Editing Transaction account

{{Short description|Bank holding that clients can access on demand}}
{{Banking |accs/cards}}
[[File:Bank account (UML class diagram).svg|thumb|UML class diagram depicting a customer with accounts]]
A '''transaction account''' (also called a '''checking account''', '''cheque account''', '''chequing account''', '''current account''', '''[[demand deposit]] account''', or '''share account''' at [[credit union]]s) is a deposit account or [[bank account]] held at a [[bank]] or other financial institution. It is available to the account owner "on demand" and is available for frequent and immediate access by the account owner or to others as the account owner may direct. Access may be in a variety of ways, such as cash withdrawals, use of [[debit card]]s, [[cheque]]s and electronic transfer. In economic terms, the funds held in a transaction account are regarded as [[liquidity|liquid funds]]. In [[accounting]] terms, they are considered as [[cash and cash equivalents|cash]].

Transaction accounts are known by a variety of descriptions, including a current account (British English), chequing account or checking account when held by a [[bank]], share draft account when held by a [[credit union]] in [[North America]].<ref>U.S. and Canadian spelling, respectively; see further at [[Cheque#Spelling and etymology|Etymology and spelling]].</ref> In the [[Commonwealth of Nations membership criteria|Commonwealth of Nations]], [[United Kingdom]], [[Hong Kong]], [[India]], [[Ireland]], [[Australia]], [[New Zealand]], [[Singapore]], [[Malaysia]], [[South Africa]] and a number of other countries they are commonly called current or, before the demise of cheques, cheque accounts. Because money is available on demand they are also sometimes known as demand accounts or demand deposit accounts. In the United States, [[Negotiable Order of Withdrawal account|NOW accounts]] operate as transaction accounts.

Transaction accounts are operated by both businesses and personal users. Depending on the country and local [[demand|demand economics]] earning from interest rates varies.<ref name=MSMHighInterest>{{cite web |url= http://www.moneysupermarket.com/current-accounts/high-interest-bank-accounts/ |title= High interest current accounts |publisher= Money Supermarket |website= moneysupermarket.com |access-date= 12 November 2016 |archive-date= 12 November 2016 |archive-url= https://web.archive.org/web/20161112212341/http://www.moneysupermarket.com/current-accounts/high-interest-bank-accounts/ |url-status= dead }}</ref> Again depending on the country<ref name=BBC35482233>{{cite web |url=https://www.bbc.co.uk/news/business-35482233|title=Do other countries offer better banking than the UK? |publisher=BBC |website=bbc.co.uk |date=24 May 2012 |access-date=12 November 2016}}</ref> the financial institution that maintains the account may charge the account holder maintenance or transaction fees or offer the service free to the holder and charge only if the holder uses an add-on service such as an [[overdraft]].<ref name=BBC18186363>{{cite web |url=https://www.bbc.co.uk/news/business-18186363 |title=Free banking a dangerous myth, says Bank official |publisher=BBC |website=bbc.co.uk |date=24 May 2012 |access-date=12 November 2016}}</ref>

== History ==
[[File:1967 Midland Bank letter on electronic data processing.JPG|thumb|1967 letter by the [[Midland Bank]] to a customer, informing on the introduction of electronic data processing and the introduction of account numbers for current accounts]]
In [[Holland]] in the early 1500s, [[Amsterdam]] was a major trading and shipping city. People who had acquired large accumulations of cash began to deposit their money with ''cashiers'' to protect their wealth. These cashiers held the money for a fee. Competition drove cashiers to offer additional services, including paying out money to any person bearing a written order from a depositor to do so. They kept the note as proof of payment.

This concept spread to other countries including [[England]] and its colonies in North America, where land owners in [[Boston]] in 1681 mortgaged their land to cashiers who provided an account against which they could write checks.

In the 18th century in England, preprinted checks, serial numbers, and the word "[[cheque]]" appeared. By the late 18th century, the difficulty of clearing checks (sending them from one bank to another for collection) gave rise to the development of [[Bankers' clearing house|clearing houses]].

