Banking Breakdown – Checking Accounts

In a world where online shopping, card transactions and direct deposit reign supreme, it’s no surprise almost everyone has a checking account. In fact, according to the Federal Deposit Insurance Corporation (FDIC), 94.5% of U.S. households had at least one deposit account in the first quarter of 2022.

But what IS a checking account, and how can you make it work for you? Let’s break it down, starting with the basics.


Types of Accounts

There are two major classes of financial accounts you’re likely to encounter in your life: deposit accounts and investment accounts.


Deposit Account

A deposit account is an account that allows the user to deposit and withdraw funds. Seems pretty self-explanatory, right? Checking (aka transaction) and savings accounts are types of deposit accounts. You can move cash in and out as needed by visiting your financial institution or an affiliated ATM.


Investment Account

An investment account is an account where funds are deposited and held until a predetermined date or account balance is reached. Retirement accounts like 401(k)s and IRAs are a common example.

An easy way to remember the difference is that you use an investment account to invest in your future and a deposit account to deposit your paycheck.


Checking Account Overview

As previously mentioned, a checking account is a type of deposit account. It can be accessed using checks, bank cards, ATMs and in-person transactions with bank tellers.

Most checking accounts allow for unlimited deposits and numerous withdrawals per month. However, this liquidity has a downside: most consumer and commercial checking accounts don’t allow for much, if any, interest accrual.

Let’s break down the difference between consumer and commercial checking accounts.



Checking accounts designed for use by individual people. These tend to have lower daily transaction balance limits than commercial accounts, but usually don’t charge for deposits. For accounts with monthly maintenance charges, there is usually a balance amount to waive them.

They accrue little to no interest and don’t tend to have credits to make up for that.



Checking accounts designed for businesses and other commercial endeavors. These accounts have fewer free deposits and withdrawals than consumer accounts, but have higher transaction balance limits. They also abide by and assist account holders with maintaining state and federal compliance statutes.

These types of accounts are more likely to charge maintenance fees, but they also tend to offer earnings credits and/or interest to counteract those charges.


Making Checking Accounts Work For You

By now you’ve learned what a checking account is. Now we can talk about how to make it work for you.


Learn More About Your Bank

Talk to a personal or account banker at your institution and learn more about the different types of accounts they offer. They may have a checking account that earns interest and has a low maintenance charge. If the terms seem good to you, ask to open or move your funds to that type of account.


Avoid Overdrafts

An overdraft occurs when you withdraw more funds than you have. Depending on the agreement you have with your bank, they may or may not cover the charge. If they do, you’re usually in for a heavy fee. By avoiding overdrafts, you can make sure those charges stay far away from your cash


Maintain a Bigger Balance

For accounts with maintenance fees, there are often balance limits to waive that fee. For instance, Firstar Bank’s Advantage Checking account charges a $8/month maintenance fee, but will waive the fee if the account balance is over $5,000. If your account makes interest, having a bigger balance means more interest each month.


Sweep and Store

If you don’t like the terms of a more robust checking account or aren’t eligible for one, you can “sweep” your funds instead.

“Sweeping” is a financial term for moving money from one account to another in order to increase interest. To do this, move your checking account funds to a savings account and transfer funds back as you need them. The higher balance and interest in a savings account will grow your funds.