Cheque Account

Definition

A cheque account, also known as a checking account in the United States, is a type of bank account that allows the account holder to make withdrawals and deposits. Money held in a cheque account can be accessed using cheques, electronic debit, ATM withdrawals, and other methods. These accounts are typically used for everyday transactions and are a core product offered by banks and financial institutions.

Examples

Personal Cheque Account: Jane uses her cheque account to deposit her paycheck, pay bills, and make everyday purchases. She can write cheques, use a debit card, or use online banking to access her funds.
Business Cheque Account: XYZ Corporation maintains a business cheque account to manage their day-to-day transactions, such as paying suppliers, processing payroll, and handling other operational expenses.

Frequently Asked Questions

What is the main difference between a cheque account and a savings account?

A cheque account is designed for frequent transactions and easy access to funds, whereas a savings account is intended for storing money and earning interest over time with limited access.

Can I earn interest on a cheque account?

Some cheque accounts offer interest, but the interest rates are typically lower than those offered by savings accounts.

Are there fees associated with cheque accounts?

Yes, banks may charge fees for maintaining a cheque account, including monthly maintenance fees, overdraft fees, and fees for using ATMs outside of the bank’s network.

How do I write a cheque?

To write a cheque, fill in the date, payee’s name, the amount in both numbers and words, and your signature. You may also write a memo to note the purpose of the cheque.

What is an overdraft in a cheque account?

An overdraft occurs when you spend more money than is available in your cheque account. This can result in overdraft fees unless your bank offers an overdraft protection service.

Checking Account: The US term for a cheque account.
Current Account: Another term for cheque account commonly used in the UK.
Overdraft: A facility that allows a cheque account holder to spend more than their current balance.
Savings Account: A bank account that earns interest and is intended for saving money with limited access.

Online Resources

Suggested Books for Further Studies

“Accounting Made Simple: Accounting Explained in 100 Pages or Less” by Mike Piper - Simplifies accounting concepts including bank accounts.
“Financial Accounting For Dummies” by Maire Loughran - Provides comprehensive coverage of financial accounting principles and practices.
“The Essentials of Finance and Accounting for Nonfinancial Managers” by Edward Fields - A practical guide to understanding financial statements and bank accounts.

Accounting Basics: “Cheque Account” Fundamentals Quiz

### What is another name for a cheque account in the United States? - [x] Checking account - [ ] Savings account - [ ] Credit account - [ ] Loan account > **Explanation:** In the United States, a cheque account is commonly referred to as a checking account, designed for everyday transactions. ### What type of transactions is a cheque account primarily used for? - [x] Everyday transactions - [ ] Long-term savings - [ ] Investment purchases - [ ] Stock trading > **Explanation:** A cheque account is primarily used for everyday transactions, providing easy access to funds for personal or business use. ### What must be included when writing a cheque? - [ ] The payee's name, date, amount in numbers, and signature - [ ] The bank’s logo - [ ] Your home address - [x] The payee's name, date, amount in numbers and words, and your signature > **Explanation:** When writing a cheque, you must include the payee's name, the date, the amount in both numbers and words, and your signature. ### Can you earn interest on a cheque account? - [x] Yes, but typically at lower rates than savings accounts - [ ] No, cheque accounts never offer interest - [ ] Only on specific transactions - [ ] Only for large balances > **Explanation:** Some cheque accounts offer interest, but at generally lower rates compared to savings accounts designed for long-term savings. ### What happens if you spend more money than is in your cheque account? - [x] You may incur overdraft fees - [ ] The cheque is voided - [ ] The cheque account is closed - [ ] The transaction is reversed > **Explanation:** If you spend more money than you have in your cheque account, you may incur overdraft fees unless your bank offers overdraft protection services. ### Which type of account typically has lower interest rates, a cheque account or a savings account? - [x] Cheque account - [ ] Savings account - [ ] Both have the same rates - [ ] It depends on the bank > **Explanation:** Cheque accounts typically have lower interest rates compared to savings accounts, which are designed to store money and accumulate interest over time. ### What is another term for a cheque account commonly used in the UK? - [x] Current account - [ ] Mortgage account - [ ] Savings account - [ ] Stock account > **Explanation:** In the UK, the term "current account" is commonly used to refer to a cheque account. ### Which of the following features is not commonly associated with a cheque account? - [ ] Easy access to funds - [ ] Ability to write cheques - [x] High-interest rates - [ ] Permanent overdraft protection > **Explanation:** Cheque accounts are not typically associated with high-interest rates, which are more common in savings accounts. ### Do banks charge fees for maintaining a cheque account? - [x] Yes - [ ] No - [ ] Only on balances under $10,000 - [ ] Only during the initial setup > **Explanation:** Banks may charge various fees for maintaining a cheque account, such as monthly maintenance fees, overdraft fees, and ATM usage fees outside the bank's network. ### Can you use a debit card to access funds in a cheque account? - [x] Yes - [ ] No - [ ] Only in emergencies - [ ] Only for online purchases > **Explanation:** You can use a debit card to access funds in your cheque account, making it easy to make purchases and withdraw cash.

Thank you for exploring the subject of cheque accounts with us and taking our quiz to solidify your understanding. Keep honing your financial knowledge!