Can’t do direct deposit? Get free checking anyway


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While free checking hasn’t disappeared, more banks and credit unions are asking account holders to meet certain requirements to avoid monthly maintenance fees.

The most common string attached to checking accounts? Direct deposit.

“Increasingly, consumers are finding that simple steps like having their paychecks directly deposited or using ATMs owned by their bank result in a free service that protects their money,” says Nessa Feddis, senior vice president and deputy chief counsel for consumer protection and payments at the American Bankers Association.

It sounds easy enough, right? Wrong. While plenty of employers have abandoned paper checks for their employees and converted to electronic payroll management, not every checking account holder has an employer and can utilize direct deposit to dodge bank fees. This includes freelancers, self-employed workers and people with employers who don’t set up direct deposit for their workers.

2 ways to dodge checking fees

According to a 2014 study from the ABA, 62 percent of account holders do not pay anything for their checking accounts. But what about the other 38 percent? Are they all just stuck handing over monthly maintenance fees to their banks? No.

High-yield checking

High-yield, or rewards, checking accounts offer higher rates than traditional checking accounts but carry more requirements, such as making 10-15 debit card transactions each month.

“For customers who want a checking account that lets them earn interest and avoid fees, the lack of direct deposit is not necessarily a barrier to entry,” says Greg McBride, CFA, chief financial analyst of Bankrate.

There are opportunities for account holders without direct deposit to snag free checking at some of the country’s largest banks, though they’ll need to maintain a sizable average daily balance. For example, the entry-level checking accounts at JPMorgan Chase, Bank of America and Citibank waive fees if account holders maintain a minimum balance of $1,500. But if the account pays little or no interest, that money isn’t accomplishing much.

“It’s just not a very efficient use of the money,” McBride says. “Some of those balance requirements can be prohibitively high.”

But the majority of financial institutions in the Bankrate 2015 High-Yield Checking Survey offer account holders an option of enrolling in direct deposit or scheduling automatic, electronic withdrawals to pay bills online. If they can meet one of these requirements, consumers can have free checking and earn higher interest, too.

So, if you’re an employee who doesn’t have access to direct deposit for whatever reason, you should look into a high-yield checking account.

“You’re better off looking for a rewards checking account that will give you some extra earnings and won’t penalize you for not having direct deposit,” McBride says.