What is a Checking Account?

A checking account is a service provided by banks, credit unions, and other financial institutions which allows account holders to deposit money and withdraw funds with ease. A checking account uses a negotiable instrument known as a check to pay bills and other monetary transaction in liue of cash. When a check is supplied with the correct information, the recipient of the check treats it the same as cash for liquidation of bills, debts and other payables.

After receiving a check as payment, the recipient can either deposit it in a bank or use it as payment also to his monetary obligations. Checks go through a clearing period wherein the check issuer's account balance can pay for the issued check. After confirmation, the check issuer account balance will be debited with the equal amount of money written in the check. This is then credited in favor to the individual holding the issued check.

There are some benefits to the use of checking accounts in financial transactions. First, it is safer than actually carrying cash as it cannot be encashed immediately without the check issuer's valid signature. Second, a checking account is convenient to use as checks can be used as payment for any services provided or products purchased. In addition, they are accepted as a mode of payment in most business establishments. Using a checking account has no transaction limits. A checking account holder can have several transactions a day with the use of a check.

What is a Check?

A check is a written order on a credit union, bank, or savings institution, by the account owner, payable on demand to the person named on the check (payee), to that person's order, or the bearer. The check is drawn on funds on deposit in the account owner's checking account.

On demand? That means the financial institution, by contract with the account owner, must honor the check unless there are not sufficient funds in the account to cover it.

To that person's order? If you look on the front of a check, you'll see the words Pay to the Order Of at the beginning of the line where you write the payee's name. This language is one of the things that legally makes a piece of paper a check. Payees communicate their orders with the type of endorsement they write on the back. If the payee simply signs their name on the back, then the bearer (any person who has the signed check) can legally cash or deposit the check.

Your checks will usually be personalized for you. They will have your name, address, the financial institution name, and a check number printed on the face. It's recommended you add your telephone number as well. This helps payees feel more comfortable accepting your check.

The numbers that appear along the bottom of the check are pre-printed in special magnetic ink that can be read by magnetic ink character readers (MICR). Starting from the left, there are three numbers. The first is the routing and transit or ABA number. This number identifies the financial institution. The next number represents the checking account. At many institutions, this is your account number. At DCU, because we identify your checking account by your Member Number and your Account Number (5 for most checking accounts), we instead use a checking cross reference number. The final number is the number of your check. It matches the check number usually found in the upper right corner of the check. (dcu.org)