Important Features to Look for in a Checking Account
Introduction:
When searching for a checking account, it’s crucial to find one that meets your specific needs. While many banks offer various perks and features, it’s important to understand which ones are essential. In this article, we will explore eight important features to consider when choosing a checking account.
No Monthly Fees:
One of the most significant factors to consider is whether the bank charges monthly fees. These fees can quickly add up and eat into your savings or checking account balance. The average monthly fee in the United States ranges between $5 and $15, with premium checking accounts reaching as high as $25 per month. By opting for a bank that doesn’t charge monthly fees, you can save a substantial amount of money in the long run.
No Overdraft Fees:
Another crucial feature to look for is a bank that doesn’t charge overdraft fees. Overdrafts occur when a transaction brings your account balance below zero. While most banks charge overdraft fees ranging from $10 to $40, many online banks do not impose such fees. By choosing a bank without overdraft fees, you can avoid unnecessary charges and maintain better control over your finances.
No Low Minimum-Balance Requirement:
Some banks impose fees if your account falls below a specific balance. To avoid these charges, it’s important to read the terms of service before opening a checking account. By opting for a bank that doesn’t have a low minimum-balance requirement, you can ensure that your account remains fee-free.
Checking Account That Refunds ATM Fees:
ATM fees can quickly accumulate, particularly when you’re traveling or using out-of-network ATMs. In 2023, the average ATM fee was $4.73, including both surcharges and fees from the user’s bank. To avoid these costs, consider choosing a bank that reimburses ATM fees. Online banks like Ally offer fee reimbursements of up to $10, making them a convenient option for frequent travelers.
Digital Products Offered:
In today’s digital age, it’s essential to have access to various digital banking products. Look for a bank that offers a mobile app with features such as balance checking and check deposits. Additionally, consider whether the bank provides peer-to-peer payment options like Zelle. Some banks even offer early direct deposit, allowing you to receive your paycheck up to two days earlier. By researching the digital services offered by different banks, you can find one that meets your specific needs and makes banking more convenient.
High-Yield Checking Account:
If you tend to maintain a high account balance, it’s worth considering a bank that provides interest on checking accounts. According to the Federal Deposit Insurance Corp. (FDIC), the average checking account interest rate as of May 2024 was 0.08 percent. However, many online banks offer higher rates on both checking and savings accounts. For example, SoFi offers a 0.50 percent interest rate on checking accounts. It’s important to note that banks offering high-yield checking accounts often have transaction requirements and balance caps.
Sign-Up Bonuses:
While sign-up bonuses can be enticing, it’s essential to carefully review the requirements and potential drawbacks. Some banks offer sign-up bonuses ranging from $200 to $500, but they may charge large monthly fees that offset the bonus’s benefits. Additionally, keep in mind that sign-up bonuses are taxable, reducing their overall impact. Before being lured by a sign-up bonus, thoroughly read the fine print to ensure it aligns with your long-term financial goals.
FDIC Insurance:
Lastly, consider the bank’s FDIC insurance coverage. While bank failures are rare, having a safety net is always wise. The FDIC and the National Credit Union Administration provide insurance coverage of up to $250,000 per financial institution per ownership category and depositor. If your bank holds large balances in both certificates of deposit (CDs) and savings accounts, it’s crucial to confirm if additional insurance is available through a private fund. This precaution will protect your funds in the event of a bank failure.
Conclusion:
When choosing a checking account, it’s essential to consider various features that align with your financial goals and lifestyle. By prioritizing features such as no monthly fees, no overdraft fees, and no low minimum-balance requirements, you can minimize unnecessary charges and maintain better control over your finances. Additionally, exploring digital products, high-yield checking accounts, sign-up bonuses, and FDIC insurance will help ensure that you choose the best checking account for your needs. Remember to conduct thorough research and consider the bank’s reputation and level of personal service before making a final decision.
