A transaction account is a bank account that provides individuals with immediate access to money. Transaction accounts have full liquidity to pay bills and make everyday purchases.
What Type of Account Is a Transaction Account?
A common type of transaction account is a checking account. These accounts are ideal for covering day-to-day spending, like grocery bills, gas station purchases and doctor’s visits. Savings accounts are non-transaction accounts because they earn interest and are designed to hold money on a long-term basis.
What Is an Example of a Transaction Account?
A checking account opened at a physical bank, credit union or online bank is an example of a transaction account. Many individuals fund these accounts through direct deposits and mobile transfers. Depositors can move money in and out of their accounts using wire transfers, ACH transfers, ATM cards and debit cards.
Good To Know
Many of the largest financial institutions are eliminating overdraft fees for transaction accounts. A growing focus on financial health has propelled large banks such as Capital One and Citibank to allow customers to spend more than their available balance without charging them a fee.
What Is an Everyday Transaction Account?
An everyday transaction account is a standard account offered by most financial institutions. Most everyday accounts come with basic features such as debit card access, mobile banking and personal checks.
Some basic transaction accounts have minimum balance requirements. For instance, the account holder may need to maintain a minimum daily balance, or the bank will charge a maintenance fee. Certain financial institutions may also require a minimum deposit to open an everyday transaction account.
What Is a Transaction Deposit Account?
The Federal Reserve uses the term “transaction deposit” to describe accounts for which an individual can withdraw money or make payments. While these accounts do not typically earn interest, they generally have security features that are designed to keep cash secure.
What Are the Benefits of a Transaction Account?
Because benefits vary depending on the financial institution, it is crucial to do research before opening a transaction account. Many people prefer banks or credit unions that offer features like online banking, electronic statements and mobile banking access.
Some transaction accounts offer low monthly fees and manageable opening balance requirements. Some banks reduce monthly costs for customers who set up direct deposits, and institutions may offer extra benefits such as ATM fee refunds and free checks.
Why Is a Transaction Account Important?
Having a transaction account is an essential tool for money management. Many banks will send account holders alerts when their balances are running low to help improve budgeting. Financial institutions may even report positive banking behavior to the credit bureaus, allowing holders to build a positive credit history.
This article has been updated with additional reporting since its original publication.
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- Nasdaq. "Savings account."
- Nasdaq. "Checking Account."
- Nasdaq. "Transaction account."
- United States Federal Reserve. 2020. "The Federal Reserve Payments Study."
- Forbes. 2022. "Overdraft Is So Over: Banks, Regulators Making Financial Health A Priority."