Fees are lame, especially when it comes to something so basic as a checking account. Luckily, there are ways to avoid them. Let’s start with a brief overview of the fee structure. A good way to think about checking fees is comparing the fee structure to how you pay for your living costs, let’s take the example of your monthly housing expenses.
Checking fees contain a fixed portion where the dollar amount is pre-determined and unchanging over a period of time, like your monthly rent. In the checking account world, the comparable fee to rent is commonly referred to as a monthly service or monthly maintenance fee. These monthly service fees can almost always be waived though!
When you pay rent, you often have to pay for other things as well, such as utilities, electric, and heat. These costs are variable, and are charged based on how much you use them. Notice how your bills are higher in the summer if you blast the air conditioning all day and night. It’s the same thing with checking usage fees. In the checking world, the comparable fees are essentially all the other fees out there; things like out of network ATM withdrawals and overdrafts, which are charged only if you use them. No use, no fee!
In summary, checking fees are comprised of fixed monthly service fees and lots of variable usage fees that are charged only if you use them.
BUT WAIT! HOLD THE PHONE! There is good news:
Turns out that, if you do your homework, you can actually end up paying close to nothing for your checking account. In fact, we’re determined to help you to never pay any fees. The fixed monthly service fees can typically be waived if you direct deposit or maintain minimum balances. If you have a job, getting your employer to direct deposit is a common and easy way to waive monthly fees. Usage fees can be avoided if you’re diligent about not making any out-of-network withdrawals and monitor your balance carefully so you don’t overdraw. With this in mind, if you’re paying for your checking account, you should probably reevaluate your bank of choice.
How to find free checking (or cheap checking):
When searching for checking accounts, look for opportunities to waive fees. You should never pay any monthly service or maintenance fees, given all waivers out there. At an average big bank, there are 5 to 20 different ways to waive a fee. The first and foremost fee you should avoid is the monthly maintenance fee. The top three most common ways to waive monthly fee (across all financial institutions) are:
- Maintaining a minimum account balance: you’re usually off the hook if you can maintain between $500-$1500 in your account
- Direct depositing, for example your paycheck or other regular income
- Having linked accounts and signing on to other non-checking accounts and services (e.g., CDs, savings, mortgages, loans)
As stated earlier, usage fees can be avoided by keeping your banking in-network. When researching potential banks, be sure to check the locations of their branches and ATMs. If you are a college student, it is helpful to have a bank with ATMs available both at home and near campus. Out-of-network ATM fees can be anywhere from $2.00 to $5.00 per transaction! This does not limit you to just the large national banks either. Credit Unions and local banks often have shared networks of ATMs and branches. Although this is more rare, some accounts even reimburse you for out-of-network ATM fees.
There are online resources to help you locate the best checking account options. NerdWallet has a great checking account comparison tool that lets you find the best checking account for you based on your individual abilities to direct deposit and maintain balance minimums. We also factor in your behavior to show you how your fees change based on what you do.
Cheat-sheet (tips and tricks):
- Beware of “free” checking. Technically, an institution can’t call their checking account free if they charge a maintenance fee or an activity fee like going below a minimum required balance. However, banks can still charge you usage fees on ATM withdrawals or overdrafts. There’s virtually no such thing as free checking – there are fees for almost everything.
- If you can’t direct deposit or maintain minimum balances, credit unions and internet banks are your best bet. Virtually no “big banks” offer free checking anymore.
Other considerations to keep in mind when opening a checking account:
- Convenience: availability of ATMs and branch locations and proximity to places you live, work, play, and travel
- Customer service: having access to representatives that are friendly and helpful
- Technology: ability to access and manage your money online and through mobile applications