Now, more than ever, it is imperative that you take the time to review the choosing of the right checking account. The reason is that banks are raising rates and fees almost on a whim. Unfortunately, you will have to monitor these rates and fees regularly or possibly find yourself in a position of being charged a high rate or fee that takes your money for which you have worked so hard.
Here are four steps that you need to perform when choosing the right checking account for you.
1. Examine Options
It used to be simple to just walk into a bank and open a simple checking account. Those still exist, but there are also other checking accounts that warrant your consideration:
- Free accounts that require no minimum balance and do not pay interest.
- NOW accounts which require you to keep a minimum balance to earn interest
- Money market deposit accounts that pay more interest but require even higher balances and can limit you on the number of checks that you can write each month.
- Specialized accounts for students or senior citizens.
The choice of the type of account depends on your needs. Most people choose an interest bearing account so that they can at least earn some interest and offset the other fees that they might incur during the banking process. Also, look at how much money you intend to keep in your checking account. If it is over $1,000.00 or more on a regular basis, then you should definitely obtain an interest bearing account.
2. Compare Fees and Rates
This can be a wearisome task because it requires you to obtain information from other sources and then chart it to see what your choices look like. The good news is that you should be able to do most of this gathering of information online through banks Internet sites. And, if you cannot find the rates on their website, send them an email. The fees and rates that you want to pay attention to are:
- Interest rates – what is the going rate for earning interest on checking accounts above?
- Checking fees – any and all minimum balance fees, ATM and other fees.
- Overdraft or NSF fees – these are the ones that ding you if you write a check and do not have the money to cover it in your account. Most banks have one of two programs to deal with this: first is a bounced check service that pays your check up to a certain limit, but you will pay the NSF fee plus some daily fees until you make up the difference. The second one is better: overdraft protection which not only pays the check, but takes the money out of other accounts to cover it for you. The small monthly fee for this service is worth it.
- Other fees that are bank specific – you should ask for a document that spells out all of the fees that can be incurred during the course of business in your checking account.
3. Consider Other Accounts
Are there any advantages to having more than one account with a financial institution? If so, it might be advantageous to open a savings or other account at the same time. Banks like this because studies prove that if you have multiple accounts with a given bank it greatly lessens the chance of your taking your business elsewhere. Also, having more than one account gives you the ability to instantly transfer money between accounts with online access and that is important when it comes to managing cash flow.
4. Ask About Locations
The big push in the nineties was to reduce the number of branches, but that has gone by the wayside and now there are more branches than ever. This might not seem like a major issue, but consider that the more local branches (and ATMs) are available to you, the less you will pay in ATM fees. Convenience is still very important with most customers.