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How to Compare Checking Accounts: 10 Key Factors
Key takeaways
- Compare the services and features of a checking account, as well as monthly fees, minimum balance requirements, and overdraft policies
- Check to see how many branches and ATMs a bank has, their hours, and their proximity to your home and workplace. In-person support can be a valuable option
- Review the terms-and-conditions documents to understand fee schedules, deposit limits, and account policies before opening a checking account
A checking account is a workhorse in the financial life of many people. It's the place where you deposit earnings and pay expenses—the foundation of your personal finances. The right account can help you optimize your money and streamline budgeting. The wrong one can drain resources with fees and services that don’t suit your needs.
Picking the right account is an important step toward financial stability. Consider these 10 important elements when you compare checking accounts:
1. Compare monthly maintenance fees
Many banks charge a monthly fee, perhaps $5 to $15, to keep an account open. Fortunately, banks may also provide easy ways to avoid these checking account fees. Some banks waive the monthly fee when you meet requirements regarding direct deposit of paychecks, maintaining a minimum daily balance, and/or linking accounts.
2. Check minimum balance requirements
Balance requirements might apply in two ways: providing a minimum amount to open the account and maintaining a minimum balance.
Some accounts require larger initial deposits than others, and some may allow you to open an account with no deposit.
When it comes to maintaining a minimum balance, see if the requirements fit well with your budget and spending habits. Look for accounts that give you options for having the monthly fee waived. This could include using direct deposits at a certain level each month and/or linking accounts to meet a minimum balance.
3. Review ATM access and fees
When doing a checking account comparison, review ATM network sizes and locations. See if the bank has ATMs near your home, place of work, and places you regularly travel to. Many financial institutions have an ATM map on their websites and mobile apps to help customers find ATMs.
Banks may offer customers access to their ATM networks free of charge but have a fee for using an ATM that’s out of their network. The ATM operator might also charge a fee for an out-of-network transaction. Look for accounts offering ATM fee reimbursements. That helps cover non-network ATM fees when using out-of-town or overseas ATMs.
4. Evaluate digital and mobile banking tools
Nowadays, mobile banking features are as important to some people as a physical branch. The best type of checking account for you may provide a useful, mobile digital experience, allowing you to manage finances on the go. Look for features like mobile check deposit, online bill pay, and peer-to-peer payments using a system like Zelle. Banking apps often include budgeting features, spending analysis tools, and custom alerts for low balances or suspicious activity. Evaluate the user interface—a good one is intuitive, fast, and easy to use.
5. Compare overdraft policies
Overdraft protection can ensure that your checks and payments go through even if there is not enough money in the account. Some banks charge an overdraft fee (typically around $35) if your balance dips below zero. Some overdraft protection policies let you link checking to a savings account or credit card to cover overdrafts, but a service fee might be incurred. Some banks also offer no-fee overdraft buffers under certain guidelines. This can let you go below your account balance by a certain amount without penalty, provided funds are replenished within a certain timeframe (such as by the end of business day).
6. Look at interest-earning options
Checking accounts are primarily used for transactions, but there are interest-earning checking options. As you compare the Annual Percentage Yields (APYs) on interest-earning checking accounts, remember to also look at any requirements they might have regarding things like a minimum monthly use of debit cards, paperless statements, electronic-only banking, or keeping a high balance.
7. Examine account access and branch availability
Digital tools make it easy for people to access their accounts whenever it’s convenient. However, some people place a high value on having a physical bank branch, or branches, nearby.
If you want the convenience of walking into a branch to handle your finances, check to see how many branches a bank has, their proximity to your home and workplace, and the hours of operation. Physical locations make it easy to deposit large amounts of cash, access your safe deposit box, handle complex transactions, and speak to bank representatives.
ATMs are an important point of access, too. Check to see if a bank has ATMs in convenient locations and whether it’s part of a larger ATM network. This will make it easy to withdraw cash without fees when you're near one of the ATMs in their network.
8. Consider special features and perks
Beyond the basics, look for perks that are a good fit for your financial needs and habits. These could be debit card benefits like cash-back rewards, or early access to direct deposits. Some premium accounts may include cell phone insurance, roadside assistance, or loan discounts with the same bank. Individually, these aren't the primary reasons to choose an account, but they may help you decide between similar offerings.
9. Check deposit and withdrawal limits
Banks may have daily and monthly limits on debit card purchases, ATM withdrawals, and mobile check deposits. If there's a $500 daily ATM withdrawal limit, it might be too low when you need to pay someone in cash for a big item. A mobile deposit limit may force you to visit a branch to deposit a large check or deposit more than a few checks per month. Review the terms and conditions and see if you can temporarily raise a limit for large, one-time transactions.
10. Carefully read account terms
Banks provide detailed information on checking accounts in documents with headings like: "Terms and Conditions" and "Account Agreement."
This is where you'll find a comprehensive description of services, fees, and policies to help you understand how the account works. It's essential reading material when you are comparing checking accounts.
Understanding the terms and conditions could help you avoid surprises later. These documents cover subjects like:
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Account disclosures. These documents cover a wide range of topics, such as policies for opening and using an account, dispute resolution, processing withdrawals and deposits, and general rights
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Fee schedules. You'll see information on the fees and charges you might incur on the account, including fees for ATM use, overdrafts, stopping payment on a check, money orders, wire transfers, and international transactions
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Interest rate information. The document should specify whether money in a checking account earns interest and, if so, what the Annual Percentage Yield (APY) and/or interest rate may be. (Actual rates may be provided on an accompanying document.) You can also learn about the compounding method, schedule of interest payments, and any variable or tiered rate systems
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Overdraft terms. Overdraft options and fees terms vary across banks and even across accounts. These terms tell you what triggers overdraft fees and what overdraft services are available
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Deposit hold policies. Banks will describe the timeline for when deposited funds will be available for withdrawal. They may also outline exceptions where longer holds apply, such as for large checks and new accounts
FAQs
When deciding on how to compare checking accounts, consider factors like low fees, easy options for waiving fees, and powerful mobile tools for easy control.
Think about your banking needs and consider whether you would like to have convenient access to bank branches for personal services. To avoid frees, consider whether a bank is part of a wide network of ATM services where you live, work, shop, and travel. Additionally, look for other helpful features like early direct deposit.
In general, weigh services, costs, convenience and value.
Most banks do charge a monthly fee for a checking account. However, they might offer ways to avoid it.Common ways are maintaining certain minimum daily balances, having linked accounts that combine balances to meet minimums, having a certain number of direct deposits per statement cycle, or being in a specific age group.
Overdraft fees are charges a bank levies when you spend more than your available balance. Some banks offer different types of overdraft protection to avoid fees.
These might include:
- Reimbursement of a certain number of overdraft fees each year
- Dropping the fee if the overdraft is below a certain amount (such as $50)
- Providing a grace period so that there is no fee if you deposit money to cover the overdraft within a certain period of time
- Declining purchases that would exceed the amount available in your account
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