Checking accounts are the ultimate personal finance paradox. We hardly go a few hours without them, accessing them for our day-to-day spending. Our checking accounts are always there when we need them — from our checkbooks, to ATMs, online and with mobile apps. They’re like our best financial friend who takes part in all of our transactions, big and small.
So why is choosing a checking account so darn difficult?
It’s not such a simple choice since checking accounts are not what they used to be. Gone are the days when accounts were limited to basic deposits and withdrawals, with any remaining cash balance destined to sit there, lonely, gaining zero interest. Today’s checking accounts are abundant with options, high-yield rates and rewards, as well as their notorious rising fees, making it hard to find the one that’s best for a discerning consumer.
Finding the right checking account, though, is as easy as identifying your banking and lifestyle needs, and then comparing different checking accounts for the same features you want in a financial product.
Checking Out Checking Accounts
Looking at different types of checking accounts can help you decide what it is or isn’t you’re seeking. Modern variations give CDs and credit cards a run for their money in the number of incentives and rewards just for transacting funds. A lot of that has to do with the financial institution you’re dealing with, but most of it is on account of choosing what’s most important to you in a checking account.
For instance, must your checking accrue dividends — or do you leave that to savings? Are checking account fees the bane of your banking existence, and something you’d rather avoid? Your “haves” and “have nots” are important when considering a checking account.
- The no-fee checking account. Alas, fees are almost unavoidable in today’s banking age, like $35 overdraft charges and $25-a-month administrative fees. The good news is that you can bypass them depending on how often you use your checking account, and how much money you keep in it. Zero fees are mostly about minimum balances – if you have direct deposit hooked up to your checking, and you’ll be keeping at least a few thousand dollars in your account at all times (not to mention avoiding the red zone), then fees shouldn’t be a problem. Many checking accounts with different banking institutions also waive their fees; a more premium account may do away with fees altogether.
- Interest-bearing/premier checking accounts. Many banks carry new checking account promotions with rewards similar to platinum credit cards. Chase Bank’s Premier Platinum Checking, for example, earns interest, gets linked to an additional, higher-interest savings package and comes with a number of other options, like points with retailers, airlines and other services. Keep in mind that the minimum opening balance for this one is $75,000; you might be better off investing that money into a money market or IRA savings account if you prefer your checking balance lower.
- Credit or debit? Remember that while checking can be your go-to account for daily transactions, it won’t build credit. Using your checking account exclusively means you’ll have no revolving credit, and that can be bad for your credit score. When opening a checking account, it’s nice to have one with lots of nice features, but don’t rely on them — make sure you’re putting some expenses on credit. (A smart move is to then pay off your credit balance through your checking.)
Banking On It
It’s important to keep in mind what various financial providers can do for you. The Wall Street Journal wisely points out that the days of opening a savings, checking, mortgage and credit card at one local brick-and-mortar bank branch are gone. Today’s personal finance means that you can seek out banking products from a variety of sources.
Accessibility. According to Nerd Wallet, a Federal Reserve survey revealed that 46 percent of people choose their bank on its physical location. So if you prefer having access to your checking account wherever you go, you may want to select a bank that has many branches or ATMs.
Big names like Chase, Wells Fargo and Bank of America have walk-in locations nationwide. And banking with a credit union like Kinecta means ATM access wherever you turn. Banks with a wide-reaching network make a good checking account offer worth it if you’re frequently on the go and need more than one branch destination — the same goes for good online access, too.
Online banks. Some financial institutions are online-only, which is very convenient for people who prefer to handles their finances over the web. The Wall Street Journal notes that because virtual banking entities have no rent or other overhead, they can funnel more money into the services they provide — thus, that means a better deal for consumers. Several online checking accounts will come with higher interest rates as a result and other incentives, if you don’t miss physical, walk-in bank branches.
Credit unions. Checking account or not, opting to bank with a credit union has many advantages over a conventional bank. Like online banking, credit unions pay fewer taxes, so more expense can be put into the products they offer. Credit unions are nonprofit and rely on their membership base for financial support. Noting that, a credit union checking account means a direct, positive operational impact to the institution you choose to bank with.
Checking and Balancing
A simple checking account comparison indicates that no two checking accounts currently available are the same — it’s up to you to decide which one suits you best. Chase’s basic, no frills Total Checking offers several free services with a small $25 opening fee. Then there are two unique checking/savings hybrid accounts from Bank of America and Wells Fargo — Keep the Change and Save as You Go — which set aside money after each checking account transaction.
These returns on your investment are as much about balancing your expenses as checking what your financial needs are. There are a lot of banking options out there, but with some examination, you’ll know when you’ve found the right checking account.
Photo: PT Money