Checking Account Information

A checking account is usually the beginning of your financial life. Choosing the right checking account can be easy, but here are a few things you should know.

Many checking accounts claim to be free, but there might be some fees involved. Take a look at the different types of accounts, what fees you might be charged, how banks withdraw the money from your account, why banks no longer have to return your canceled checks to you, how bounce-protection plans work (and the consequences of being automatically enrolled in one) and how the banking industry uses ChexSystems to check on potential customers.

Most Popular Types of Checking Accounts
Basic checking - This is for people who just use a checking account to pay some bills and perhaps use a debit card to pay some daily expenses. Some basic accounts require direct deposit or a minimum balance to avoid monthly "maintenance" fees. You may be limited to a certain number of checks per month; exceed that number and you'll pay a "per item" fee for each additional check you write. You don't want to maintain a high balance in these accounts because you won't be paid interest.

Free checking - For most people, this is the best checking account. Bankrate.com's definition of a free checking account is "no monthly service charges or per-item fees regardless of balance or activity." In other words, write all the checks you like and keep your balance as low as you like without worrying about paying a fee. Free checking doesn't mean you won't have to pay any fees. If, for instance, you bounce a check, you'll pay a non-sufficient funds fee.

Interest-bearing - Usually requires a minimum balance to open, and you may need to maintain an even higher balance to avoid fees. For example, a bank may require just $100 to open an account, but will charge $10 in service fees each month if you don't maintain a $1,500 balance. Interest usually is paid monthly, but these accounts pay a notoriously low interest rate. For most people it's simply not worth maintaining the required balance.

Joint checking - An account owned by two or more people, usually sharing a household and expenses. Each co-owner has equal access to the account. Most types of accounts, whether it's basic checking, savings or money market, allow for joint use. Good bookkeeping is essential with all checking accounts, but especially so with joint accounts. An overdrawn account usually results in steep fees for non-sufficient funds.
 
Express - Designed for people who prefer to bank by ATM, telephone or personal computer, this account usually boasts unlimited check writing, low minimum balance requirements, and low or no monthly fees. The catch is you pay a fee for using a teller. You might get one or two free teller visits per month and then have to pay a fee for subsequent visits. These accounts are especially popular with students and younger customers who are on the go and don't want to spend a lot of time on banking transactions.
 
 Lifeline - This is a "no-frills" account meant for people who have a low income. These accounts usually have monthly fees ranging from zero to $6; require a low, if any, minimum deposit and balance; and allow the user to write a certain number of checks per month. Lifeline accounts are required by law in Illinois, Massachusetts, Minnesota, New Jersey, New York, Rhode Island and Vermont. In those states, minimum terms, fees and conditions are set by law, not by individual banks.

Senior/student checking - Many institutions offer special checking deals if you are a student or if you're age 55 or older. The perks vary from bank to bank, but may include free checks, cashiers and traveler's checks, free automated teller machine use, better rates on loans and credit cards, or discounts on everything from travel to prescriptions.
 
 Money market - This account combines checking with savings and/or investment opportunities to help you pursue higher earnings. It requires a high minimum deposit to open -- usually $1,000 to $10,000, higher balances to avoid fees and imposes tighter limits on checking transactions than other accounts. It pays more interest than basic checking or savings accounts. This account is for people who can afford to maintain a high balance and do not write more than three to five checks each month.