How to choose a checking account
A checking account is the primary
reason why many people use a bank. Probably no other account offered has as
many variables as a checking account.
The right checking account will serve your needs without costing
a lot of money in fees or forcing you to maintain a high balance to avoid those
fees. The wrong checking account will cost you plenty.
Open an account that requires a higher minimum balance than you're
comfortable maintaining, bounce a check, write more checks than your account
allows, ask for your checks to be returned each month -- just a
few of the more common ways institutions pick your pocket with fees.
Some institutions charge fees for visiting tellers, hard copies
of monthly statements or using a deposit or withdrawal slip from the bank's
Determine your checking needs
Beating the financial institutions at their own game requires some research
and an honest assessment of your own checking needs.
The only way to know what checking account is right for you is
by knowing your checking habits. Take time to review your statements. Look at
how many checks you write per month and your ending balance. Do you bounce checks?
Should you have overdraft protection? Do you have to have your checks returned?
Are ATM fees killing you?
Most people want a checking account that allows unlimited check
writing. Some basic checking accounts have a limit on the number of checks you
can write each month, maybe as few as eight. Exceed that number and you could
find yourself paying 50 cents for each extra check.
A critical element in selecting a checking account is knowing
the minimum balance you'll carry day in and day out. Many institutions let you
open a checking account with less than $100 but require a much higher minimum
-- maybe several hundred dollars higher -- to avoid fees. If your balance dips
below that minimum you'll be assessed a fee.
Watch out for accounts that charge a monthly service fee regardless
of how much money is kept in the account.
Is earning interest important to you? Interest checking accounts
require a much higher minimum balance to earn interest. You'll have to consider
whether the going interest rate warrants keeping such a hefty balance in your
account. Generally, a checking account doesn't fare well as a savings vehicle.
If you use a checking account simply to write checks and you just
want to keep enough to cover payments, or if you can't be sure how much you'll
keep in the account, find a free checking account.
Free checking accounts, by Bankrate.com's definition, have no
monthly service charges or per-item fees regardless of balance or activity.
But often you can have a free account by doing something as simple as having
your paycheck directly deposited into your account, or passing up the return
of checks or check images.
Some banks might offer a free checking account if you have a mortgage,
vehicle loan or maybe if you just open a CD account.
How bouncy are you?
Bouncing checks is very expensive. Non-sufficient funds fees are usually
the highest fees charged. If you have trouble balancing a checkbook and you
find yourself bouncing even one or two checks per year, it may be worthwhile
to purchase overdraft protection.
Suppose you write a check to pay for groceries at the supermarket
and your account is overdrawn. Overdraft protection would cover the check. That
saves you from paying whatever fee the supermarket would charge for a bounced
check, plus you've avoided the embarrassment of having your neighbors see your
name posted on the "bounced checks" list above the cash registers.
Your bank will still charge you a fee for overdrawing your account,
and if you don't fund your account right away you may be charged interest. Some
banks will automatically take money from your savings account to cover an overdrawn
ATMs also play a role when choosing a checking account. It's nice
to find your bank's ATMs on every other street corner, but the best checking
account for you may be at an institution that doesn't have a lot of ATMs. Find
out what fees are charged if you use another institution's ATM.
The online alternative
For a growing number of people, an online bank may be the best choice
when it comes to checking. If you're comfortable with banking online, an Internet
bank may be a better deal, especially if you want to earn interest on your balance.
Internet banks also tend to have more free accounts and lower fees. Since most
Internet banks don't have large ATM networks, they tend to be fairly liberal
about reimbursing the fees for using other institutions' ATMs.
The main drawback is Internet banks generally require higher balances.
Bankrate.com can assist you in your search for the right checking
account. We survey the biggest banks and thrifts in the top 35 metropolitan
areas of the US. You'll find valuable information including how much is required
to open an account, minimum balance to avoid fees, monthly service charges,
NSF fees and whether the institution offers online access and bill payment.
To access that information, click
-- Posted: April 6, 2004