A checking account is an essential part of managing your finances. It allows you to make deposits, withdraw cash, pay bills and cover day-to-day spending. Understanding these 11 checking account terms can help you get the most out of your account—and avoid unwanted bank fees.
1. Present Balance
Money is probably flowing in and out of your checking account on a continual basis. Your present balance tells you how much cash is in your account at any given moment. This number will change as transactions and deposits are processed and cleared by your bank. You should see your present balance when you log in to your bank account.
2. Available Balance
Your available balance is your present balance plus or minus any pending transactions. It provides a more accurate balance because it shows how much money is actually available for you to spend.
3. Pending Transaction
When you swipe your debit card or make a purchase online, it can take up to three business days for those charges to clear your bank account. In the meantime, they'll be listed as pending transactions and deducted from your available balance.
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4. Check Clearing
A cleared check is one that's been successfully processed by your bank. If you've written a check, that amount will be deducted from your account balance when it clears. Checks you deposit into your account can take up to two business days to become fully available. However, your bank or credit union might give you access to a portion of the deposit right away.
5. Bounced Check
If you write a check and there aren't enough funds in your account to cover it, that check will get rejected. A bounced check could result in your bank charging you a nonsufficient funds fee. The company you were trying to pay with that check might also charge you a late fee if your payment has become overdue. If this happens repeatedly, it could negatively affect your ChexSystems report, which shows any previous problems you've had with checking and savings accounts.
If you cash a check that bounces, your bank might charge you a returned payment fee—and reverse any funds they had credited to your account when the check deposit was pending.
6. Cashier's Check
A cashier's check is a guaranteed form of payment. If you're buying a home or making another large purchase, you may be required to provide one. The amount of the check will be transferred from your bank account to your bank or credit union. Your financial institution will then write a cashier's check directly to the receiving party.
7. Certified Check
A certified check is a regular check that's been certified by your bank or credit union. They'll confirm your identity, verify that you have enough money in your account to cover the check, then freeze those funds before certifying the check with a stamp or signature.
8. ACH Transfer
Automated clearing house (ACH) transfers use a third party to move money from one bank to another. It's typically used for direct deposits and direct payments. ACH transfers are often free and take one to three business days to complete.
9. Wire Transfer
Like ACH transfers, wire transfers can move money from your bank account to someone else's. The main difference is that wire transfers do it without a third party, making them much faster—your transfer may be processed on the same day, though it could cost up to $50. Wire transfers may be required for large purchases, like making a down payment on a home.
10. Overdraft Protection
Overdraft protection is a service that helps prevent declined transactions. If you initiate a transaction and don't have enough money in your checking account, your bank may cover it for you and charge you an overdraft fee, or transfer money from a linked account. Every bank is different but overdraft fees can cost about $35 per transaction.
11. Stop Payment Order
A stop payment order can allow you to cancel a check or automatic online payment before it clears. You might do this if the payment was scheduled in error, your account has insufficient funds or your checkbook was stolen. Stop order fees vary but generally cost $20 to $30 per occurrence.
The Bottom Line
Your checking account plays a key role in your financial health. Understanding common terms can help you avoid potential fees and take advantage of certain banking services. It's just as important as routinely checking your credit score and credit report, which you can do for free with Experian.