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Checking account

A checking account is a deposit account opened at a bank that allows making numerous withdrawals and unlimited deposits. Checking account is the most liquid account and can be easily accessed at any time using ATMs, checks, online banking, credit or debit card. Due to its characteristics, checking account is also known as demand or transactional account.

Many financial institutions offer checking accounts for very low monthly or annual fees and traditionally banks use this service as a loss leader. The loss leader is a term in marketing, which includes offering a product below its market value in order to attract consumers. When the consumers have been attracted with free or low-cost checking accounts, banks offer them more profitable products, such as mortgages, personal loans, investments in life insurance or retirement funds.

Functions of checking account

Different types of checking accounts have been designed in order to meet the requirements of the users. They can include student accounts, business accounts, as well as joint accounts for households. Generally, checking accounts do not offer any interest return due to its liquidity.

Checking accounts are easy to set up at bank branches for a private individual. For businesses, you might be required to go through a certain procedure depending on the bank rules and state regulations. Checking account is one of the most practical solutions for keeping your cash available for any transactions, such as paying your bills, purchasing goods online, as well as paying with a credit or debit card in a store. Demand account is the most simple bank service and is used by almost every bank customer in the world. This account gives you a freedom and convenience when accessing your funds immediately and without any extra charges, except transaction fees in some cases.

Some banks offer checking accounts with a certain credit limit, which you can use in case of an emergency. If this is the case of your transactional account, you can be restful that you have an access to some extra cash at any time. Meanwhile, you should be more careful in order not to exceed your balance without an important reason. Typically, this short-term credit is tied to huge interest. For some people, who like spending all accessible cash, checking account with credit line might not be the best option.

pen hovering above a cheque

Advantages & disadvantages of checking account

Although checking accounts in terms of liquidity are close to cash, it is considered that keeping your money in a bank and accessing it over your transactional account may reduce unnecessary spending. It is also a good alternative to cash in case of a robbery, wallet loss or other accidents. Instead of losing all your cash, your funds would safely be held in your bank account.


Nowadays, it may be hard to imagine receiving your paychecks in cash, which include physical reception after depositing cash in your account. It is hard to imagine going and paying for your utilities and other bills. Checking accounts even allow you to set up regular payments for mortgage or other payments that occur on a regular basis easily.

Most of the banks also offer debit or credit cards tied to your transactional account, which allows you to debit funds from the account by going to your closest ATM instead of visiting the branch, standing in queues and paying transactional fees. In addition, credit and debit cards allow you to do online shopping, purchase plane tickets and rent a car. Your credit or debit card information can also be used as a personal identification method for different sites online.

checking account flowchart


Overdraft fees and huge interest payments are the biggest disadvantages when using a checking account. Many people do not notice when the negative balance is reached and due to the interest payments that may be up to 20%, the credit is growing at a high speed. Luckily, credit line, as the name implies, goes only with a credit card, while it’s impossible to open a credit line for a debit card. Therefore, when deciding what type of card you should chose with your demand account, evaluate your ability to control your spending.

Confidus Solutions

Our professional team of lawyers and bank agents will help you to choose the bank and type of account. We have many years of experience in servicing private and corporate clients. If you have any questions regarding bank accounts and their types – please check F.A.Q. section or contact us now!