checking

Types of checking accounts

For most people, the centerpiece of their relationship with their bank is a checking account. Studies have shown that consumers overwhelmingly define "their" bank as the institution where their checking accounts are held, not the bank where they may have a mortgage or certificate of deposit. It's no wonder that banks throw a sizeable amount of money toward attracting and retaining consumer checking accounts.

In this chapter, we'll go over the various types of checking accounts and the importance of selecting the account that's right for you. You'll also learn the ins and outs of protecting your account and your money if you bounce an occasional check. We'll show you how a new law has made it all too easy for checking account users to bounce checks, and why it's critical to keep your account in good standing.

Beyond the gifts

Banks know one way to get you in the door to open a checking account is to lure you in with gifts. In the old days they used toasters; today's gifts are less domesticated -- coolers, camping gear and beach gear are popular. The freebies get better as the stakes get higher. One bank dished out pricey Apple iPod Minis for new customers who deposited $2,500 and promised to pay a couple bills online every month for a year.

Don't let the freebies cloud your judgment. What really matters is that you get a checking account that meets your needs as cheaply as possible -- preferably for free.

Selecting the right account isn't as simple as it may seem. Most banks carry approximately a half-dozen types of checking accounts. You can find an account that fits your needs, but if you aren't careful you could end up with one that doesn't match your banking habits and may cost you a bundle in fees.

Here's a rundown of some of the more popular checking accounts available at many financial institutions:

Popular checking accounts
1.Basic5.Express
2.Free6.Lifeline
3.Interest-bearing7.Senior/student
4.Joint8.Money market
1. Basic checking -- This is for people who just use a checking account to pay some bills and perhaps use a debit card to pay some daily expenses. Some basic accounts require direct deposit or a minimum balance to avoid monthly "maintenance" fees. You may be limited to a certain number of checks per month; exceed that number and you'll pay a "per item" fee for each additional check you write. You don't want to maintain a high balance in these accounts because you won't be paid interest.

2. Free checking -- For most people, this is the best checking account. Bankrate.com's definition of a free checking account is "no monthly service charges or per-item fees regardless of balance or activity." In other words, write all the checks you like and keep your balance as low as you like without worrying about paying a fee. Free checking doesn't mean you won't have to pay any fees. If, for instance, you bounce a check, you'll pay a nonsufficient funds fee.

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