11 Different Types of Current Accounts
Despite the rise of teller apps and other fintech tools , having a checking account (or two ) is still a good idea. Of course, no one writes checks anymore (except for those who do ), but having a checking account is often necessary in order to get paid for work and pay bills without having to jump through hoops (or pay unnecessary fees; being unbanked can be expensive). Life becomes easier with a checking account, even if you rarely or never write a check.
However, if you decide to open a checking account, you will be faced with a problem: what type of checking account should you open? There are many checking accounts available, each with features that will appeal to different groups of people. Banks typically don’t offer all of these, so your choice of bank may also be influenced by the checking accounts they allow you to open. And having the right checking account can make a huge difference in your financial life. Here are the eleven main types of checking accounts you can open and who should consider each one.
Traditional
A traditional checking account is your basic checking account with no frills. It comes with a debit card, paper checks (which usually have to be purchased either through a bank or a third party), and recurring statements. Sometimes these accounts pay interest and sometimes they don’t; if you’re not going to maintain a balance and just use it to pay bills while keeping your money elsewhere, it doesn’t matter whether it pays interest or not.
Who needs it: A traditional checking account is a basic checking account that’s ideal for those who just need to pay bills and deposit paychecks somewhere.
Premium
A premium checking account is a traditional account with some added bells and whistles. Typically, you’ll need to maintain a relatively high minimum balance (usually at least $15,000). In exchange, you’ll get perks that only matter to people who can keep $15,000 in an account without lying awake at night, including free checks and other services (like money orders or wire transfers), no ATM transaction fees . and a safe included in the price. These accounts almost always pay interest (and usually higher rates than traditional accounts).
Who needs it: people who will actually use banking services regularly and who have free money that they can leave unattended. If you use ATMs or write a lot of checks, you’ll benefit from freebies and higher interest rates.
Acellular
As you might guess, a checkless checking account is a checking account that doesn’t issue paper checks—you can only access your money through a debit card or online transactions. They are sometimes seen as a good way to avoid overdraft fees if you have a bad habit of writing checks and lose track of how much money you need in the account to cover them.
Who needs it: If you never write checks, often lose track of the checks you write, or just need a direct deposit account, this might be a good option.
Compound
A joint checking account is a checking account shared between two or more people. Although you’re traditionally associated with married couples, you don’t have to be a formal partner of someone to open a joint account—you could open a joint account with an aging parent to help them pay bills, as well as with your children so you can give them access to money, but control their spending, or for any reason at all. The account can be of any type (traditional, premium, etc.). Keep in mind that the owner of a joint account has full access not only to the money, but also to transaction records and statements – there are no secrets in a joint account.
Who needs it: Anyone who needs to collaborate on paying bills or who needs to combine income streams with someone else, be it a couple paying house bills or a fund set up for other reasons.
Business
As should be abundantly clear, business checking accounts are intended to be used by businesses. Many businesses have multiple accounts for specific purposes: one for payroll, another for purchasing, etc. If you’re a small business, it’s a good idea to keep your accounts separate from your personal finances, and business accounts usually have additional features , such as the ability to have multiple debit cards (for employees) and integration into payroll and accounting software. They also often have higher fees (and even more) than personal accounts.
Who needs it: Anyone running a small business.
Multicurrency
For obvious reasons, most checking accounts in the US operate exclusively in dollars. But if you do business with people overseas, get paid in another currency, or have accounts in other countries, a multi-currency checking account may make sense. These accounts allow you to store amounts in different currencies in one account, making moving money much easier. Typically, you can set up “sub-accounts” for each currency to write checks in those currencies. Typically, you will already need to maintain a high bank balance or have a business account before you can open a multi-currency checking account.
Who needs it: People who can maintain a high balance, travel frequently, or make frequent transactions across multiple currencies.
Student and teenager
Typically, student checking accounts are only for students ages 18–23 and have a low minimum balance and no high fees. They usually also include overdraft forgiveness and often come with free budgeting tools such as smartphone apps and other educational services that help young people learn how to manage their own money. Typically, you must be actively enrolled in school to qualify for the program.
Who’s it for: College students looking to open their first bank accounts and learn the basics of personal money management.
Awards
A Rewards checking account works the same way as a Rewards credit card: you get something back when you use your debit card to make purchases, usually in the form of cash back. They also often have fairly high interest rates if you maintain a high balance or a specific deposit schedule. Just be aware of the security concerns associated with using a debit card for purchases rather than a credit card.
Who needs it: Anyone who frequently uses their debit card to make purchases and doesn’t mind the security risks.
Life line
A Lifeline checking account is an account with a low minimum balance (or no minimum balance), few (if any) fees, and very few requirements. They are intended for low-income, unbanked people who may not qualify for a more traditional account. They often don’t have some of the features found in most checking accounts (like actual paper checks), and there may be a certain income threshold you must meet to qualify.
Who needs it: Anyone who can’t afford a traditional checking account.
“Second Chance”
Second Chance Accounts (sometimes called Opportunity Testing Accounts) are basic accounts offered to people who have a poor banking history that prevents them from opening a traditional account—a history of overdrafts, bad checks, or other problems. Second Chance accounts tend to be a simple set of services and typically include mandatory maintenance fees and minimum balances and usually do not include overdraft protection or other services. Not all banks offer them, but those that do usually have the option to upgrade the account to a regular checking account if you keep it in good standing for a certain period of time.
Who needs it: People who can’t open a traditional account due to past banking irregularities.
Senior
Senior checking accounts are designed for people ages 55 to 65 and offer benefits such as free checking or fee waivers. They are designed for people on a fixed income in retirement. It’s important to note that sometimes this is just a marketing term, as many current accounts offer similar benefits, so it makes sense to compare the features offered to other accounts at your bank (or competing banks).
Who needs it: Retirees or people over the minimum age living on a fixed income who want a checking account without a lot of additional fees.