Thanks to their multipurposeness, it is clear why checking accounts are an essential part of the banking system and daily money management. You can use a checking account to write checks, make purchases, transfer money, pay bills, receive your paycheck, and for many other things.
When choosing a checking account, the most important thing to consider is its cost: the “fees and how to avoid them” question. Many banks and credit unions offer the possibility of having your monthly fees waived, under certain conditions. On the other hand, there are many free checking accounts, but they might come with high rates or penalty fees. Some might charge you a lot when using an out-of-network ATM, while others might offer a poor APY. So, prior to opening a checking account, make sure you’ve done your research.
However, you also need to decide which kind of checking account to open. There are many to choose from, and we’ve listed several types of checking accounts you should know about.
1. Regular Checking Accounts
Also known as the “traditional checking account”, this checking account offers the basics: you can pay bills, write checks, withdraw money from ATMs, make deposits, and use a debit card for purchases. Regular checking accounts usually come with a monthly fee, but a bank might waive it if you deposit or keep a certain amount of money each month in your account. These checking accounts might offer additional services, such as overdraft protection, but they might be costly. Also, traditional checking accounts rarely pay any interests, so if you’re looking to put some money aside, you’d better skip this type.
2. Premium Checking Accounts
Premium checking accounts are for those who can keep a higher balance in their account - we’re talking 5 figures here - required to have monthly fees waived. This type of checking accounts offers perks that others normally have to pay for. Such features might include additional assistance, free checks, counter checks, money orders, and cashier’s checks, no fees on out-of-network ATM withdrawals, free safe deposit boxes, and even earning interests. That said, a premium account might not always be the best option, as you could get a better deal elsewhere, especially when it comes to interest rates.
3. Free Checking Accounts
Quite self-explanatory: free checking accounts don’t have a fee you need to pay each month, and they don’t require a minimum balance to avoid a monthly fee. This, however, doesn’t mean all services and perks a free checking account offers are free of charge, on the contrary. You will still have to pay, for example, out-of-network ATM fees, overdraft fees, foreign transaction fees, and alike. Keep that in mind.
4. Interest-Bearing Checking Accounts
Interest-bearing checking accounts allow you to earn interest on your monthly balance. Some interest-bearing checking accounts require you to meet specific requirements to earn interests, such as keeping a minimum balance or making a number of card transactions each month. Usually, you’ll get a flat interest rate, no matter how much money you’ve got in your account, but some banks or financial institutions may offer a higher APY on higher balances. Interest-bearing checking accounts provide other benefits as well, although you might want to consider a savings account if it comes with a higher annual return. You can also get a better deal if you have two (linked) accounts with the same bank. Another advantage of linking checking and savings account is overdraft protection, since you could arrange automatic money transfer from your savings to your checking account in case you overdraw your checking account.
5. Rewards Checking Accounts
With a rewards checking account, you can earn cash back or points on your debit card purchases, but make sure you read the fine print as there are almost always certain requirements you need to meet to qualify for rewards. Some rewards checking accounts offer a signup bonus if you deposit or spend a certain amount of money.
6. Second-Chance Checking Accounts
If you need to rebuild your credit after past financial mistakes, a second-chance checking account might help you get back on track. While these checking accounts usually come with higher fees than standard accounts, as well as some restrictions, such as not allowing overdrafts, they also come with similar benefits, including those to better manage your budget. A monthly fee may be waived if you keep your account in good standing.
7. Student Checking Accounts
Student checking accounts are for people aged 17-24, but age conditions vary from one bank to another. Student checking accounts are usually low-cost accounts, and some offer to have monthly fees waived if you keep or deposit a certain amount of money in your account. Students usually get a debit card they can use for their purchase and ATM withdrawals. Some student checking accounts don’t charge overdraft or foreign transaction fees, but most of them come with the usual set of benefits, such as online and mobile banking, checks, digital wallet, and theft protection solutions. Student checking accounts are great for college students looking to build their credit, and learn to manage their finances responsibly.
8. Senior Checking Accounts
Senior checking accounts are designed by banks and other financial institutions looking to attract people aged 55+ by offering seemingly unique solutions to seniors’ needs for simple, flexible, and hassle-free banking. Indeed, benefits, such as waived monthly and/or overdraft fees, free checks, free advice services, rewards, etc., might sound appealing, but this doesn’t make a senior checking account the best checking account for elderly people. These accounts often come with ridiculous conditions or hidden fees, which is why it’s important to consider other options prior to opening an account.
9. Online Checking Accounts
An online checking account works just like the regular bank account, except that everything's done, well, online. The bank you're doing business with has no physical branches, and communication usually takes place within an app. With very low to no fees, advanced digital banking tools, higher interest rates, and hassle-free banking options, online checking accounts are quite competitive - a real threat to brick-and-mortar banks and financial institutions in a world where most of us live on the go, and look for as flexible and fast way to bank as possible. However, make sure you familiarize yourself fully with an offer you're considering, especially if you plan to keep a lot of money in your account. You want an online checking that's FDIC-insured, and provides at least some basic identity and account protection features. That said, these digital or neobanks aren't a thing to be afraid of, to the contrary. But if you're still reluctant to online-only banking, you should know that even some "real" banks offer online checking account options, such as BBVA USA's Online Checking Account.
10. Lifeline Checking Accounts
Designed for low-income consumers, lifeline checking accounts usually have low to no minimum monthly balance requirements, as well as low to no monthly maintenance fees. While lifeline checking accounts do offer basic features, there may be some limitations, such as to the number of checks you’re allowed to write per month. Overdrafts aren’t usually possible, either. However, for people who earn less, lifeline checking accounts can be a fair way to access financial products and services.
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Now that we’ve gone through some of the most common types of checking accounts, you should have a basic knowledge thereof, and be ready to start looking for checking account offers that best suit your financial needs and situation!