== Features and access ==
[[Image:CanadianCheque.svg|225px|thumb|right|The [[cheque]] was the traditional mode of payment for a transactional account.]]
All transaction accounts offer itemised lists of all financial transactions, either through a [[bank statement]] or a [[passbook]]. A transaction account allows the account holder to make or receive payments by:

* [[ATM card]]s (withdraw cash at any [[Automated Teller Machine]])
* [[Debit card]] (cashless direct payment at a store or merchant)
* [[Money|Cash]] (deposit and withdrawal of [[coin]]s and [[banknote]]s at a branch)
* [[Cheque]] and [[money order]] (paper instruction to pay)
* [[Direct debit]] (pre-authorized debit)
* [[Standing order (banking)|Standing order]] (automatic regular funds transfers)
* [[Electronic funds transfer]]s (transfer funds electronically to another account)
* [[Online banking]] (transfer funds directly to another person via internet banking facility)

Banks offering transactional accounts may allow an account to go into [[overdraft]] if that has been previously arranged.  If an account has a negative balance, money is being borrowed from the bank and interest and overdraft fees as normally charged.

== Country specific differences ==
In the [[United Kingdom]] and other countries with a UK banking heritage, transaction accounts are known as current accounts. These offer various flexible payment methods to allow customers to distribute money directly. One of the main differences between a UK current account and an American checking account is that they earn considerable interest, sometimes comparable to a savings account, and there is generally no charge for withdrawals at cashpoints (ATMs), other than charges by third party owners of such machines.

=== Transfer systems ===
Certain modes of payment are country-specific:
* [[Giro (banking)|Giro]] (funds transfer, direct deposit in European countries)
*In the [[United Kingdom]], [[Faster Payments Service]] offers near immediate transfer, [[BACS]] offers [[Giro (banking)|giro]]s that clear in a matter of days while [[CHAPS]] is done on the same day.
*[[Canada]] has an [[Interac e-Transfer]] service
*In [[India]], [[National Electronic Funds Transfer|NEFT]] and [[Real-time gross settlement|RTGS]] services are available to clear funds in a day.

=== In the European Union===
The [[Regulation (European Union)|Regulation (EU)]] n. 655/2014 has introduced the European Account Preservation Order, a new procedure of [[asset freezing]] in order "to facilitate cross-border debt recovery in civil and commercial matters."<ref>{{cite web| url = http://data.europa.eu/eli/reg/2014/655/oj | title =Regulation (EU) No 655/2014 of the European Parliament and of the Council of 15 May 2014 establishing a European Account Preservation Order procedure to facilitate cross-border debt recovery in civil and commercial matters | website=[[EUR-Lex]]}}</ref>

== Access ==
[[Image:ATM 750x1300.jpg|thumb|right|An [[Automated Teller Machine]] (ATM)]]

=== Branch access ===
{{Main|Branch banking}}
Customers may need to attend a bank branch for a wide range of banking transactions including cash withdrawals and [[financial advice]]. There may be restrictions on cash withdrawals, even at a branch. For example, withdrawals of cash above a threshold figure may require notice.

Many transactions that previously could only be performed at a branch can now be done in others ways, such as use of ATMs, online, mobile and telephone banking.

===Cheques===
[[Cheque]]s were the traditional method of making withdrawals from a transaction account.

=== Automated teller machines ===
[[Automated teller machine]]s (ATMs) enable customers of a [[financial institution]] to perform [[financial transaction]]s without attending a branch. This enables, for example, cash to be withdrawn from an account outside normal branch trading hours. However, ATMs usually have quite low limits for cash withdrawals, and there may be daily limits to cash withdrawals other than at a branch.

=== Mobile banking===
{{Main|Mobile banking}}
With the introduction of mobile banking; a customer may perform banking transactions and payments, view balances and statements, and use various other services using their [[mobile phone]]. In the UK this has become the leading way people manage their finances, as mobile banking has overtaken internet banking as the most popular way to bank.<ref name=BBANumberOne>{{cite web|url=https://www.bba.org.uk/news/press-releases/mobile-phone-apps-become-the-uks-number-one-way-to-bank/#.WCbhZ2uLSUl |title=Mobile phone apps become the UK's number one way to bank |website=bba.org.uk |publisher=BBA |date=14 June 2015 |access-date=12 November 2016}}</ref>

=== Internet banking ===
{{Main|Online banking}}
Internet or online banking enables a customer to perform banking transactions and payments, to view balances and statements, and various other facilities. This can be convenient especially when a bank is not open and enables banking transactions to be effected from anywhere Internet access is available. Online banking avoids the time spent travelling to a branch and standing in queues there. However, there are usually limits on the value of funds that can be transferred electronically on any day, making it necessary to use a cheque to effect such transfers when those limits are being reached.

