mismanaging your checking account and partaking in irresponsible financial behaviors can have serious ramifications on your credit score. For instance, if you repeatedly overdraw your account and fail to cover overdraft fees, this can lead to debts being transferred to collection agencies, which will have a negative impact on your credit score.

That being said, if you are fiscally responsible, you can use your checking account to build credit and strengthen your overall score. For example, you can set up automatic payments for loans and credit card bills from your checking account, ensuring timely payments that prove your trustworthiness. Certain financial institutions, like HFS Federal Credit Union, do not pull credit when opening a checking account, making it accessible for individuals looking to manage their finances without immediately affecting their credit. This approach allows individuals to use their checking account as a tool for financial stability, which can indirectly support credit-building efforts by facilitating the management of bills and debts. Other financial institutions may pull your credit during the approval process, which docs your credit score and leads to potential complications with securing loans.

Checking Account vs Savings Account

Checking accounts and savings accounts serve distinct roles within personal finance management. Checking accounts are designed for frequent transactions, including deposits, withdrawals, and payments, making them ideal for daily use, such as paying bills, receiving income, and making purchases. They typically offer unlimited transactions but lower interest rates compared to savings accounts. 

On the other hand, savings accounts are intended for long-term savings and usually offer higher interest rates to encourage saving. They may limit the number of withdrawals or transfers you can make each month, reflecting their purpose for storing funds rather than handling daily financial activities. Checking and savings accounts are often opened in conjunction with each other, as they are highly complementary. Your checking account is accessed regularly for daily transactions, while your savings account is built up for long-term financial accumulation.

Final Thoughts

Checking accounts are invaluable financial tools that offer convenience, accessibility, and security. Opening an account starts with choosing a financial institution that offers services that align with your personal financial needs and habits. Thoughtful consideration should go into your decision, focusing on the account features that will most benefit your overall financial goals. It’s important to survey the various fees and requirements associated with opening a checking account at different financial institutions before you make a final decision. Your checking account should simplify and streamline your daily financial transactions; choosing the right credit union to bank with is the first step in effective financial management.

Get Started with a Checking Account from HFS FCU

At HFS FCU, we understand the importance of accessibility and security. Banking doesn’t need to be a complicated and frustrating process. We’re here to help you achieve your financial goals in the easiest way possible. With competitive fees and user-friendly online services, HFS FCU is your go-to financial institution for checking accounts. We have numerous member rewards built into our services, and offer a variety of specialized accounts for each member.. Whether you visit one of our branches or interact with us online through our website or mobile banking app, you’ll feel the care that we put into our financial services. Contact us today to check out our personalized account options and start your journey towards fiscal responsibility and long-term financial freedom.


What’s a checking account?

A checking account is a type of bank account that allows for easy access to your funds for daily transactions.

What are checking accounts used for?

Checking accounts are used for daily financial transactions such as depositing paychecks, withdrawing cash, and paying bills.

How does a checking account work?

A checking account works by allowing you to deposit money that can then be withdrawn or transferred out through various methods, including checks, debit cards, and electronic transfers.

Can I Have Multiple Checking Accounts?

Yes, you can have multiple checking accounts, often with different banks for various purposes.

Can I Open a Checking Account Online?

Yes, many banks and credit unions allow you to open a checking account online.

How Do I Close a Checking Account?

To close a checking account, you usually need to contact your bank, bring the balance to $0, and follow their specific closing procedure.

What Happens If My Checking Account Is Overdrawn?

If your checking account is overdrawn, you may incur overdraft fees, and if not resolved, it could affect your credit score and banking history.

Is a Checking Account Right for Me?

Yes, checking accounts are right for anybody that wants easy access to their money for daily transactions, bill payments, and direct deposits.

Is a debit card a checking account?

A debit card is typically linked to a checking account, allowing direct access to the funds for purchases and withdrawals.