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Everything You Should Know Before Choosing a Checking Account

Introduction

A checking account is one of the basic building blocks of our financial lives. For most of us, it’s where we put the money that we rely on to get through the day, the week, the month, and beyond. It keeps the lights on, keeps the heat or AC running, and puts food on the table.

It’s therefore important to choose a checking account that meets your needs. In a bygone era, a bank’s physical location largely made that decision for you. With the advent of online banking and the convenience of mobile access, a bank’s brick-and-mortar location is no longer a top priority. Instead, the focus has shifted to an account’s features, whether it’s interest rates, rewards for spending, or low fees.

This guide will walk you through these and other options when selecting a checking account.

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Types of Accounts

A checking account is where you put the money you earn, and where you take out the money you need. You can access it through debit cards, ATMs, mobile devices, and personal checks. Most accounts allow an unlimited number of monthly transactions.

There are many types of checking accounts to fit a wide variety of financial needs. If you've got the travel bug and like to pay in cash, then opt for an account connected to an extensive ATM network. If you often push your balance down to zero, consider an account with built-in reminders and overdraft protections. If you need the in-person treatment, look for a legacy bank or credit union with many branch locations.

Here are the basic types of checking accounts you can expect to find:

  • Personal checking account. This is the standard place to put cash where it will be readily available at a moment’s notice. Your money will typically be accessible via a debit card, checks, your mobile device, at ATMs, or at a physical branch location.
  • Online-only checking account. Similar to a standard personal checking account, but only available online. Because online banks don’t have branch locations, they often pass those savings on to customers in the form of lower fees and more favorable interest rates than your typical brick-and-mortar bank.
  • Joint checking account. This account allows for two or more individuals to share access to a pool of money. Often used by couples, parents and children, adults and elderly parents, roommates, and business partners, joint accounts can be a useful way to share financial responsibility, or to help a friend or relative who needs assistance managing their money.
  • Rewards checking account. Some accounts provide perks for your loyalty, such as cash back on debit purchases, reimbursement for ATM fees, airline miles, or a one-time signup bonus.
  • Challenger bank account. If you’re looking to get in on the cutting edge of checking, you may want to consider a challenger account. Typically run by financial startups (also known as “fintech” companies), these accounts usually offer low fees (or no fees) and feature perks like making your paycheck available up to two days early when you use direct deposit.
  • Interest-bearing checking account. Some accounts pay interest on your money and may offer lower fees. But there are often requirements, including maintaining a minimum balance and/or using your debit card a certain number of times per month.
  • Student checking account. Students often need low-fee, easily accessible accounts, whether it’s for an allowance in high school, or to help pay for college.

There are other types of accounts beyond checking that are also worth considering:

    • Savings account. Somewhat similar to a checking account, it’s where you put money that you don’t immediately need. But these funds are still usually accessible at a moment’s notice in case of emergency.
    • Money market account. These accounts usually offer higher interest rates but may also require a higher minimum balance. They share some features with checking accounts, such as debit cards or checks. For example, the MyLife Money Market account typically has a higher rate than online-only savings rates. 
    • Cash management account (CMA). These technically aren’t bank accounts but are places to store cash offered by investment firms or other financial services companies, such as robo-advisers. They often provide higher interest rates than a legacy bank account.
  • Certificate of deposit (CD). A bank holds your money for a set term—anywhere from a few months to five years—and provides a generous interest rate in return. The longer you park your money with that bank, the higher the rate.

Now that we’ve laid out a basic roadmap of your checking account options, we’ll dive into which one is best for your particular stage of life.

Match Your Lifestyle

From your freewheeling 20s to your more mindful 40s and 50s, every stage of life brings with it new financial opportunities and demands. It stands to reason, then, that the ideal checking account just out of college will probably not be the same as the one you’ll need as you approach retirement.

The right account also depends on your lifestyle. Are you constantly traveling (for work, pleasure, or both) or are you content at home in your garden? Do your tastes in hobbies run on the expensive side or do you get a thrill simply from hunting for seashells on the beach?

So what account is the best fit for your current place in life?

Your 20s: Cost and Convenience

At this earliest stage of your financial life, you move quickly and want your money to keep up with your needs and wants. It’s no surprise, then, that 47 percent of millennials accomplish this with mobile banking, which allows them to transfer money, deposit checks, and even apply for a loan, all without setting foot in a branch, or even interrupting their stride as they walk down the street.

The first thing to look for in a 20-something-friendly checking account is minimal fees. In addition to easy access for spending, it should be just as easy to save, because this is the decade when you can set a good foundation for future life milestones. High fees can put a major speed bump on this road to financial security. Start with a student account and then move into a personal or online account.

Your 30s: Features

Those milestones that are only vague ideas in your 20s now start to come into focus, such as buying a home, starting a family, and planning for retirement. If marriage is on the horizon, consider a joint account, which allows you to easily pool your resources. Also be on the hunt for a bank that offers advice on how to meet these ambitious life goals.

