Deciding which checking account is best for your money management needs is no easy feat.
It’s often difficult for consumers to compare checking account terms and conditions at different banking institutions, according to a 2012 report by the Pew Safe Checking in the Electronic Age Project. The report found that many banks do not provide information on important policies and fees in an easy-to-understand format.
For example, the report noted that the median length of bank disclosures for checking accounts is 69 pages, while disclosures for checking accounts from credit unions have a median length of 31 pages.
That’s some dense reading material.
In order to find value and savings in your first checking account, you’ll need to cut through the clutter and comparison shop. To help find a checking account that fits your banking needs, ask the following seven questions:
1. What are the requirements to avoid monthly service fees?
You’ll likely be required to deposit a certain amount of money to first open your checking account, but you may also have to maintain a certain balance in your account to avoid a monthly service fee. Compare the minimum balance required for different checking accounts, as well as the fees that could be charged if your funds don’t reach the threshold.
If you set up direct deposit, you may be able to steer clear of the monthly service fee without having to maintain a minimum balance. You may also qualify for a lower monthly fee if you use electronic banking.
2. How do I qualify for a free checking account?
A free checking account will not have any monthly service fees. You also won’t see fees for failing to meet a minimum balance, for surpassing a designated number of transactions, or for depositing, withdrawing, or transferring money.
You may be eligible for a free checking account if your paycheck will be directly deposited into your account or if you open another account, such as a savings account, money market account, or certificate of deposit, at the same bank.
Remember that even if you are able to secure a free checking account, you could still be charged some fees, including overdraft fees, bounced check fees, and balance inquiry fees.
3. Which ATMs are in my network, and where are they located?
Think about where you’ll be able to go when you need to take out cash. Is there an ATM you can use close to home or work?
Your bank or credit union will likely be in a network of ATMs, and usually you will not be charged a fee for using an ATM in that network. Some banks also partner with certain retailers or gas stations to allow you to make withdrawals without a fee at those locations.
Ask about the fees for using an ATM that is not in your network, and consider the additional fee you’ll be charged by that ATM’s operator. If you travel extensively, having ATMs in your network that are spread around the country could be a priority.
4. Is overdraft protection worth it?
If you make a purchase with insufficient funds and you don’t have overdraft protection, the transaction will be declined. If you do opt in for overdraft protection—you can usually opt in or out at any time—the bank will cover the transaction for a flat overdraft penalty fee, with the median fee at $35, according to the 2012 Pew report.
Other fees that you could face include a transfer fee, which is charged if you have money transferred from a different account or line of credit to cover the overdraft, or an extended overdraft penalty fee, which is charged if the overdraft goes unpaid for multiple days.
5. How long will it take for my deposits to become available?
Consider how long different banks or credit unions will take to make the funds from a deposited check available to you. While federal law determines the maximum length of time a bank or credit union can make you wait, some act more quickly than is required.
Also look into what time your bank or credit union considers the end of the business day. If your deposit clocks in after the institution’s end of day, it will be processed as if it were made on the next business day.
6. Will I have access to free online banking and bill pay?
If you want to manage your checking account online or from an app on your smartphone, make sure those features are offered. If you are normally glued to your computer or smartphone, see if text or email account alerts are available to help you manage your spending.
7. Can I earn interest?
With certain checking accounts, you can earn interest—typically at very low rates—if you keep a minimum balance available or meet other requirements established by your banking institution. Keep in mind that an account that earns interest may come with higher fees and may require you to maintain a larger balance to prevent monthly fees.
As you assess your checking account options, remember that your financial situation will likely change over time. Ask your bank what you will need to do as your finances grow.
Ilyce Glink is the author of ten books, including the bestselling 100 Questions Every First-Time Home Buyer Should Ask. Her nationally syndicated column, “Real Estate Matters,” appears in more than 125 newspapers and Websites, and her online “Ask Ilyce” columns are read by hundreds of thousands of people every month. She is a top-rated radio host on WSB Radio in Atlanta, the Home Equity blogger at CBS MoneyWatch.com, host of the Internet program “Expert Real Estate Tips,” managing editor of the Equifax Personal Finance Blog, and publisher of ThinkGlink.com.
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