Choosing the Right Checking Account

The foundation of most people's finances is their checking account. It is usually the account where paychecks are deposited and from which most checks are written. Spending a little time to choose the right account can make your financial life simpler, maybe save you a little money and probably help you earn a little more interest.

Consider how you "use" your checking account:

• How many checks do you write each month?
• How large of an average balance do you maintain?
• Do you make extensive use of ATM access to the account? If so, at which ATMs?

Most institutions offer a variety of accounts with different levels of fees, transaction limits and interest bearing terms.

• Accounts with no (or very low) minimum balance requirements may charge a monthly maintenance fee or have a per check charge.
• Accounts that pay attractive interest rates probably have higher balance requirements. Be sure to find out how the "minimum balance" is calculated. Some institutions use a monthly average, some look at the lowest level during the month and others may look at the total of all your account balances to determine if you are subject to the monthly charge.
• You should also pay attention to fees that are charged for ATM usage. Usually, the institution will allow almost unlimited usage at their ATMs, but may charge a fee for transactions at other institutions' ATMs.
• Some institutions also may provide a "no-fee" checking account if you use direct deposit for your paycheck.
• Also, be sure to understand "bounced check" fees and the costs for the checks.

The key is to find the account (or accounts) that matches how you use your checking account with the lowest costs and that pays the highest interest on your balances.

Some Guidelines

If you keep a very low balance in your checking account and write few checks, your primary consideration should be fees. A "basic" checking account with no monthly fee that does not pay interest may be your best option. Although it may sound nice to earn interest on an average balance of $500, at today's low interest rates, earning 1 ½% ($7.50 for the year) doesn't justify paying a monthly fee of $5.

If you keep larger balances, say over $1000, then you need to consider how much interest you will be earning on your balances in addition to fees that may be charged. Some institutions may offer interest bearing checking accounts that charge a monthly fee, but waive it if your balances exceed a certain amount.

If you keep even larger balances, say over $10,000, then you may want to consider using one account that pays higher interest, but charges per check fees, for paying large expenses like your mortgage and have another account that pays a lower level of interest and that has no per check fees for your normal check-writing.

Some Other Issues

• ATMs have become a great convenience for many. Be sure to know where your institution's ATMs are located and try to avoid using others where you may be charged a fee. A $3 fee to withdraw $50 is very expensive.
• Take advantage of direct deposit for your paychecks or government checks. It saves time, it is safer and it puts your money to work faster.
• Consider enrolling for over-draft protection. This type of "stand-by" loan provision may help you avoid some embarrassment and a "bounced check" fee.