Transactional Account

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A transactional account 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.

Transactional accounts are meant neither for the purpose of earning interest nor for the purpose of savings, but for convenience of the business or personal client; hence they tend not to bear interest. Instead, a customer can deposit or withdraw any amount of money any number of times, subject to availability of funds.

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Name

A transactional account is known as a checking account (or chequing account) in North America, and as a current account or cheque account in the United Kingdom, Hong Kong and some other countries. Because money is available on demand it is also sometimes known as a demand account or demand deposit account.

History

In Holland in the early 1500s Amsterdam was a major trading and shipping city. In order to protect their large accumulations of cash, people began to depositing their money with "cashiers". 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.

This idea spread to other countries including England, and the English colonies in North America, where land owners in Boston in 1681 mortgaged their land to cashiers which would provide an account against which they could write checks.

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.

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