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
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 counter.
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
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
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
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 checking account.
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
Bankrate.com can assist you in your search for the
right checking account. We survey the biggest banks and thrifts
across the nation. 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
here and select your state.