Three Questions To Ask Before Opening A Free Checking Account

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These days, a checking account is a must-have financial tool for managing your money. While numerous banks offer free checking accounts, here are three questions you should ask before opening one to ensure you're getting the right product for your needs.

What's the Minimum Balance Required?

Some banks offer free accounts with no strings attached, but others require you to maintain a minimum balance to qualify for no-fee checking. For instance, your account must have at a certain minimum balance or else you'll be charged a maintenance fee each month it falls below that amount.

However, banks handle the minimum balance in different ways. Some financial institutions are very strict, and at no point can your balance be less than the minimum or you'll be charged. Other banks, however, calculate your average balance for the month and will only charge you if it comes out to less than the required amount.

And still others are a bit more lenient and won't charge you a fee if the combined balances between all your accounts at the bank average equal to or higher than the minimum. For example, you might have to keep at least $300 in your account, but you have $1,000 in your savings and $200 in your checking. You wouldn't be charged a monthly fee because the average between the two accounts is $600, well above the minimum.

Be sure you understand how the bank calculates the minimum balance if one is required, and choose the account that best fits how you handle money.

Are There Fees for ATM Use and Other Banking Services?

Although the account itself may not have a monthly fee, you may still incur charges in other ways. It's common for banks to levy service charges when you withdraw money from an ATM, for instance. However, some banks will waive these fees up to a certain dollar amount (e.g., $10 per quarter), so that's definitely something to look for if you use ATMs a lot.

But ATM fees aren't the only thing you should be concerned about. Some checking accounts are free only if you use mobile banking or their website to manage your money and will charge you a service fee to speak to a representative at the bank. Wire transfers, bill pay services, cashier checks, paper statements, and card replacement are also things banks may charge for.

All banks are required to provide fee schedules detailing any charges you may incur using your account. Think about the services you would use the most and choose an account that offers them for free or at the lowest price.

What Is the Overdraft Protection Terms?

Whether you miscalculated or are simply short on funds, sometimes you end up spending more money than what is in your checking account. Many banks offer overdraft protection services that pay checks and other withdrawal requests they would otherwise reject for insufficient funds. This can be a lifesaver and help you avoid unpleasant NSF fees and other issues related to bounced checks.

However, not all overdraft products are the same. All banks put a dollar limit on how far in the black your account can go, but some banks will charge for each item paid that puts your account into the negative, while others treat the overdraft protection like a line of credit and only charges interest each day your account is in the negative.

In either case, overdraft fees can be quite hefty, landing anywhere from $26 to $35 per item. Additionally, some banks will also charge a daily fee for every day your account is negative until you pay it off.

Overdraft protection is one thing that can have a negative impact on your credit if you mishandle it. Thus, it's essential you understand how your bank handles it so you can avoid unpleasant surprises.

To open a free checking account, contact a local bank you trust.

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3 September 2020