Do I Need a Checking Account?

Quick Answer

A checking account makes it easier to store money safely, pay bills efficiently and make purchases without the risks and hassles of using cash. Here are the benefits of checking accounts and how to open one.

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Do you use cash to pay for everything? There's an easier way. You'll generally need a checking account to efficiently complete everyday transactions such as paying bills or making purchases. Going through life without a checking account may be possible, but it can be time-consuming, costly and tedious. Find out why a checking account is so useful and how to open one.

Reasons Why You Should Open a Checking Account

Checking accounts are bank accounts you can use to deposit and withdraw money, pay bills and transfer funds to and from other bank accounts. A checking account usually comes with a debit card you can use to access ATMs or make purchases. Opening a checking account has many benefits, including:

  • Fast access to your money: Many checking accounts allow you to access your paycheck, benefits check or tax refund up to two days sooner via direct deposit. Without a checking account, you'd have to wait until your check is issued or arrives in the mail, then cash it by visiting a retailer, check cashing store or the issuing bank.
  • Security features: If your cash, prepaid debit card or gift card is lost or stolen, you're usually out of luck. If someone accesses your checking account fraudulently, however, you generally won't lose any money if you report the fraud in a timely fashion. Funds in a checking account are protected up to certain limits even if your financial institution fails, as long as your bank or credit union is federally insured.
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  • Simplifies financial transactions: Paying bills and making day-to-day purchases is easier with a checking account. Not all businesses accept cash; even if they do, do you really want to make a trip to the utility company's office to pay your bill, or wait around to meet up with your landlord and hand over an envelope full of cash? With a checking account, you can use your linked debit card for purchases or write checks to pay bills. Easier still, you can set up online bill pay to electronically pay bills directly from your checking account quickly and securely, helping you avoid missed payments and late fees.
  • Helps you budget and manage your money: A checking account provides a real-time record of your spending, revealing where your money goes and helping you stick to a budget. Many banks provide free budgeting tools synced to your account, which can be easier to use than spreadsheets or standalone budgeting apps.
  • Mobile account access: Visit your bank's website or use the mobile app to see your checking account balance or set up alerts of withdrawals, deposits and more. You can even use mobile banking apps to conveniently deposit paper checks wherever you are.
  • May earn interest and rewards: High-yield checking accounts available from some banks pay interest on your account balance, which can help your money grow. Currently, you can find high-yield checking accounts with annual percentage yields (APYs) north of 3%. Some checking accounts even offer rewards such as bonuses for opening an account; ATM fee refunds; or points, cash back or discounts on debit card purchases.

How to Choose a Checking Account

To find the best checking account for you, compare accounts from various banks and credit unions. Consider the following factors:

  • Fees: Checking accounts may charge monthly maintenance fees, non-network ATM fees, overdraft fees, nonsufficient funds fees and more. Find out what triggers fees and any options for having them waived.
  • Branch and ATM locations: Make sure the bank has enough convenient locations and ATMs for your needs.
  • Bank services: Even if you don't need them right now, access to services such as home loans, auto loans, cashier's checks, money market accounts or certificates of deposit (CDs) might be useful later on.
  • Overdraft protection options: See if the bank offers overdraft protection, which advances you money to cover shortfalls in your checking account. Although there's typically a cost for this, it can help you avoid missed payments and late fees.
  • Interest earnings: If a checking account produces interest, weigh your potential earnings against any fees or minimum balance requirements.
  • Rewards: Investigate any rewards an account offers, such as cash back, points or bonuses for opening an account.
  • Security: To help safeguard your money, look for a bank federally insured by the Federal Deposit Insurance Corp. (FDIC) or a credit union insured by the National Credit Union Administration (NCUA).

What Do I Need to Open a Checking Account?

You can open a checking account by completing an application online or in person at the bank (if it has physical locations). Check the bank's website to see what information is required. In most cases, you'll need the following to open a checking account:

  • Government-issued photo identification, such as a driver's license, state ID card or passport
  • Social Security number or taxpayer identification number
  • Contact information
  • Birth date
  • Proof of your address, such as a mortgage statement or utility bill with your name on it

If the bank has a minimum initial deposit requirement, you'll need to deposit money into your account. You can generally do this via cash or check or by transferring funds from another bank account. Have your account and routing numbers ready if using the latter option.

What to Do if You're Denied a Checking Account

If your application for a checking account is rejected, get a copy of your ChexSystems report. This report contains information about your previous bank accounts. Banks and credit unions review your ChexSystems report when you apply for an account. They may deny you a checking account if the report shows negative information such as unpaid bank fees or a history of overdrafts or nonsufficient funds.

You can address any problems your ChexSystems report reveals by paying outstanding fees and disputing errors. This can help you qualify for a checking account. If you're still having difficulty getting approved, consider applying for a second chance checking account. Tailored for people who can't qualify for traditional checking accounts, second-chance checking accounts don't require a ChexSystems report and can help repair your banking history if used responsibly.

Prepaid debit cards are another alternative to checking accounts. You can buy these cards from banks or retailers, load them with money or have government benefits or your paycheck directly deposited to them, and use them to make purchases. However, prepaid debit cards may have high fees, and because using these cards won't affect your ChexSystems report, they can't help you qualify for a checking account in the future.

The Bottom Line

Checking accounts are fundamental financial tools that can help you manage your money, pay your bills and streamline your finances. Because banks don't check your credit score when you apply, having poor credit or being new to credit won't prevent you from getting a checking account.

Like opening a checking account, working to build and maintain good credit is a smart financial move. Practicing good financial habits such as checking your credit report regularly, paying your bills on time and keeping your credit utilization to a minimum can all help improve your credit score.