Checking Accounts

We all have checking accounts; it would be impossible to live our lives without one. While we all have one, many don’t pay much attention to it. Our carelessness makes it easier for banks to charge fees that we don’t notice. Ideally, you should have a checking account for easy access to cash to pay bills and expenses, keeping the remaining balance in higher interest-bearing accounts such as saving accounts. Keeping excess funds in a checking account serves no purpose as you are not likely to earn any interest.

Checking Account Basics

Banks always have some sort of checking account promotion. Some of the recent promotions I have seen offer a free TV or tablet. These offers can be enticing and it may seem like a good deal. Remember that there is no such thing as a free lunch. Banks would not give away freebies if they didn’t have anything to gain in return. By opening a checking account banks are hoping they can in return lock you in a personal loan or a mortgage. These days the interest you earn on these accounts is probably around 0.25% if not 0%. So the banks earn interest on your loans, you earn nothing on your deposits.

On top of this, banks usually charge a monthly maintenance fee, which may be waived for certain accounts if you maintain a minimum balance. These fees increase every year and the chances are you don’t even notice it, and even if you do, you are probably not going to do much about it.

Mistakes You Should Avoid

Don’t just walk into a bank and ask to open a checking account. Do some research before you walk into the bank. You will be offered accounts with low monthly fees that offer basic banking facilities or accounts with high monthly fees offering extras. The number of checking accounts each bank offers can be confusing. Basically, there are three different kinds of checking accounts available:

  • Accounts with low monthly fees that pay no interest.
  • Accounts that charge high monthly fees requiring a minimum balance but with low interest.
  • Basic checking accounts that don’t pay interest, charge lower monthly fees and have low monthly balance requirements.

So before opening an account you should know which category you fall into. There is no point in opening a high monthly maintenance fee account with all the extras if you are not going to take advantage of these extras.

Not paying attention to add-on fees can be costly. Some of these fees are:

  • Using your bank’s ATM.
  • Using another bank’s ATM.
  • Bounced checks.
  • Money transfers.
  • Money orders.
  • Falling below the minimum required balance
  • Certified checks.

You can avoid these fees by being aware of the conditions attached to your checking account. The best way to avoid these fees is to ask yourself, what is your expected monthly account balance, are you going to write any checks, are you expecting to use the ATM, and so on. Look at your bank statement from the last few months to get an understanding of the fees charged.

Shop Around

There are a lot of banks and they all want your business. To find the best deal you have to shop around and do your research. I have found to be a useful site when comparing bank accounts. The more banks you research, the better your chances of getting a good deal. Look for checking accounts that offer low fees and low deposit requirements. When shopping for a checking account you should have an idea of what are your expectations. Don’t ignore online banks, online banks are starting to offer some good deals and offer no monthly fee accounts that require no minimum daily balance. They may also offer no annual fee credit cards with cash back.

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