=== Telephone banking ===
{{Main|Telephone banking}}
Telephone banking provides access to banking transactions over the [[telephone]]. In many cases telephone banking opening times are considerably longer than branch times.

=== Mail banking ===
{{Main|Mail banking}}
A financial institution may allow its customers to deposit [[cheque]]s into their [[deposit account|account]] by [[mail]]. Mail banking can be used by customers of [[virtual bank]]s (as they may not offer branches or ATMs that accept deposits) and by customers who live too far from a branch.

=== Stores and merchants providing debit card access ===
{{Main|Debit card}}
Most stores and merchants now have to accept debit card access for purchasing goods if they want to continue operating, especially now that some people only use electronic means of purchase.{{citation needed|date=January 2020}}

== Cost ==
Any cost or fees charged by the financial institution that maintains the account, whether as a single monthly maintenance charge or for each [[financial transaction]], will depend on a variety of factors, including the country's regulations and overall interest rates for lending and saving, as well as the financial institution's size and number of channels of access offered. This is why a [[direct bank]] can afford to offer low-cost or free banking, as well as why in some countries, transaction fees do not exist but extremely high lending rates are the norm. This is the case in the United Kingdom, where they have had free banking since 1984 when the then [[Midland Bank]], in a bid to grab market share, scrapped current account charges.<ref name=telegraph001>{{cite web |url=https://www.telegraph.co.uk/finance/personalfinance/bank-accounts/9286185/Free-banking-should-end-Bank-official-says.html |archive-url=https://ghostarchive.org/archive/20220112/https://www.telegraph.co.uk/finance/personalfinance/bank-accounts/9286185/Free-banking-should-end-Bank-official-says.html |archive-date=2022-01-12 |url-access=subscription |url-status=live |title=Free banking should end Bank official says |publisher=telegraph |website=telegraph.co.uk |date=24 May 2012 |author=Philip Aldrick |access-date=12 November 2016}}{{cbignore}}</ref><ref name=telegraph002>{{cite web |url=https://www.telegraph.co.uk/finance/newsbysector/banksandfinance/11322363/You-may-not-know-it-but-you-are-paying-for-your-bank.html |archive-url=https://ghostarchive.org/archive/20220112/https://www.telegraph.co.uk/finance/newsbysector/banksandfinance/11322363/You-may-not-know-it-but-you-are-paying-for-your-bank.html |archive-date=2022-01-12 |url-access=subscription |url-status=live |title=You may not know it, but you are paying for your bank |publisher=telegraph |website=telegraph.co.uk |date=3 January 2015|author=James Titcomb |access-date=12 November 2016}}{{cbignore}}</ref> It was so successful that all other banks had no choice but offer the same or continue losing customers. Free banking account holders are now charged only if they use an add-on service such as an [[overdraft]].<ref name=BBC18186363/>

Financial transaction fees may be charged either per item or for a [[flat rate]] covering a certain number of transactions. Often, [[youth]]s, [[student]]s, [[senior citizen]]s or high-valued customers do not pay fees for basic financial transactions. Some offer free transactions for maintaining a very high average balance in their account. Other service charges are applicable for [[overdraft]], [[non-sufficient funds]], the use of an external [[interbank network]], etc. In countries where there are no service charges for transaction fees, there are, on the other hand, other recurring service charges such as a [[debit card]] annual fee. In the United States, there are checking account options that do not require monthly maintenance fees and this can  keep costs down. While a majority of U.S. checking accounts do charge monthly maintenance fees, about one-third of accounts do not charge those fees. A survey of  monthly checking account maintenance fees shows the average cost to be $13.47 per month or $161.64 per year.<ref>{{Cite web|url=https://www.money-rates.com/checking/the-cost-of-sloppy-banking-habits.htm|title=Cost of sloppy banking habits {{!}} MoneyRates.com|website=money-rates.com|language=en|access-date=2020-02-13}}</ref>

== Interest ==
{{Main|Interest}}
Unlike savings accounts, for which the primary reason for depositing money is to generate interest, the main function of a transactional account is transactional.  Therefore, most providers pay little or no interest on credit balances.

