Banking 101: What is a Checking Account?

Banking 101

A checking account is an account at a financial institution into which money can be deposited and from which purchases and bills can be paid. Couples, families, individuals, and businesses use checking accounts for everyday use to buy things and pay bills.

Checking accounts are also called a demand deposit account (DDA) because the funds can be withdrawn without advance notice (“on demand”).  Unlike savings accounts, which often limit the number of deposits or withdrawals within a given period, checking accounts are designed to be transactional accounts and allow for numerous withdrawals and deposits.

How a Checking Account Works

Funds can be deposited into the checking account in cash, by paper check, via direct deposit, or by wire transfer. Deposits can be made at a banking location, through an ATM, or using a mobile device. The money deposited into a checking account can be accessed using a paper check, debit card, ACH transfers, online bill payment, wire transfer, or via digital wallet app.

Checking accounts often include a booklet of paper checks which act as withdrawal slips. When first introduced, writing a check was the only way to withdraw money from a checking account. To pay a bill or make a purchase, the payor (also referred to as the “maker”) would write a check to the company or person they wanted to pay (called the “payee”) and send the check through the mail or deliver it in person. To take money out of your checking account for your own use, you would write a check payable to yourself or to “cash.”

The person or company receiving the check would have to “cash the check” by presenting it at their own bank or the bank that issued the check to receive the money. In some instances, such as when a business presented a check “to be cashed”, the check would need to be deposited into the business account. It might take several days for the check to clear the banking system and for all the funds to be fully available for use.

Digital technology has reduced the need for writing physical checks. Point of sale (POS) terminals in retail outlets, service centers, and gas stations make paying for purchases quicker and easier. Bills can be paid through banking online bill pay or vendor automatic payment systems, and purchases can be made using various payments apps on a computer or mobile device. Electronic processing has reduced the time required to process payments by eliminating the time needed for delivery through the postal system and delivering paper checks for deposit at a bank.

Benefits of a Checking Account

  • Highly liquid – you can access your money easily and quickly in multiple ways.
  • Allows for numerous deposits and unlimited deposits.
  • Deposits can be made in person at a banking branch, via ATMs, through direct deposit, or by other electronic transfer.
  • Funds can be withdrawn at banks and ATMs, by writing checks, or by using electronic debit or credit cards paired with the account.

Disadvantages of a Checking Account

  • Many checking accounts pay little or no interest.
  • There might be monthly account maintenance fees.
  • You may need to keep a minimum balance in the account to avoid paying monthly fees.

Financial institutions offer a variety of checking accounts to suit different ages and stages of life.

To learn about products and services offered by Enterprise Bank, please visit If you would like to speak to an Enterprise Banker about opening an account, we invite you to call us at 877-671-2265 or visit one of our convenient branch locations.

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