Checking Account Basics: Understanding Personal Checking and Your Finances

One of the most important parts of managing your money is figuring out where to keep it—which is why understanding the basics of checking accounts is so important to your financial success.

While there are several options for where you can save your money, keeping at least a small part of your money in an FDIC-insured checking account is a great way to manage everyday expenses like food, gas and bills.

But what is a checking account? Does it differ from a savings account? How do you choose an account that’s right for you?

We’ve provided a quick summary of what you’ll need to know below. However, please keep in mind that finding the best strategy for your specific situation is something you should discuss with your local banker.

What is a checking account?

A checking account is a bank account designed for everyday use that makes it easy to deposit, withdraw and transfer money. Like savings accounts, checking accounts keep your money safe until you need it.

However, while most savings accounts come with restrictions on how many deposits or withdrawals you can make in any given month, checking accounts generally have no restrictions on how frequently you can use them.

The trade-off for this flexibility is that checking accounts often have much lower interest rates than comparable savings accounts and certificates of deposit (CDs). For this reason, it’s generally smart to use a checking account for your immediate needs such as rent, groceries or paying down your credit card. You can then use a savings account for any long-term financial goals, such as saving up for a larger purchase or building out an emergency fund.

How do I use a checking account?

Different accounts have different features that can affect how you manage your finances. For example, if you want your money to grow over time—and don’t need it in the near future—you may want to put it in an investment or savings account so it can grow in value over time.

Checking accounts, on the other hand, are usually used to save up for short-term expenses like rent or next month’s groceries.

For example, you could:

• Have your employer direct deposit your paycheck into your checking account to gain immediate access to your money.
• Write checks to other people or entities to easily transfer money from your account to someone else’s.
• Make purchases with the debit card attached to your checking account.
• Make withdrawals and deposits at your local branch or any ATM.
• Use your bank’s online services to pay bills, set up recurring payments or transfer funds from one account to another.

Keep in mind that checking accounts have low interest rates, meaning that you generally wouldn’t store large amounts of money in a checking account. Instead, a good general guideline is to try to keep around one to two months’ worth of living expenses in your checking account, plus a small buffer for any unexpected expenses.

If you have more than this amount in your checking account, consider opening a savings or investment account instead so your money can gain more interest and grow over time.

How to choose a checking account that’s right for you

People use money in different ways, and there’s no single “best” checking account that’s right for everyone. For this reason, it’s smart to compare the benefits of different checking accounts to find the one that’s right for you.

As you’re looking at the different checking accounts that banks have to offer, there are a few things to keep in mind:

• Does the account have a minimum deposit? Some banks and account types require a small deposit upfront to let you open an account.
• Does the bank charge any fees related to the account? Some banks charge monthly maintenance fees and administrative fees, while others charge fees to use ATMs and other services.
• Does the checking account pay any interest? Banks will typically offer a small interest rate each month depending on how much money you have in your checking account, and while checking accounts normally earn less interest than savings accounts, it’s certainly a factor worth exploring.
• Is the account FDIC-insured? If so, then your account is protected for up to $250,000. This means that the account is backed by the U.S. government and your money will be protected in the event of a financial crisis (with the most recent example being the 2008 financial crisis).
• Does the bank have easy-to-use digital banking options? You can perform many common banking tasks quickly and easily on your computer or phone, so having a convenient and secure way to manage your checking account is an important aspect to consider.

The biggest factor, however, is whether the checking account—and the bank—works for you.

Remember, you’ll likely log in to your checking account at least a few times every month to pay bills and check your balance. Since you’ll be using the account regularly, you’ll want to work with a trusted banking partner that can help you manage your finances in a way that fits your lifestyle.

For this reason, it’s smart to choose a bank that’s active in your local area so you can easily access any resources you’ll need from people who live and work in your community.

Should I open a checking account or a savings account?

Checking and savings accounts may seem similar at first glance, but they’re very different in practice. To quickly summarize the differences:

• Checking Accounts — Checking accounts are set up to help you manage everyday deposits and withdrawals. Often, this means you’ll deposit your paycheck or any other money into your checking account and use this money to pay any bills and other expenses. Checking accounts typically come with debit cards and make it easy to withdraw cash through your bank’s ATM network. However, they generally have low interest rates, meaning you won’t make much money off of your money if you keep a large balance in a checking account for long periods of time.
• Savings Accounts — Savings accounts are typically set up for storing money for longer periods of time. You’ll usually gain more interest on money you have in a savings account versus a checking account. However, you may not see the same returns as if you’d invested the money in the stock market or put it in a certificate of deposit (CD). Savings accounts sometimes also have limits on how often you can deposit or withdraw money, and usually don’t come with a debit card (though you may get an ATM card depending on the bank).

To summarize—the key difference is that checking accounts are typically used for everyday or monthly spending, while savings accounts are typically used for storing your money for longer periods of time.

