With so many different banking products available, it can be difficult to determine what you actually need. Some people might say everyone needs a savings account, while others think a CD or money market account is necessary. However, the one account everyone should have is a checking account.

If you’ve never had a checking account before, you might be wondering what is the benefit of a checking account. Beyond just depositing and withdrawing cash, there are several benefits of having a checking account.

Continue reading as we explore the benefits and introduce you to various types of checking accounts that may be suitable for your needs.

What is The Benefit of a Checking Account?

Having a checking account can help you manage your money easily. However, that’s not the only benefit. Here are the other benefits of a checking account.

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Receive Money Quickly With Direct Deposit

If you have a job or collect government benefits, there’s a good chance you get paid through direct deposit. By setting up a direct deposit, your employer can deposit your paycheck directly into your bank account. No more paper checks. No more waiting for the deposit to clear. Instead, when payday arrives, your money will be automatically deposited into your account, ready for use.

Get Paid Early

If you’ve set up direct deposit, many online banks are giving you the ability to receive an early direct deposit. This means your paycheck will typically arrive in your checking account roughly two days early. This allows anyone living paycheck to paycheck the ability to have their money early to pay bills and other expenses.

Easy Access With ATM Withdrawals

Most checking accounts come with a debit card, which enables you to make purchases online or in-store. It also allows you to access your money through ATM withdrawals.

However, depending on the bank you choose, there can be limitations on using an ATM to withdraw money. Some banks will only allow you to use their ATMs. If you use an ATM outside the network, you’ll be charged a fee.

Then, some banks partner with larger ATM networks, such as Allpoint or MoneyPass, which gives you access to a much larger number of ATMs. If you use an ATM within the network, you’ll be able to do so without a fee.

Earn Interest

One of the most significant downsides to most checking accounts is that they don’t allow you to earn interest on your balance. However, there are a few high-interest checking accounts that do provide an APY to their customers.

The biggest downside to most accounts that offer interest is that they have high account balance requirements. For example, you might need a checking account balance of $10,000 or more before being able to earn interest.

Additionally, other accounts may only offer interest on a limited balance. For example, you might earn 4.00% APY on the first $1,000 and then everything over that might only earn 0.01%.

Make Digital Payments

Having a checking account also opens up the ability to use digital payments, such as a mobile wallet (Apple Pay or Google Pay), or a peer-to-peer payment app like Venmo or Zelle. All you need to do is set up your payment account with your bank account number or debit card number. Then you’ll be able to make digital payments with the funds in your checking account.

Track Your Spending

One of the most underrated benefits of a checking account is that it can help you track and manage your spending. Being able to see each transaction in your account allows you to spot anything unusual that could be a sign of fraud.

If you spot unauthorized transactions, most modern checking accounts allow you to freeze your account online without needing to visit a branch location.

Peace of Mind With FDIC Insurance

There was a time when people would hide their money in the weirdest places because they didn’t think it would be safe in the bank. However, placing it in a checking account might be one of the safest places for it to be, as long as the balance isn’t too high. The reason is because of FDIC insurance.

FDIC insurance protects the money in your checking account, up to a certain limit (usually $250,000), in case a bank were ever to fail. Think of FDIC insurance like you would homeowners’ insurance on your home, or car insurance on your car. If the bank fails, the federal government would repay the money you had in your account.

Teach Your Kids Positive Money Management Skills

Teaching kids good money management habits at an early age can help set them up for success as they get older. Setting up a teen checking account for your kids will allow them to monitor the money that comes in and leaves the account. It will also help teach them the basic concepts of budgeting.

What Are The Disadvantages of Having a Checking Account?

Some Accounts Don’t Earn Interest

While some accounts offer interest, most don’t. Given that the long-term average inflation rate is 3.28%, money not earning interest is losing value each day. This is one of the reasons why most experts recommend keeping only one to two months’ worth of expenses in your checking account.

Also Read: How Much Money Should I Keep in My Checking Account?

Minimum Balance Requirements

With some checking accounts, especially those that offer rewards to their customers, there may be balance requirements. If your account balance falls below a certain level during the month, you might be required to pay a monthly maintenance fee. These types of bank fees can eat into your account balance, so it’s best to look for a checking account that doesn’t have any balance requirements.

Account Fees

Minimum balance fees aren’t the only fees you need to be aware of. Some accounts will also charge you a fee if you overdraft your account, use an ATM that’s not within their network, or use your debit card while traveling outside the United States. Understanding if your account charges these types of fees and if there are ways to avoid them will be important.

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Different Types of Checking Accounts

• Traditional Checking Accounts: A traditional checking account is a common financial tool used by many people. They provide accountholders with a debit card, the ability to write checks from the account, and ATM access. Some of these accounts have fees, especially accounts with the best bank bonuses.
• Online Checking Accounts: Online checking accounts allow you to conduct your banking online and typically don’t have any physical locations. Due to the lower overhead, these checking accounts usually allow you to avoid fees. SoFi, Discover, and Capital One are examples of banks that offer online checking accounts.
• Teen/Kid Checking Accounts: Some banks offer checking accounts just for kids or teens. These accounts may have additional features for budgeting or money management to help teach users how to manage their finances effectively. They could also allow parents to set up alerts so they know when the account is used and what the transaction was for.
• Joint Checking Accounts: Joint checking accounts allow multiple individuals to access the funds in the account. These are ideal for married couples who want to share the same account.
• Business Checking Accounts: If you run a small business, you’ll want to have a business checking account. These will allow you to keep all your business and personal transactions separate.