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Too often people open a checking account with a particular bank simply because of convenience — the bank is near their home or work. But convenience is just one factor to consider when opening an account that you may end up having for years. We can help you make a smarter decision. By considering fees and minimum balances you’ll find an account that’s thrifty, one that can save you hundreds, in some cases thousands, of dollars over time. You may find that it’s worthwhile to go a little bit out of your way for such an account.

Bankrate.com maintains and routinely updates a database of checking account pricing information from the largest banks and thrifts in the top 25 metropolitan areas of the country. In other words, we look at what it costs the consumer to maintain a particular checking account. The database contains information on nearly 500 accounts at so-called brick-and-mortar institutions, as well as more than two dozen online checking accounts.

How to use the information

From the Bankrate home page, click on “Compare rates” and then on ” Checking & Savings.” From there select “Checking Accounts,” and choose “traditional.” Let’s select Indiana and then Indianapolis. Now we’re given the option of “interest checking” or “noninterest checking.” Select interest checking.

The first column on the data chart is the name of the institution. Some institutions provide a link in this column to their respective Web sites. Some entries may list “notes.” Click on that and you’ll find bits of information, such as “No ATMs.”

The second column is the date of the latest survey by Bankrate. All fee and balance information is current as of that date.

The “APY” column refers to the annual percentage yield, which is the total interest you’ll receive provided you leave the money in the account for a full year. The yields vary widely. Some accounts pay just 0.25 percent, while another may pay more than 3 percent. The high-yielding accounts are most likely to be high-yield savings accounts.

Next is “Minimum balance to open an account.” In a noninterest checking account, the minimum balance to open an account is just that. In an interest-bearing account, it’s the minimum balance necessary to open an account and earn interest. Some banks might let you open an account with $100, but they don’t pay interest unless you have $1,000. This is the only difference in the data charts between interest-bearing accounts and noninterest accounts.

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The “Minimum balance to avoid fees” is the amount you must maintain. Let it drop below that and you’ll pay the monthly service fee. These two minimum balance categories can make it quite expensive to maintain an interest-bearing checking account. Go back to the “APY” column and see if the interest paid is worth the cost of locking up that much money in a checking account.

The next two columns are the fees that bedevil many checking account customers, “Monthly service fees” and “Nonsufficient funds,” or NSF, fees. Monthly service fees frequently range from $6 to $12. It’s what you’ll pay if you don’t maintain the minimum balance required to avoid fees. Even if you’re paying a fee on the low end of the scale, it’s sure to wipe out any interest you earn for the month.

Nonsufficient funds fees are the steepest, most punishing fees you’ll see in connection with a checking account. Bouncing just one check can wipe out the interest you might earn in a year. If you occasionally bounce checks, consider applying for overdraft protection. We’ll discuss this coverage at length in a separate section but, essentially, you’ll pay a much smaller fee for the service and your checks won’t bounce — the deficit will be taken from your savings account or, perhaps, billed to your credit card.

ATM fees

Fees to use an ATM are another thorn in the side. You’ll never pay a fee to use your own bank’s automated teller machines, so it’s important to plan ahead. Keeping an eye on the amount of cash in your wallet can help you avoid having to use another bank’s ATM in an emergency. Use another bank’s ATM and that bank will charge you a fee and so will your bank. If you withdraw $20 from another bank’s ATM you could easily pay $3 in fees. That equates to a 15 percent fee.

Many online banks don’t have a network of ATMs and allow their customers to use any ATM. These banks will reimburse customers for the fees incurred when using another institution’s ATM.

We’ll discuss ATMs and their fees in greater detail in a later chapter.

The “Online access” column tells you whether the institution has online banking, and the final column, “Advertiser comments” gives the bank a little space to share miscellaneous information about the account.

In the next section you’ll see why it’s now easier than ever to bounce a check if you’re not careful. The ever-popular “float” is disappearing, thanks to a law called Check 21.

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