Formerly, in the [[United States]], [[Regulation Q]] (12 CFR 217) and the Banking Acts of 1933 and 1935 (12 USC 371a) prohibited a member of the [[Federal Reserve]] system from paying interest on demand deposit accounts.  Historically, this restriction was frequently circumvented by either creating an account type such as a [[Negotiable Order of Withdrawal account]] (NOW account), which is legally not a demand deposit account or by offering interest-paying chequing through a bank that is not a member of the Federal Reserve system.
The Dodd-Frank Wall Street Reform and Consumer Protection Act, however, passed by Congress and signed into law by President Obama on July 21, 2010, repealed the statutes that prohibit interest-bearing demand deposit accounts, effectively repealing Regulation Q (Pub. L. 111-203, Section 627). The repeal took effect on July 21, 2011. Since that date, financial institutions have been permitted, but not required, to offer interest-bearing demand deposit accounts.

In the United Kingdom, some online banks offer rates higher as many savings accounts, along with free banking<ref name=MSMHighInterest/> (no charges for transactions) as [[Virtual bank|institutions that offer centralised services]] (telephone, internet or postal based) tend to pay higher levels of interest. The same holds true for banks within the EURO currency zone.

=== High-yield accounts ===
High-yield accounts pay a higher interest rate than typical NOW accounts and frequently function as loss-leaders to drive relationship banking.

== Lending ==
Accounts can lend money in two ways: overdraft and offset mortgage.

=== Overdraft ===
{{Main|Overdraft}}
An overdraft occurs when withdrawals from a bank account exceed the available balance. This gives the account a negative balance and in effect means the account provider is providing credit. If there is a prior agreement with the account provider for an overdraft facility, and the amount overdrawn is within this authorised overdraft, then interest is normally charged at the agreed rate. If the balance exceeds the agreed facility then fees may be charged and a higher interest rate might apply.

In North America, [[overdraft protection]] is an optional feature of a chequing account. An account holder may either apply for a permanent one, or the financial institution may, at its discretion, provide a temporary overdraft on an ad hoc basis.

In the UK, virtually all current accounts offer a pre-agreed [[overdraft]] facility the size of which is based upon affordability and credit history.  This overdraft facility can be used at any time without consulting the bank and can be maintained indefinitely (subject to [[ad hoc]] reviews). Although an overdraft facility may be authorised, technically the money is repayable on demand by the bank.  In reality this is a rare occurrence as the overdrafts are profitable for the bank and expensive for the customer.

===Consumer reporting===
In the United States, some consumer reporting agencies such as [[ChexSystems]], Early Warning Services, and [[First Data|TeleCheck]] track how people manage their checking accounts. Banks use the agencies to screen checking account applicants. Those with low debit scores are denied checking accounts because a bank cannot afford an account to be overdrawn.<ref>{{cite news|last=Tugend |first=Alina |url=https://query.nytimes.com/gst/fullpage.html?res=9B02EEDD1630F937A15755C0A9609C8B63&pagewanted=all |title=New York Times |date=2006-06-24 |access-date=2013-11-23}}</ref><ref>{{cite web|last=Ellis |first=Blake |url=https://money.cnn.com/2012/08/16/pf/bank-account-history/index.html?iid=EL |title=Bank Account History, cnn.com |publisher=Money.cnn.com |date=2012-08-16 |access-date=2013-11-23}}</ref><ref>{{cite web|last=Ellis |first=Blake |url=https://money.cnn.com/2012/07/16/pf/CFPB-credit-reporting/index.htm?iid=EL |title=CFPB Credit Reporting |publisher=Money.cnn.com |date=2012-07-16 |access-date=2013-11-23}}</ref>

=== Offset mortgage ===
{{Main|Offset mortgage}}
An offset mortgage was a type of mortgage common in the United Kingdom used for the purchase of domestic property.  The key principle is the reduction of interest charged by "offsetting" a credit balance against the mortgage debt. This can be achieved via one of two methods: either lenders provide a single account for all transactions (often referred to as a current account mortgage) or they make multiple accounts available, which let the borrower notionally split money according to purpose, whilst all accounts are offset each day against the mortgage debt.

== See also ==
{{Portal|Banks}}
Transaction related
* [[Collection item]]
* [[Demand draft]]
* [[Error account]] a necessity for auditing transaction accounts
* [[Transaction deposit]]

Account type related
* [[Offset mortgage|Current account mortgage]]
* [[Negotiable Order of Withdrawal account]]
*[[Personal account]]
* [[Savings account]]

== Notes ==
{{Reflist}}

{{Authority control}}

[[Category:Bank account]]
[[Category:Banking terms]]