Two of the most common bank products are savings account (S/A) and checking account (C/A). Both have similarities and differences. For example, both earn a fixed interest monthly or yearly depending on the type of account you have.
At first, I only know savings account because it is easier to understand what is the purpose of this kind of bank account; it is for saving money on the bank. However, I don’t know that there is another type of account that you can get from the bank, it is the checking account.
What is Checking Account?
A checking account is a bank account that is primarily used for issuing checks as a payment method. Unlike a savings account, you can use C/A to pay for bills or issue a post-dated check for future payments of your mortgages and amortizations.
It earns interest in same way as a S/A provided it meets the requirements of the bank. Some of the difference between S/A and C/A are the initial deposit and maintaining balance. C/A has higher initial opening deposit and maintaining balance to avoid monthly charge.
Before you could use your C/A, it should have enough money or balance to cover up for the payment you want to pay or you will be issuing a bounced check that can cost you penalty or even worst a criminal case.
How Checking Account Works?
Some banks that I know requires a savings account in them before you can apply for a C/A. It makes sense because sometime you need a source fund or a maybe called a back-up account in case your C/A falls short. It works as a payment account which you can use for paying bills, recurring bills or future payments such as monthly amortization of your house.
You can pay using your C/A for bills by issuing a check or through online bill pay. It should have a sufficient balance to cover up for all the payments and checks you issued.
Take note that you can be liable for suing when you issue a bouncing check or C/A account that has no enough balance so make sure you have the enough money before sending the check to the recipient or connect it with your S/A so you have extra fund source. After completing your C/A application, you will be given a checkbook which you will use for issuing checks to your clients.
What is your experience in using checking account? Do you use it for personal or business purpose?