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Checking Account Study - What's the Best Option?


Bankrate just came out with their annual checking study. As has been typical in previous studies, NSF fees and ATM surcharges have increased. Also repeated is the warning against interest checking accounts:

Noninterest checking accounts are the best bet for most people. They usually require a low minimum deposit to open the account and a low minimum balance to avoid monthly service fees.

The study did briefly mention the reward checking account that some community banks and credit unions offer. One thing it didn't stress about reward checking accounts is that it's a free checking account. Even if you don't meet the monthly requirements that are necessary to receive the high interest and ATM refunds, the vast majority of reward checking accounts still have no monthly fees. The only reasons why I can think of that people may go with a regular checking account at a brick-and-mortar bank would be due to branch or ATM convenience. If you use ATMs a lot and you don't want the debit card usage requirements, reward checking accounts may not be for you. My full list of reward checking accounts along with an overview of this type of account is located at my Reward Checking website.

The study also mentioned checking accounts at online banks. The main advantage of online interest checking accounts was the higher interest rate which averaged 2.06% vs. 0.24% at brick-and-mortar banks. For those who want a high interest checking account without the debit card usage requirements of reward checking, online checking is your best option. A few that I've reported on include:
Unfortunately, many of these online banks have recently cut their checking account rates. The most disappointing has been Charles Schwab which recently cut the checking account yield to 1.75% APY. If rates get any lower, there won't be much advantage over the typical free checking account.
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Anonymous   |     |   Comment #1
Since I have been reading this blogg I have wondered what the big deal is about free checking. I have had checking accounts for 50 years and have never paid a fee of any kind. Anybody who uses a checking account that has a monthly fee is a brick short of a full load. A charge for N S Funds is deserved if a person can't add and subtract sinple numbers they should be charged . Why would you want a checking account that does not pay interest. If you are not getting any interest keep your money in your cookie jar and then you don't need an ATM. I agree with Banking Guy that the Schwab account has been a flop.
Anonymous   |     |   Comment #2
I have a no interest checking account.

Why?? because I could not find a bank that would pay above 1% with a minimum balance of $200.

My procedure is to transfer from a 3.5% savings account then do billpay. I can not remember the last time I wrote a paper check.
goldsheet (Bob)
goldsheet (Bob)   |     |   Comment #3
I keep a no interest checking account at Citibank, do the two bill pays per month to avoid fees, along with direct deposit, etc.. to get Thank You Points. I calculate I get $30 worth of points on my average $100 balance, for a 30% return on my no interest account. (and get two bills autopaid every month for free !)

Got to consider all the options and tricks !