Checking account is held for transaction purposes and the financial institution in which it is created allows you to deposit and withdraw. Money in checking account features liquidity and can be taken off by writing checks or via automated cash machines, electronic debts or other methods.
There are several differences between checking accounts and other accounts. With checking accounts, you will enjoy the privileges of unlimited deposits and withdrawals, both of which are a big miss in case you have a savings account. Checking accounts include student accounts, joint accounts and business accounts and there are several other types having same features.
A checking account is also known as transactional account or demand account. Though checking accounts offer liquidity manifesting through quick deposits and withdrawals several times but this advantage comes at the cost of low interest rate.
Usually all banking institutions will allow their customers or to-be-customers to open a checking account. You may be charged no fee or a minimum fee. With advent of e-banking system, people can now automate payment procedure for monthly expenses with help of checking accounts.
Larger commercial banks consider checking or transaction accounts loss leaders as these are heavily commoditized. That is why banks are offering low fee. These banks want their customers to turn attention to more profitable features like CDs or certification of deposits, mortgages and loans.
Due to liquidity of money in checking account, aggregate balances throughout the nation are taken into consideration to calculate MI money supply within the economy.