Personal Checking

What is a personal checking account?

A personal checking account or a demand deposit account is a bank account which is provided by a bank that provides the ability for individuals to store their deposits or money as well as access to their money. 

There are several ways to deposit money into a bank account. An individual can deposit currency into the account through an ATM (Automated Teller Machine) or see a teller at a bank branch. A person could also deposit a cheque (check) written to them from another party. A cheque can take a few days to be cleared against the correspondent bank or account holder. 

Payroll proceeds from a person’s employer could automatically be deposited into the individual bank account via ACH (Automated Clearing House). An individual can also receive funds via Domestic and International Wire.

Sometimes the bank will also pay the individual with a positive bank account balance with interest to encourage the individuals to keep their money there with that particular bank.

There are several ways to spend or access money in your bank account. For instance, you can withdraw cash from an ATM machine or ask a teller to withdraw money from your bank account at a bank branch.

The bank can also give you a debit card that’s associated with your bank account. These debit cards are linked to your bank account balance and can be used at any retail location. When you use your debit card to purchase an item, the bank will settle that spend or balance with the merchant’s bank so the merchant is paid and the same amount plus fees will be deducted from your bank account. This is a safe and easy way to spend your money without fumbling for cash and carry change.

Sometimes you might over spend more than what you have in your bank account and in that case you’ve overdrawn your account. Some banks allow you to temporarily overdrawn you account for a fee, but you must pay the overdrawn balance plus the overdraft fee back within 5 to 10 days typically.

Personal Checking - Account Opening

Not much is required for an individual to open up a checking account at a bank. You will need a form of identification such as a driver license or passport. You might also be asked to fund the account with a small amount of money such as $100 to seed the account.

Most of the time the checking account carries a monthly fee but there is almost always an easy way to have the bank waive the monthly service fee. For instance, if you link your direct deposit (your payroll proceeds) to your new account, the bank will waive the fee. Other ways to waive the fee is to maintain a minimum balance, say $1000 in your bank account at all times.

Sometimes, the banks will have an online account opening process where you fill out most of the information and supply identity information online. All of the account disclosures, agreements will be electronically sent to you. Your physical debit card and boxes of cheques will arrive at your residence in a few weeks.

Sometimes the banks will direct you to goto a branch and speak to a branch personnel. The branch staff might talk to you about your specific needs and offer other bank products that you may not have heard about browsing online.

There could also be a hybrid approach where the interaction starts online and ends up in a branch to have the individual wet sign certain things or have a signature card on records for verification purposes.

All in all, the personal checking account opening process should be easy and fairly straightforward. Most people should be able to obtain a checking account without any issues.

Personal Checking - Underwriting

A bank is required by law to perform verification and underwriting when they open a new relationship with an individual. The Patriot Act, for instance in the US after the 9/11 terrorist attack, requires all financial institutions to verify the person's identity.

A variety of online or digital identity verification vendors are available to seamlessly integrate into the bank’s digital onboarding system or their vendor’s digital onboarding system. 

Any credit bureaus in the US or large identity verification systems will have a quick and speed way to take in personal information form the application form and verify that these pieces of identifiable information belong together or these large databases have seen this identity been presented before at other participating banks and make an informed decision to provide a probability of authenticity to the bank and further their decision making process.

There are other ways that the bank protects themselves from habitual abusers of checking accounts. For instance, individuals could have overdrawn their account but never paid the banks back.

This type of behavior are not typically reported to a credit bureau, however the large banks have gotten together and created their own bank account behavior consortium to keep track of all of these bad behaving folks.

Early Warning Services or the company behind Zelle is a bank consortium participated by some of the largest banks in the US. 

When a new bank account application is received, the bank will first verify their identity as mentioned above and make a request to Zelle’s database to see if there is any prior overdrawn behavior with other banks that were not reconciled.

The bank, equipped with this information can refuse to open a new bank account or continue to open the bank account with this individual but revoke the overdraft privilege until the person builds up enough funds in his/her bank account.

Personal Checking - Relationship Banking

A personal checking account and savings account is the first interaction between an individual and their bank. The banks want to build that relationship so they can offer more products to this individual.

As the relationship evolves, the bank can offer the person a credit card, later perhaps a car loan and further down the line a mortgage.

Banks mines a ton of behavioral data from the individual and learn from the individual's needs and always prepared to make an offer to their clients at the time of need.

Today, most of the banks have an online presence and some have a robust set of mobile apps that really puts all of the banking needs in the hands of their clients.

LendAPI’s bank origination software

LendAPI’s bankdemo.lendapi.com is a ready-made demo site for interested parties to launch their own online banking experience. This demo site is integrated with our partner PortX and can be integrated into any of the modern bank cores such as Thought Machine, Mambu and some of the old guards such as Jack Henry as well as Fiserv banking products.