Free checking still the best deal
By Laura Bruce • Bankrate.com

For most consumers, the best deal in checking is a free account. No monthly service fee or per-item charges regardless of balance or activity.

There are 133 free checking accounts in our survey. Most are noninterest, but 22 are interest bearing.

While free accounts can be harder to find, it's worth the effort. Otherwise you can get stuck with an account that has a high minimum balance to avoid fees, or high monthly service fees, or per-item charges.

Open a checking account at a Citibank and you'll have to keep $1,500 in the account to avoid fees. At Citizens Bank you can find a checking account that doesn't require a minimum balance, but you'll have to pay a $6 monthly service fee.

You don't need to deal with that when you have a free checking account.

In general, free checking has been the province of smaller, local banks. It's a good way to compete with larger banks. The drawback is that not everyone has close access to the smaller players that offer the majority of these accounts.

At least one large bank has decided to claim a share of the market. Washington Mutual offers free checking with just a $1 minimum to open. That's hard to beat. The bank's large branch system also means that people in more than 30 states have easy access to free checking.

Free accounts make up just 11 percent of the accounts in our survey, but it's a number that's steadily growing.

"The success of free checking from the institution's perspective lies in their ability to form lasting and profitable relationships with those customers," says Bankrate financial analyst Greg McBride.

"The free checking account is very similar to the loss leader in the supermarket. You get two liters of soda for 79 cents, but you also buy the big thing of laundry detergent for $10."

When it comes to free checking, there are no bad deals, but some are better than others.

Some accounts require direct deposit of a paycheck or government payment such as Social Security. And some require a higher minimum to open, although the highest is $1500, which is within reach of many people.

Perhaps the best deals are the ones that pay interest. La Jolla Bank in San Diego pays 2 percent interest on its Premier Checking account. The bank requires $1,000 to open the account. One drawback for some consumers may be that the bank doesn't offer online access or online bill pay.

New York's Greenpoint Bank is paying 0.75 percent interest on its Direct Checking with Interest account. Just $50 to open, but direct deposit is required.

Many of the accounts don't return canceled checks. Some will give you the canceled check if you request it; others only supply a check image. Some charge a fee for the return of canceled checks.

A couple of the accounts have teller fees and one institution, Commerce Bank in St. Louis and Kansas City, makes you apply for a Visa credit card. You're not under any obligation to use it, but the bank is obviously hoping you will.

-- Posted: March 27, 2003