How to Choose the Right Checking Account
Banks offer lower interest rates on checking accounts due to the liquidity factor of their nature. Hence, unless you want to pay your bills or expenses through this account, you should go for high-yield savings accounts, cash deposits, certificate of deposit (CD), etc., for getting better returns on it.
Gone are the days when people were heavily dependent on one bank for all their banking needs like transactional accounts, savings account, debit/credit cards, CDs, loans/mortgages, etc. Today’s customer has learned that it is not necessary that one would end up getting maximum benefits from the same bank. He has learned to do some homework to find the best bank and deal which will suit his requirements. If you are looking for an account which you can use to pay your bills or expenses on a regular basis, you should consider going in for a checking account. It is insured by the FDIC for an amount up to $100,000. Most of the small and large brick-and-mortar banks offer this facility. You can also check with online banks and credit unions for getting an account. However, if you do not go for the right account, you may end up paying a lot as your fees for limited number of transactions. You should also get an account which will allow you to earn some interest on your balance. Here are a few factors that you can look into.
Try to judge how much of minimum balance you will be able to afford to maintain in a checking account. List down the banks who will allow you to retain that kind of low balance in your account. Remember that the bank will make money if you have a higher balance in your account. If you do not have the same or cannot abide by their minimum balance requirement, you may have to shell out a lot of money as bank charges every month. Hence, conduct research to find an account with a bank which will offer a minimum balance condition that you will be able to afford easily. Explore the option of online banks instead of the brick-and-mortar ones as many of them do not charge extra fees if your balance dips below the minimum limit.
One of the most important aspects is to get your monthly bills paid, or business transactions done through this account. However, check with the banks whether they have a limit on such transactions. Many banks restrict the number of debit transactions that happen within a month. Also, the number of checks issued from these accounts and bills paid may also be limited. This defeats the very purpose of going in for a checking account as one does not earn much interest from it and treats it as an expenditure transaction account. If you are a frequent traveler, verify that the bank is not going to charge you with heavy out-of-network ATM fees. Ensure that you open one with a bank who has zero or minimum of such restrictions.
One of the easiest ways to choose the right account is to list down the different types of checking accounts and the features they offer. Now, compare them with your requirements. You may also conduct a cost-benefit analysis and choose an account which will give maximum benefits at minimum charges/fees. There are many online websites like Bankrate, FindTheBest, FindABetterBank, etc., which will allow you to compare the features of accounts of different banks to provide you the most suitable option. Most of the online and offline bank websites offer tools where you fill in your personal information and requirement for a checking account, and the bank will recommend the best ones to you.
Just imagine that due to a business emergency, you have to pay extra money to your debtors. However, your account does not have the amount required for this. Don’t worry, your check will not bounce, and you can still draw a check for a higher amount. These days, banks offer overdraft facility on your account and allow you to withdraw more than your account balance. Hence, it is essential that you sign up for the bank’s overdraft feature. All this does not come for free; the bank will charge you a certain fee on the overdraft amount. Some accounts also offer ‘overdraft protection’; however, the bank charges interest on them. However, you may end up paying a high premium if you avail an overdraft for a higher amount. Also, check if your bank is allowing you to link your checking account to your credit card for avoiding the overdraft fee.
Contrary to popular belief that checking account does not earn any kind of interest, keeping a good amount of balance can actually earn you some interest. Of course, when compared with a savings account, one may feel that the interest rates are way too less. However, considering that the intention of this account is not for gaining money, any interest credited can be a good financial gain. Some local banks and credit unions offer higher interest rates as rewards to their customers. All you have to do is maintain a high balance for availing these benefits.
When you are traveling within the country or abroad, you may want a branch of your bank or ATM easily accessible to you. Hence, many end up going for an account with a bank that already takes care of requirements and has many branches or ATM centers. This may lead you to save a lot of money on out-of-network ATM transactions. However, beware that banks with a wide network may not necessarily offer the best deals and rate on interests. Also, they may levy a heavy amount of service charges. Hence, conduct research for a bank that will have a considerable presence and will offer you higher interest rates. Also, look for banks which have roped in retailers and gas stations for ATM partnerships.
You will be charged by other banks for accessing an ATM which is not within the network of the bank. However, there are many online banks which reimburse you the fees charged by other banks. Hence, you can look at an online bank option for your account as you will end up saving on the out-of-network-ATM charges. You can also search for no-surcharge on ATMs or no-fee ATM withdrawals.
Once you zero in on a bank, find out the total cost the bank will be charging you. Remember that you can get an account without the monthly fees and surcharges. One option to avail this benefit is getting your paycheck directly deposited into the account for payment of bills, expenses, etc. This will ensure that a certain amount will always remain in your account. This makes the bank believe that you are interested in becoming a long-term customer. Even if you opt for keeping a minimum balance or having a certificate of deposit, the bank may waive off the charges. Another method to avail this benefit includes, opening of savings account with the same bank. There are many banks who not only waive off the fees but also the entire cost. This may save you a certain amount of money. Hence, ensure that you get an account from the right bank.
Banks charge various fees in order to make profit and for covering their operational cost. Some banks may charge fees for online banking, debit card fees, overdraft fees, monthly maintenance fees, etc. If you are a student or someone with a low-income, you are entitled to opt for a no-frills account. This means that no fees will be charged for your personal checks and allied services. Some banks also qualify senior citizens and low-income applicants for waiving off the service and ATM fees on a monthly basis. Also, find a bank that will offer free check printing and will not charge you on a per-check transaction basis. Research for a checking account with a bank that will offer more percentage of interest and charge lesser amount of fees.
In order to choose the right account, call the customer service of banks and clear your doubts. Remember that using only your checking account will affect your credit score badly as you will not make any provision for revolving credit. Ensure that you will also put some expenses on your credit account. Also, as banks do not want to lose out on their money, they will run a credit check on you to ensure that you have not applied to some other bank regarding a similar account. You can also check out the online reviews of the accounts of the banks to know about the services they offer. Remember, don’t just settle for the first bank that you come across; look around to get the benefit of best deals and features in checking accounts.