Since each account type has different benefits, you may want to consider opening both a checking and savings account at a local bank (rather than relying on just one account type).

Checking account FAQ

Organizing your finances can be difficult at first, and you may have some questions about checking accounts and how you can use them to improve your financial situation. Below, we’ve provided some quick answers to the most common questions we get about checking accounts.

If you have any additional questions—or if you’d like to chat about your options with someone in person—don’t hesitate to reach out to your local Associated Bank branch.

What do I need to open a checking account?

Banks have a few basic requirements for opening a checking account, such as being 18 years or older and a legal U.S. resident. You’ll also have to provide your Social Security number and a valid government ID (such as a driver’s license or passport). In some cases, the bank may also require a minimum initial deposit, usually between $25 and $100.

What are the benefits of using a checking account?

The primary benefit of a checking account is the ease at which you can deposit, withdraw, transfer and manage your money. In addition, checking accounts provide several benefits over other ways of saving your money, such as increased flexibility, FDIC insurance of up to $250,000, access to a debit card and the option to have your employer deposit your paycheck directly into your account through direct deposit.

Should I open a checking account or a savings account?

Many people choose to open both a checking and a savings account at their local bank to take advantage of the benefits of each.

Checking accounts are better for everyday expenses because they give you easy access to your money, but generally have lower interest rates.

Savings accounts are better for money you don’t plan on using frequently, such as if you’re saving up for a car or just want to have an emergency fund saved up for a rainy day. Savings accounts generally have higher interest rates, but also usually have limits on how much you can withdraw. They also usually don’t come with debit cards.

How do I write a check?

Writing a check can sometimes be confusing. However, it may seem easier if you think of a check as a formal IOU with the information a bank needs to complete the transaction.

When writing a check:

1. Start by filling out today’s date at the top to make a record of when the check was created.
2. On the line titled “PAY TO THE ORDER OF” write who you want to send the money to. Note that you need to be specific here, as banks will only let the named person or entity cash the check.
3. In the “Amount” box (to the right of the dollar sign) write how much the check is for. Make sure to write out the full amount including the cents, such as “$100.00” or “$234.56.”
4. On the next line, write out the check’s amount in words so the bank can confirm the amount is correct (“one hundred dollars” as opposed to “$100.00”).
5. At the bottom of the check, you’ll find two lines. The first (“For”) is an optional memo line where you can write what the check is for (such as “rent” or “gift”). The second is the signature line where you should sign your name to validate the check.

How do I cash or deposit a check?

There are several ways to cash or deposit a check. If you have a checking account, the easiest way would be to cash the check either in-person at your local bank branch or online using your bank’s mobile app.

If you want to cash the check in person, go to your local bank and hand over the check and an ID or bank card (such as a debit card) to the teller. The teller can then give you cash for the check or deposit the amount directly into your account.

If you’d prefer to cash the check digitally, most banks offer virtual check cashing options through their mobile apps. If you choose this route, you’ll have to take a picture of the front and back of the check using your phone and upload these photos to your bank through their app.

In either scenario, make sure to endorse the check by signing your name on the back immediately before you hand it over to the teller or upload the image to your mobile app.

If you don’t have a checking account with a bank, there are still several options available for cashing the check. For example, you could take the check to the bank that issued it or cash the check at a local retailer or grocery store.

Note, however, that cashing the check anywhere but at your own bank will likely mean paying a small fee of either a few dollars (usually less than $10) or a percentage of the check’s total amount.

What do all the numbers on a check mean?

Most checks include three numbers that you should be aware of: the routing number, the checking account number and the check number. These are usually written along the bottom left-hand corner of the check:

• Routing Number — The routing number is a 9-digit code that identifies the financial institution where your money is being held. Routing numbers are assigned by bank and state. So, all checks issued by your local Associated Bank branch will have the same routing number, no matter who they are issued to. Meanwhile, a larger bank might have different routing numbers for their operations in each state or region.
• Checking Account Number — The checking account number identifies the checking account that the check is associated with, and the account that the money will come out of. This number is private to you and unique to your bank account.
• Check Number — The check number simply identifies the specific check that you’re holding. Generally, checkbooks will have around 100 checks, each with an associated number to identify which check is which.

Using a checking account to improve your finances

Opening a checking account is an essential first step in getting a handle on your finances.

Checking accounts offer a variety of benefits when it comes to managing and saving your money, including easy access to your funds, multiple ways of depositing and withdrawing money and automated solutions for paying your bills.

Finding a checking account that works for you will largely depend on the bank and its offerings. When looking for an account, keep an eye out for a bank with superior customer service, local banking options and tools to help you bank efficiently—digitally or in-person.

Associated Bank offers a variety of personal and business checking options to help you easily manage your money in-person or online. If you’re interested in opening an account with us, please schedule an appointment to speak with a local banker who can help set you up for financial success.