Your 40s and 50s: Reevaluation

When you reach this stage, it’s the perfect time to look back and see how your priorities have shifted over time, and what kind of checking account will meet your current needs. Those may include funding your kids’ college education(s), buying a second home, taking care of your aging mother-in-law, or turning up the gas on retirement funding. The right checking account should be a partner in these journeys, smoothing the path to success, such as a joint account to help an elderly parent manage their money.

It’s also a good time to reevaluate your savings account and make sure it’s giving you everything you need. How easy and safe is it to transfer funds and access them quickly? Does your bank offer a competitive IRA or certificate of deposit?

As with any financial decision, do your homework on which type of account is best for your particular age, salary, and goals.

Fees + Balances

Fees and minimum balances are the elephants in the room, lurking behind every financial decision you make. Most checking accounts have them, and comparing one to another can be complicated. A zero-fee account with a minimum balance requirement can quickly turn into a high-fee account when you drop below that level.

If you tend to zero out your account regularly, look for banks that provide overdraft protection and don’t have minimum balance fees. If your lifestyle favors cash over credit, sign on with an account that gives you access to plenty of no-fee ATMs.

Fees come in a wide variety of shapes and sizes, but here are a few that you’ll likely encounter (from a 2019 Bankrate survey):

  • Monthly fees. If your account earns interest, expect an average fee of more than $15.05, and $5.61 for a non-interest checking account. Always ask your bank if there are steps you can take to reduce or waive these fees.
  • Minimum balance requirement. Many banks require a deposit of a certain amount to start an account, averaging $574.57 for interest-bearing accounts and $162.94 for non-interest accounts. If your balance then falls below a certain threshold, some banks may slap you with a minimum balance fee.
  • Overdraft fee. If you spend more than you have in your account, many banks are willing to let the balance go into the red and tack on a fee for their trouble, currently in the neighborhood of $35.
  • ATM fees. Every time you use an ATM that’s outside of your bank’s network, you will probably be hit with two separate fees—one from your bank ($3.09 on average) and the other from the out-of-network ATM itself ($1.63). This adds up to an average of $4.72. These exact figures vary by geography, with cities like Atlanta and Houston having much higher fees than similar markets out west.
  • Foreign transaction fees. If you spend much time abroad, be prepared to pay a currency conversion fee of 1-3 percent. There are also fees for using international ATMs, typically a flat fee of $5 plus a percentage of the amount withdrawn.

The good news is that there are ways to avoid or minimize these fees. Avoid ATM fees by requesting cash back at your grocer or convenience store. Many non-traditional, online-only banks don’t charge overdraft fees. Get rid of foreign transaction fees by choosing a bank that partners with overseas financial institutions.

Incentives

Though fees and lifestyle fit are important reasons to choose a checking account, don’t forget that there are other useful incentives out there.

  • Interest: Even though interest is best known as a feature of savings accounts, some checking accounts offer it, and the rate varies depending on the type of account. Online-only banks typically offer better rates—1.00 percent annual percentage yield (APY) in 2018—than brick-and-mortar banks (0.04 percent APY in 2018). But be vigilant about the fine print. A sweet interest rate may also come with steep requirements for minimum balance and/or minimum deposits.
  • Insurance: A great feature of checking accounts is that they come with protection. If you work with a bank, the Federal Deposit Insurance Corporation (FDIC) will insure your money up to $250,000. If your account is with a credit union, the National Credit Union Administration (NCUA) provides the same level of coverage.
  • Mobile access: You can now carry out almost all of your financial business through your phone. From check deposits to overdraft alerts to investment advice, you’ve got a fast, efficient way to bank right in your back pocket.

Again, sometimes these perks aren’t entirely free. Be sure to read the fine print and understand what, if any, fees or other obligations come with the rewards.

Switching from a Bank to a Credit Union

A checking account is far more than just a place to park your cash. It’s the steadfast co-pilot that helps you steer your financial ship into safe waters—the wingman who’s always got your back and helps you make smart money decisions.

However, as the previous chapters have demonstrated, not all checking accounts are created equal. From fees to minimum balances to incentives, there are a wide variety of options out there to fit every age, lifestyle, and financial goal.

And is a traditional bank even the best fit for you? If you’re tired of low rates on deposits, high rates on loans, and lackluster customer service, consider a MyLife Checking Account from USALLIANCE.

One account; dozens of features.

  • 24/7 access
  • No minimum balances and no monthly fees
  • Early Pay Direct Deposit
  • Overdraft Protection and Privilege
  • Free monthly credit score
  • Visa debit card, with alerts
  • Access to more than 30,000 no-fee ATMs and rebates on out-of-network ATMs
  • NCUA insurance up to $250,000

Make the switch. Become a member today.

Our members live life to the fullest, with access to our full range of checking and savings accounts, loan products, credit cards, and a suite of online services. Find us at 6,000 branch facilities and 30,000 surcharge-free ATMs nationwide, or use our mobile app, named one of the best in the business by Finovate.

Let’s get started. Become a member today and take the first step toward achieving your dreams (and save money along the way).

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