Checking Account Basics

There are many different types of checking accounts, basic checking, free checking, high yield checking, etc.  It is important for anyone who is looking for the best checking account for them, to evaluate the features of the account and then match the account features to their checking activity.

Basic Checking

For instance if you don’t maintain large account balances then a basic checking account may be for you.  Look at the minimum balances that the account requires.  Is there a monthly fee if you go below the minimum balance requirements?  Some basic accounts may require a direct deposit.  Banks may require direct deposits, because they know that the customer is more likely to stay with the bank if they have a regular deposit to the account.   You may also be limited to a number of transactions that can be processed per month and if you exceed this, then you may be charged a service charge per check.

Free Checking

For many people this is the best type of account if they do not maintain large balances, use it to pay basic household expenses and debit card purchases.  Make sure that the account is truly free.  In order for it to be free, there should not be any minimum balances, nor any regular monthly fees.  That doesn’t mean that there may not be other transaction fees for items such as returned checks, stop payments, and wire transfers.  These are all legitimate charges for a free checking account.

High Yield or Interest Checking

These types of accounts are typically best for those depositors that maintain high balances.  There is no sense in letting your deposit balances sit idle.  Again, look at the monthly service charges on these accounts.  There are typically no service charges if the minimum account balances are maintained.  These are really termed Negotiable Order of Withdrawal or NOW accounts.   These accounts typically act like a true demand account,  (i.e. you can get your money upon demand as opposed to time deposits which may require a notice)  however, if you read the fine print you may be required to give the bank a notice before you withdraw the funds.  To my knowledge no bank has ever enforced this restriction.

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