Why your checking account type matters

Friends spending a debit card on lunch.
March 04, 2020 | Katie Levene

Your checking account is part of your daily life. It allows you to pay your bills, spend on the fun stuff, deposit your hard-earned paycheck and even give to family and friends. Your checking account should allow you to do all these things from anywhere with ease. We take a look at your options, so you can pick the best checking account for you.

Types of checking accounts

You shouldn’t settle for any checking account. There are many accounts that let you maximize your money with simple solutions for transactions and few fees. There are accounts that combine many of the features below, but it helps to know the categories before you search.

Regular big-bank checking account

Most of us have these regular big-bank checking accounts because we didn’t shop around. It was convenient to open, and it allows us to use our debit card, write checks and pay bills. These types of accounts usually have fees if your balance is too low or you don’t make enough transactions each month. Plus, there are no extra perks other than convenience.

When comparing checking accounts, weigh the fees and the benefits to see if this kind of account is right for you. What are you getting in return for holding your money at this bank? If there is something better out there (and I bet there is), consider a switch.

Free checking account

Yes, free checking accounts do exist, and they’re available at both banks and credit unions. We’re talking about the ones that don’t have hurdles to get a free account. A $0 monthly service fee is not dependent on your number of transactions, your balance or whether you have direct deposit set up. The account does not have a monthly service fee, period.

Fees such as overdraft or bounced check fees may still apply to these accounts. As long as you manage your account, you should be able to avoid fees.

These accounts are good for everyone. You don’t have to worry about a fee if you stop using it or if your balance is low. It is especially ideal for teenagers and students who typically keep a low balance.

Online checking account

If you do most of your banking without stepping into your bank branch, then an online checking account may be for you. An online account is really simple to use, especially if you’re always on the go. Instead of depositing a check with a teller, you can use photo deposit in the bank or credit union mobile app. You can also set up direct deposit or use deposit-taking ATMs that accept checks and cash.

Many online checking accounts come with a debit card and ATM fee rebates. The nearest ATM becomes your ATM because you’ll get reimbursed for those fees. Plus, your debit card can be uploaded to a peer-to-peer payment app like Venmo or your digital wallet like Apple Pay.

Finally, online banks and credit unions have call centers or secure messaging for their customers. When you’re in a bind, you can still talk to a person.

High-interest checking account

If you’re a firm believer that every dollar counts, then a high-interest checking account could be for you. Also called high-yield checking, this type of account has an APY on the money in your account that is higher than the national average. It typically doesn’t have as high of a rate as a savings account but is better than the average checking account.

High-interest checking accounts can be found at many banks and credit unions. Some accounts have monthly fees or make it difficult to get the high rate. Some of the requirements for getting a great rate could be a high minimum balance, direct deposits, e-statements, a high number of transactions or other accounts at the bank.

Before jumping into a high-interest account, take a look at the hoops you need to jump through to either get the rate or avoid added fees. One or two simple qualifications are fine. Five or six qualifications is difficult to manage.

Premium checking account

Some banks will offer premium checking accounts for customers that have a high average daily checking balance (sometimes $15,000 or more) or have multiple bank accounts with them. High monthly service fees often come with the checking account, but there are ways to avoid the fee such as automatic payments. Extra perks come with these more exclusive accounts such as an interest rate, free checks, safe deposit box access and ATM fee reimbursements.

Comparing checking accounts

You deserve a checking account that meets your needs. Thankfully, there are many great checking accounts out there. You’ll want a hybrid account that combines many of the types of banking accounts mentioned earlier. For example, some accounts are online, high-rate and free without a ton of qualifications or restrictions.

“All checking accounts are certainly not equal,” said Chris Moore, director of deposit & payments product strategy at Alliant. “When comparison shopping for checking accounts, look for an account with no monthly service fee and perks like ATM rebates when you use out-of-network ATMs. These perks are especially nice if you travel because you could avoid all those fees when out of town.”

Here are some of the features to keep in mind when comparing checking accounts:

As you would with any other decision, you want to shop around and know your options. You don’t need to settle for a checking account at the same place you have your savings. “It’s nice to have both your checking and savings in one spot, but it’s not necessary,” Moore said. “When shopping for a checking or savings, find an institution that offers both, just in case you want to consolidate for convenience.” In other words, branch out and weigh your options. Good luck!

Katie Levene is a marketer fascinated with finance. Whether the topic is about the psychology of money, investment strategies or simply how to spend better, Katie enjoys diving in and sharing all the details with family, friends and Money Mentor readers. Money management needs to be simplified and Katie hopes she accomplishes that for our readers. The saying goes, "Knowledge is Power," and she hopes you feel empowered after reading the Money Mentor

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