A personal checking account is the financial hub that many people use to receive income, pay bills, and make everyday purchases. More than 96% of US households have one, with a 2022 median balance of about $2.8K. These liquid accounts are designed for frequent use and immediate access, trading the higher interest earnings of savings accounts for convenience.
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Average household checking account balances have doubled since 1989. Older, white, educated, and male customers tend to have larger balances on average, according to the data. See further data visuals here.
As long as traders have looked to pay in cash or coin, the idea of an IOU has been close behind. Clay tablets from ancient Mesopotamia (roughly modern Iraq) and Persia (Iran) suggest proto-checks were used at the time. Islamic traders innovated "sakks" in the 9th century, leading to the broader adoption during the Middle Ages in Europe.
At the time, lending money for interest (also known as usury) was banned in much of the Christian world. The enterprising Medicis developed bills of exchange to allow merchants to promise payment without cash or coin (with some discrete means of earning interest woven in). Learn more about how this family laid the foundation for modern banking.
Until that time, each banker was required to bring that day's checks to every other bank for settlement. Perhaps understandably, the first place bankers opted to gather to clear and settle checks was a tavern known as the Five Bells. The innovation gave rise to what would become clearinghouses, key institutions that facilitate payments.
That amount allows you to pay your bills and avoid overdraft fees while ensuring you don't lose interest. Most checking accounts have a near-zero interest rate (0.07% APY on average) while high-yield savings could earn up to 4% as of 2026. Cash sitting in your checking account can mean a loss of hundreds of dollars.
While the checking account is many people's primary daily account, savings accounts can earn customers more in interest, though access to these funds is generally more limited. Customers can earn several percent interest in savings accounts compared to near-zero checking account rates.
At the start of the millennium, more than 68 million checks were processed daily. Amid the adoption of automated clearinghouse (ACH) payment systems, that number has sunk to 12 million a day.
Major retailers like Target have stopped accepting checks in recent years as real-time payment systems are increasingly being implemented across the US. This shift is considered an improvement in safety—as checks are vulnerable to fraud—but can lead to some exclusion for those without access to digital devices.
This means the interest you earn on your deposits is lower than what the bank earns on the same amount. Banks often keep cash reserves (though a minimum requirement was rescinded in 2020) but generally invest in government bonds, corporate securities, and loans to other banks. During bank runs, depositors withdraw more than the bank has on hand.
The traditional view of banking is that customers deposit money into the bank and the bank lends out those deposits. That's partly true, but most banks work by making loans first, which creates an asset on their balance sheet as a corresponding deposit. Banks often operate under a money multiplier ratio, lending out several times their total reserves.
The United States is home to more than 33 million businesses, the vast majority of which are small businesses, with millions being created (and others closing shop) every year. These businesses often rely on loans, provide the goods and services that keep the economy flowing, and sometimes even grow large enough to enter public markets or provide private investment opportunities. Explore key topics central to business and finance, from the role of the Federal Reserve to how initial public offerings work, how millions of American students finance higher education, and more.