Checking accounts are among the most liquid bank accounts, which means you have easy access to your money. They frequently enable limitless deposits and withdrawals (depending on the bank, they may have daily maximums ranging from $300 to $5,000).
A checking account’s principal goal is to keep your money in a safe place for the short term, so it’s available when you need it to pay bills and other costs. You can have your paycheck deposited directly into your checking account and then transfer a portion of your earnings to a savings or investment account where it can grow over time. Checking accounts should not be used for long-term goals such as saving for a home because the interest rate is so low, averaging around.04%. However, some banks may provide a range of checking account tiers, so there is always the possibility of earning somewhat higher interest if you retain more money.
Fees for standard checking accounts
Checking accounts, like most financial products, frequently carry fees. Here are two of the most prevalent (along with tips on how to avoid them):
Monthly service fee: Many checking accounts, particularly those from central banks, impose a monthly service fee of up to $15 to keep your account. If you meet specific requirements, such as maintaining a minimum level or setting up a direct deposit, you may be able to avoid paying the monthly charge. There are also no-fee checking accounts with no monthly fees.
Overdraft fee: If you spend more than the amount in your account, you may be charged an overdraft fee of up to $30. Overdraft protection, which will deny transactions bigger than your checking account balance or transfer extra funds from a linked savings account, will help you avoid this.
Savings vs. checking accounts
While checking and savings accounts are both bank accounts, they serve different functions and allow for various actions. Here are some important distinctions:
Checking accounts include a debit card. You can withdraw funds from your checking account using the debit card you receive. Savings accounts do not come with a debit card, but if your account is connected to a checking account at the same bank, you may be able to use one to access cash.