How To Find The Best Checking Account

Are all checking accounts and banks basically the same? Not really. And that can make applying for a new checking account more of a challenge.

Fortunately, consumers have more options today. You can work with a bank that’s completely online or you can apply for a checking account with a bank that has both brick-and-mortar locations and an online banking portal. 

You can choose a checking account with a big national bank or one with a regional bank that’s active in your area. You might even choose to open an account with an alternative to a traditional bank, such as a credit union.

What Factors Are Commonly Considered When Selecting A Checking Account?

Whatever option you choose, make sure to search for a checking account that doesn’t charge fees, allows you to pay bills and transfer money online and gives you free access to ATMs in your area. 

Here, then, are the signs of a good checking account:

No Monthly Maintenance Fees

Finance experts agree on one point: You should never sign up for a checking account that charges monthly maintenance fees. It’s hard to save money consistently if you’re constantly dealing with these small fees that add up over time. 

A growing number of banks don't charge these fees, offering what they pitch as free checking. Those banks that do charge monthly maintenance fees will usually charge you $5 – $15 every month to keep your checking account open. 

But again, there is no reason to sign up for a checking account that charges these fees, said Chane Steiner, chief executive officer of financial site Crediful.

"You shouldn't have an account with a monthly fee," Steiner said. "There are enough free options out there that, unless you're getting extraordinary features from your bank, you shouldn't be paying for them to hold your money."

Watch Those Overdraft Fees

Monthly fees aren't the only ones that come with checking accounts. Some banks or credit unions will also charge you hefty overdraft fees.

An overdraft happens when your checking account balance gets low and you write a check or make a debit-card purchase for an amount greater than this balance. When this happens, your bank might cover this shortfall and then charge you an expensive overdraft fee. These fees vary, but it's not unusual for banks to charge $30 or more every time your checking account is overdrafted.

Jared Weitz, chief executive officer and founder of Great Neck, New York-based United Capital Source, says that these fees can add up.

"A $3 cup of coffee could accidentally cost $33 due to an unexpected $30 overdraft fee," he said.

Weitz recommends that consumers only apply for checking accounts with banks or credit unions that charge low overdraft fees. It makes sense, too, to work with financial institutions that offer overdraft protection with their checking accounts.

With overdraft protection, if you write a check or make a purchase that will drain your checking account balance, your bank will funnel funds from another linked account– usually your savings account – to cover that purchase. This way the purchase isn't declined. There's usually a charge for this service, though it is typically less costly than an overdraft fee.

Other banks might simply decline any purchase that would empty your checking account. This can be embarrassing, but it's better than paying a large overdraft fee.

Interest Matters

You'll never make a fortune with your checking account. But you should still earn some interest on the money in it. Unfortunately, many banks don't pay interest on their checking accounts.

Tom Nathaniel, founder of the personal finance site LushDollar.com, says consumers should never sign up for one of these accounts. You should always earn money on your investment, even if you sign up with a bank that's paying just 0.5 percent interest on checking accounts.

As Nathaniel says, something is better than nothing.

"Look for higher-than-average interest rates," Nathaniel said. "If you can find an account with a rate higher than 2 percent, you're doing awesome."

Stacy Caprio, writer with finance site DealsScoop.com, says that consumers should look toward online banks if they want to find higher interest rates on checking accounts.

"There are many online banks that pay 2% to 3% interest for money in their checking accounts, so shop around until you find one that is a good fit for you," Caprio said.

No Minimums

Some checking accounts require you to keep a minimum daily balance in your checking account. If your account’s balance is below this level at the end of the day, you’ll be hit with a monthly maintenance fee. If you don’t dip below this minimum, you won’t.

Uri Abramson, co-founder of OverdraftApps, says that even the most careful of consumers can fall victim to the minimum balance penalty. Because of this, it's best to find a checking account that doesn't have such a requirement, he said.

"Since it's getting more and more difficult to find a brick-and-mortar bank that won't require a minimum balance to avoid fees, check online banks instead if you don't need physical locations," Abramson said. "The primary goal is to find an account that isn't too fee-hungry."

How Do I Choose A New Bank?

If you’re hunting for a new bank, focus first on the accounts they offer. You want a bank that offers checking accounts that don’t charge fees and do pay out interest. You should also check out the interest that these banks or credit unions pay out on savings accounts. Again, you won’t get rich from the interest on these accounts, but you should still shop around for the best rates.

Just as important, though, is access. If you want a brick-and-mortar bank or credit union, make sure an institution has locations and ATMs near you. Make sure, too, that it offers online banking. If you’re happy with an online bank, make sure the process for paying bills, transferring money and depositing money is simple.

You’ll need to look at ATM fees, too. Many banks, especially online ones, will reimburse ATM fees even if you use ATMs that are out of your bank’s network. Make sure to sign up for a bank that covers these fees. For more articles like this one, check out our credit and personal finance learning centers.