If you’re conducting a self check-up on your cash, you’ll want to start by making sure that you have the right checking account. There are loads of other big-picture financial worries -- saving for retirement, taking out a loan to buy a car, comparing mortgages -- but checking accounts are the foundation of your money management.
People tend to stick with the same checking account for a long time, too. In fact, research from CNET’s sister site, Bankrate, shows that the typical adult keeps the same checking account for 17 years. That’s longer than most people will drive the same car (eight years) or live in the same house (12 years).
With that in mind, it’s important to understand all the basics of checking accounts to find one that can meet your needs today and will grow with you in the future.
What is a checking account?
Historically, a checking account did exactly what the name implies: It allowed you to write checks. As more account holders are breaking up with the old-school paper-based form of payment, a checking account is still as important as ever. Your employer can send you direct deposits, which you can then transfer to savings and investment accounts. So, your checking account is central to one of the most important things on your to-do list: getting paid.
Your checking account balance -- which is insured at a federally insured bank for up to $250,000 per account by the Federal Deposit Insurance Corporation (or the National Credit Union Administration if you do your banking at a credit union) -- serves as your everyday expense account. You can use a debit card linked to your checking account to, among other things, pay for items, send person-to-person payments to your friends to split a dinner bill and make an online bill payment to cover your electricity for the month. Simply put, a checking account is the core of your money.
What to look for in a checking account
While checking accounts have some basic similarities such as FDIC or NCUA insurance coverage and processing times for transactions, the benefits and fees can vary widely. Even at the same bank, you may find a free checking account alongside another checking account that can come with monthly fees of $30 in exchange for more perks.
As you compare different options, be sure to ask yourself these important questions to find the right checking account:
- Do you want to worry about fees? If the answer is no, narrow your selection process solely to free checking accounts. These may still charge fees for more rare activity -- stopping a check payment, for example -- but you won’t have to deal with any concerns about monthly charges simply for having an account.
- What are the minimum balance requirements? Banks want more of your money (that’s how they make money -- by lending it out), so you’ll need to be comfortable that you can hit their minimum balance thresholds each month. These vary from easily attainable amounts like $1,500 to massive chunks of $150,000 for private banking options.
- What’s the current interest rate? Interest rates on checking accounts are variable, but right now, the best high-yield checking accounts are paying more than 4% on deposits. If your main focus is earning interest, your best bet will likely be an online bank.
- Is there a sign-up bonus? Some banks and credit unions will pay you a nice chunk of money -- typically around $200 -- for opening a new checking account. If you’d like to see a small bump in your bottom line right now, take your business somewhere that will pay you upfront.
- Does the account offer discounts for other services at the bank or credit union? Your checking account is only one piece of your money puzzle. Compare options to see if certain accounts can help you save money with a mortgage rate discount or an auto loan discount.
- How often do you need to deal with cash? If you’re constantly paying in cash or you’re regularly making cash deposits from your work, the checking account’s ATM network should be a deciding factor. Additionally, some accounts offer reimbursements for out-of-network ATM fees. However, if you’ve shifted to a largely cashless lifestyle, ATM fees don’t need to be part of your consideration process.
- What kind of technology do you want to access? Banks have come a long way in their digital offerings -- but some are further down the high-tech pathway than others. If you’re looking for access to the latest and greatest mobile app available, you may want to look at the best big banks, which have the budgets to invest in emerging tools to transform the customer experience.
Types of checking accounts
|Type of account
|Who should consider it?
|Typically a no-frills account with fewer services but fewer fees. Often doesn’t have any sort of minimum balance or transaction requirement.
|Anyone who needs the core functions of a checking account and wants to avoid fees.
|Typically offers higher interest rates than the bank’s standard checking account. May include other benefits such as rate discounts for mortgages and auto loans.
|Anyone who can satisfy higher balance requirements and are looking to keep all their accounts under the same roof.
|Compounds interest at a set interval (daily, weekly, monthly or quarterly).
|Anyone who wants to earn interest on their checking account balance.
|May come with additional services such as payroll services and ability to accept credit and debit card payments from your customers. May require higher minimum balance to avoid monthly fees.
|Anyone who wants to maintain a separate account for their business dealings as a qualifying corporation, LLC or sole proprietorship.
|Often includes free checks or lower to no monthly fees.
|Anyone who meets the bank’s age requirements for a senior account -- often 62 and older.
|Typically doesn’t charge any monthly fees. Often includes the ability to manage jointly with a parent or guardian.
|Anyone who meets the bank’s or credit union’s definition of a student, which can range from middle school to college.
|Cash back rewards for debit card spending. Typically requires a certain number of monthly transactions.
|Anyone who likes to use their debit card for most transactions and wants to take advantage of cash-back earning potential.
|Offers other standard checking account services like a debit card and online account management. May charge fees.
|Anyone who doesn’t need to write physical checks.
|Private bank checking
|Requires a large amount of cash to be deposited at the bank. Includes additional benefits like foreign currency exchange services and cash flow management tools.
|Anyone with a huge chunk of cash who wants an elite-level banking experience.
|Designed specifically for those who have struggled with money management. Often includes a mandatory monthly fee.
|Anyone who has faced financial hardships in the past such as a bankruptcy or repeated overdrafts.
