Transactional account

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A transactional account, known as a current account (British English) or checking account (American English), is a deposit account held at a bank or other financial institution, for the purpose of securely and quickly providing frequent access to funds on demand, through a variety of different channels.



A transactional account is commonly referred to as a checking or chequing account in North America,[1] and as a current account or cheque account in the United Kingdom, Hong Kong, India and a number of other countries, generally former British colonies. Because money is available on demand it is also sometimes known as a demand account or demand deposit account (DDA), except in the case of NOW accounts in the U.S., which are technically distinct.


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" in order 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.


In the eighteenth century in England, preprinted checks, serial numbers, and the very word "cheque" appeared. By the late eighteenth century, the difficulty of clearing checks (sending them from one bank to another for collection) gave rise to the development of clearing houses.

Features and access[edit]


Country specific[edit]

The cheque is the traditional mode of payment for a transactional account.

Certain modes of payment are country-specific:


Branch networks[edit]

Main article: Branch banking

This refers to the practice of maintaining physical locations where customers can receive a wide array of banking and financial services, such locations are described as branches. They may provide access to a combination of cash machines, telephone banking, counter services and financial advice.

Automated Teller Machines[edit]

An automated teller machine (ATM) (American, Australian, Singaporean and Indian English), also known as an automated banking machine (ABM) (Canadian English), cash machine, cashpoint, cashline or hole in the wall (British and Hiberno-English), is an electronic telecommunications device that enables the clients of a financial institution to perform financial transactions without the need for a cashier, human clerk or bank teller. ATMs are known by various other names including ATM machine, despite its grammatical inaccuracy, automated banking machine and various regional variants derived from trademarks on ATM systems held by particular banks.


Main article: Overdraft

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 sole discretion, provide a temporary overdraft on an ad hoc basis.


Main article: Interest


High-yield checking accounts[edit]

In the United States, high-interest NOW accounts have become prevalent throughout the industry.[citation needed] They pay a higher interest rate than typical NOW accounts and frequently function as loss-leaders to drive relationship banking.

In 2003, banks and credit unions began to establish maximum balance accounts, which pay a premium rate up to a specified cap and a lower rate on balances above the cap. This counter-traditional trend (banks had typically established minimum account balances rather than maximum account balances) developed as a way to allow financial institutions to attract multiple customer relationships while limiting the interest expense associated with each account.

The first maximum balance, high-interest chequing account was offered in 2003 by a small community bank in New Mexico, Pioneer Bank. In 2004 and 2005, several community banks in West Texas adopted the idea, and a 3rd party vendor, BancVue, combined the maximum-balance concept with the idea of a higher yield for customers who adopt specific cost-savings behaviors, as a "Reward" Checking account.

Other imitators rapidly followed. By 2010, over 1.5 million REWARDChecking(r) accounts had been opened at BancVue's clients alone.[2]

Internet banking[edit]

Main article: Online banking

Internet or online banking describes the use of a bank's secure Web site to view balances and statements, perform transactions and payments, and various other facilities. This can be very useful, especially for banking when a bank is not open or for banking from anywhere Internet access is available. Since the Internet revolution, most retail banking institutions offer access to their own current accounts via online banking.

Telephone banking[edit]

Main article: Telephone banking


Mail banking[edit]

Main article: Mail banking

Stores and merchants providing debit card access[edit]

Main article: Debit card


Main article: Overdraft


Consumer reporting[edit]






Main article: Interest


Current accounts[edit]

A current account is the form of transactional account found in the United Kingdom and other countries with a UK banking heritage; a current account offers various flexible payment methods to allow customers to distribute money directly to others. Most current accounts come with a cheque book and offer the facility to arrange standing orders, direct debits and payment via a debit card. Current accounts may also allow borrowing via an overdraft facility.


Current accounts have two different ways in which money can be lent: overdraft and offset mortgage.


Main article: Overdraft


Offset mortgage[edit]

Main article: 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 allow the borrowers to notionally split their money according to purpose whilst all accounts are offset each day against the mortgage debt.


Main article: Interest

In the UK some online banks offer rates as high as many savings accounts along with free banking (no charges for transactions) as institutions which 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.

See also[edit]

Transaction related

Account type related


  2. ^ "" (PDF). Retrieved 2013-11-23. 