By: Mark Thomas Walters

A checking account is a standard type of bank account that allows you instant access to your money through a number of different channels. The service is typically offered by financial institutions such as banks and credit unions. Checking accounts do not earn the holder interest and are not a popular choice for saving money. However, for day to day transactions, and for ease of use and convenience, they are perfect.

There are practically no limitations on the amount of money and the number of transactions that are allowed. With a checking account, the depositor can make use of a variety of payment methods like checks and money orders, ATMs, direct debit, SWIFT, standing order, online banking services, etc.

Low-income individuals and students may apply for no-frills checking accounts. This type of account should not have per items fees or monthly service charge. It allows the use of personal checks, together with other services, free of charge. Since banks are not earning interest, they try to coax holders into buying various services from insurance packages to mortgages.

Another feature of the checking account is the availability of an overdraft, that is withdrawing a larger amount of funds than the one currently available in the depositors account. The negative balance might be previously agreed upon with the bank. This means that the account provider is actually lending money to the depositor. It happens under a specific interest rate within the amounts negotiated between the two parties. However, if the overdraft exceeds them, the institution might impose higher interest, which differs from bank to bank and from country to country.

If you would like to earn interest on the money that you have in your checking account, then one option is to opt for a NOW (Negotiable Order of Withdrawal) account, which is very similar, but which includes interest payments on the funds in your account. Not all financial institutions offer this type of account, but ask around and you will be able to find one that does. Typically, banks determine a minimum account balance for applying a particular interest rate but, in 2003, a maximum balance was established. In practice, this means that you will only really earn interest on money that falls within the lower and upper thresholds. Though not ideal, it is better than not earning any interest at all.

Different financial institutions will also have slight variations on what they offer. Some will pay extra interest to you if you use your account in a certain way, whereas others will pay less interest to you if you do the same thing. Therefore, you need to spend a little time doing some research on the Internet to ascertain which bank best meets your specific needs. To summarize, if you want a convenient and efficient way to look after your money, then checking accounts are perfect for you. A saving account pays more interest while, checking accounts eliminate the need to keep large amounts of cash.

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