- Traditional checking: A traditional checking account will give you all the basics of a standard account. You’ll get a debit card and you can order paper checks, too (often for a fee). Some of these accounts will require you to maintain a minimum balance or receive monthly direct deposits to avoid any fees. However, the traditional checking account category also includes free checking accounts, which won’t charge you any extra costs.
Who should consider it: Anyone in need of a basic checking account and doesn’t want to worry about high fees or minimum balance requirements.
- Premium checking: Premium checking accounts offer a higher level of service than traditional checking accounts, which might include free checks and options to link a savings account for automatic overdraft coverage. Some of these accounts might appear with other labels such as “Advantage” checking, and these will likely have higher minimum balance requirements to qualify for fee waivers each month.
Who should consider it: Anyone who can meet higher minimum balance requirements.
- Interest-bearing checking: Interest-bearing checking accounts are exactly what they sound like: They’ll pay interest on your deposit balance. However, it’s important to understand that interest-bearing can range from nominal payouts (some of the biggest banks pay 0.01% APY, which is effectively worthless) to supersized payouts above 4.00% APY. There may be some fine print to consider, too. For example, you might only earn the highest rate if you make a bigger deposit, or you might be capped at earning a higher rate up to a certain balance threshold.
Who should consider it: Anyone who wants to earn interest on their checking balance.
- Business checking: Business checking accounts are designed to help business owners manage cash flow, pay employees and accept credit and debit card payments from customers. These tend to require hitting a minimum balance threshold to avoid monthly fees. They’re helpful for all kinds of business -- even self-employed sole proprietors who want to keep their money better organized.
Who should consider it: Anyone running any type of business.
- Senior checking: Just as many other businesses have discounts for senior citizens, the banking industry also offers checking accounts that are designed to help older people manage their money -- often for less. Senior checking options typically charge lower or no monthly fees.
Who should consider it: Anyone who can meet the bank’s definition of senior (usually ages 62 and older).
- Student checking: The most common student checking accounts are geared toward young adults in college, although there are also options for teens, too. Student checking accounts are designed to help introduce young people to the world of personal finance management, and the fees are typically lower (or free). You’ll need to show proof of your status as a student. It’s important to note that you won’t be fee-free forever with these accounts. They typically come with a time window before shifting to a traditional checking account.
Who should consider it: Ideal for college students.
- Rewards checking: Rewards checking accounts are arranged to pay you back for your spending on your debit card. You’ll typically need to make a certain number of monthly transactions or maintain a minimum balance to qualify for the cash back rate. Cash back rates tend to be lower than credit card rewards programs, but that’s OK: Using your debit card means managing your cash flow and never worrying about paying interest on a balance.
Who should consider it: Anyone who does most of their spending on a debit card.
- Checkless checking: The name says it all. You won’t get to write checks with a checkless checking account. Make sure you compare traditional free checking accounts options, though. Some checkless checking accounts charge monthly fees, so you could actually pay more for fewer services.
Who should consider it: Anyone who doesn’t have the need to write checks.
- Private bank checking: Private bank checking accounts are for the bank’s most coveted customers -- the ones with a lot of money to manage. You’ll get access to more personalized service and some other benefits such as foreign currency exchange services. However, you’ll need to maintain a sizable minimum deposit across all your accounts at the bank (private bank customers don’t usually just have checking accounts; they tend to have investment accounts and a number of other products at the bank).
Who should consider it: Anyone who wants an exclusive banking experience and has a lot of money to deposit.
- Second-chance checking: Second-chance checking accounts are designed for customers who have encountered challenges with managing their money in the past. If, for example, you racked up overdraft charges or bounced a check, some banks might not approve your application for a traditional checking account. Second-chance checking isn’t available everywhere, so you’ll need to look around. These accounts typically include mandatory monthly fees -- $4.95 is a common charge -- so you’re going to need to pay for the access.
Who should consider it: Anyone who has been denied an application for a traditional checking account.