What is a checking account?
When you think of a checking account, you might imagine old-fashioned paper cheques. These are increasingly uncommon in Australia, but the checking account is still widely used. Find out more about what is a checking account, and whether its a good option for you. Understanding checking accounts  A checking account is a deposit account used in day-to-day banking. In Australia, its also known as an everyday banking account or transaction account. Checking accounts can be opened with any financial institution that allows deposits and withdrawals, and theyre designed to be liquid. In other words, youll have easy access to your accounts cash. Because of this liquidity, checking accounts are usually where employers deposit salary or where you might transfer savings. They can be accessed with many payment types, including electronic debits, automated teller machines, and paper cheques. While other bank accounts might limit withdrawals and deposits, there are fewer limitations with a checking account. However, the trade-off for this is usually that you wont receive any interest in return. There are many different types of checking accounts:  Commercial checking account  Business checking account  Student checking account  Joint checking account  What they all have in common is fast access to your funds, making them ideal for everyday banking transactions and bill paying. Commercial accounts are owned by businesses, allowing officers and managers to have authority over the funds. Joint accounts offer access to two or more people, who can make payments or write cheques using the same shared account. Savings vs. checking accounts  Checking accounts are used for day-to-day transactions, making them a convenient place to store money in the short or medium term. You can link them to payment apps like PayPal, pay bills, and directly deposit your paychecks. Theres usually no limit on your withdrawals and they come with personal cheques and debit cards linked to the account. By contrast, savings accounts are better for long-term storage of your money. There are often limits on withdrawals, and fewer ways to access your money. The benefit of savings accounts is that you receive higher interest rates in comparison to checking accounts. Its beneficial to have both a checking and savings account, to reap the rewards of both financial products. Many checking accounts do charge fees, which is why its important to shop around before you open one. Some banks institute a required minimum balance, for example. If you allow your account balance to drop below this minimum during the month, youll be charged a fee. Additional fees might include:  Start-up fees  Monthly maintenance fees  Overdraft fees  Limit on cheques  The answer to do checking accounts have fees isnt always yes. You can also find checking accounts with minimal or zero fees. In fact, many commercial banks use these types of accounts as loss leaders. Checking accounts are offered as a product below market value in a bid to attract new customers. A business might sign up with a bank, lured in by the promise of a free checking account. The bank can then market more profitable products like mortgages, certificates of deposit, or loans to make up the shortfall. How to use a checking account  You can get started with learning how to use a checking account by simply signing up for one. Sign-up is easy in Australia; you can either set one up in person at a local bank branch or the financial institutions website. The two main purposes of a checking account are to make deposits and withdrawals. To make deposits, you have several options. Money is deposited into a checking account through electronic transfers like direct deposits, or it can be deposited using ATMs. You can also make a deposit in person at the bank. In order to make withdrawals with your checking account, you can write cheques, use electronic debit or credit cards, or request a withdrawal in person at the bank. Paying bills with a checking account is easier than ever thanks to online banking. Rather than writing and mailing paper cheques, you can go paperless via electronic transfer. Smartphone banking apps also enable deposits, withdrawals, and transfers. Overall a checking account is a worthwhile addition to your daily financial tools, both for personal and business transactions. Shop around carefully to find the account with the best terms and conditions. We can help  GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.