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“Free” personal and business checking accounts are on the rise, with 48% of non-interest earning accounts now opened without charge. Unsurprisingly, however, only 7.6% of interest-bearing checking accounts are free, with many institutions charging maintenance fees or minimum deposit or balance restrictions in exchange for earning rewards.

 

Although free checking accounts don't charge monthly or annual fees for the convenience of having the account itself, there is a lengthy list of service fees account holders could be subject to — like overdrafts or wire transfers — that still apply. The not-so-secret secret to avoiding fees is learning where to look for them (or just check out these seven common checking account fees.)

 

If you're wondering how much it generally costs to open a bank account, read the following to compare account options, and maybe even find a no-fee account near you that could save you hundreds annually. Even more, we can help you find a friendly community bank or credit union that offers rewarding and free interest-bearing checking accounts with minimal fees.

 

Let’s begin with the basics: 

 

What's the difference between a checking account and a savings account?

 

Checking accounts make it easy to spend money, while savings accounts are designed to accumulate money. 

Checking account advantages

Checking accounts allow you to make an unlimited number of transactions using online banking, mobile banking, and ATMs. You can use a debit card or checks to make purchases or withdraw money. Plus, some rewards checking accounts will even refund ATM withdrawal fees. 

 

Checking accounts offer a direct deposit feature to receive payments, including your paycheck or social security. Most banks in the U.S. use the Federal Deposit Insurance Corporation (FDIC) to insure amounts up to $250,000. Credit unions are backed similarly by the National Credit Union Administration (NCUA).

Checking account disadvantages

Most banks and some credit unions offer regular checking accounts with an array of fees. They may also have ATM withdrawal limitations and interest rates that are lower than you may earn from your savings account.

 

Savings account advantages

Savings accounts are a great way to start investing. Although interest rates are usually lower than other investments like bonds or certificates of deposit, your money is readily available for withdrawal anytime you need it. Also, you can open a savings account for as little as $25 at some institutions. And, like most checking accounts, your money is still insured by the FDIC.

 

Savings account disadvantages

It can be easy to spend more than you planned, and interest rates are usually lower than other investment options. Unlike checking accounts, savings accounts may limit the monthly number of transactions you can make and might even penalize you if you go over the withdrawal restrictions.

 

Additionally, be mindful of your minimum balance since many banks can charge hefty monthly fees if your account falls below it. Those fees can quickly wipe out a low balance and trigger account closure. 

 

Where can you open a free personal checking account?

 

An increasing number of financial institutions are offering free checking accounts, making their checking services more user-friendly. This trend is in response to consumer complaints, government regulations, and the increased competition traditional banks face from fintechs with lower overhead. To learn more, you can easily find a bank that suits your needs.

Megabanks

In 2021, several nationwide banks reduced or eliminated their monthly maintenance fee and some other checking account fees. However, many 'hidden' fees remain. Therefore, it is recommended to inquire about account fees before opening an account anywhere.

Community banks

At smaller, locally-based banks, you're more likely to get friendly, personalized customer service that remembers more than your name. Personnel are usually happy to answer your questions and guide you through the checking account opening process.

Credit unions

Credit unions are often designed to serve a particular group — like a particular company’s employees, members of a certain organization, or even residents within a geographic region. They provide excellent customer service levels similar to local community banks and are known for easier loan approval, better interest rates, and reduced account fees. Because many local credit unions belong to nationwide organizations, you can often access the same or better services that the megabanks offer.

Neobanks

For the digital native Gen Zs, accessing Neobanks on their smartphones comes naturally. Neobanks have lower overhead costs than traditional banks so they can offer lower fees. The drawback is that you don't get that warm, friendly service you’d find at a local credit union or community bank.

 

What do you need to open a checking account?

 

The requirements for opening any bank account differ from one institution to another. But, you'll be covered if you have these documents and cash for an initial deposit (although it is possible to find checking accounts you can open without a deposit).

Tax identification number

Your social security number or tax identification number (TIN) is required. Again, when opening an account online, be sure to follow the procedures for submitting any personal information securely.

Government ID

By law you'll be asked for two forms of identification. These can be your driver's license, state ID card, military ID, or passport. When opening an account online, the financial institution will ask you to submit these securely.

Proof of address

If your address isn't on your ID, a utility bill, cell phone bill, lease agreement, cable bill, or credit card statement in your name will do. These pieces of information are required by law, so plan ahead to have them ready before attempting to open an account.

 

Checking account fees: How can you avoid them?

 

Many checking accounts have an array of fees that can cost you hundreds or even thousands of dollars each year. The best way to avoid paying checking account fees is to shop carefully for an account with lower fees and be proactive in managing your account.

1. Monthly service fees

Many institutions offering checking accounts charge a monthly fee of up to $15. Although some accounts offer to waive the charge if you maintain a monthly minimum balance, why not look for a no-fee checking account to keep your money available without the added cost or requirements instead? (FYI: Free Kasasa rewards checking offers just such accounts!)

 

Some checking accounts may have requirements to meet in order to avoid such a monthly account fee — like setting up direct deposit or opting for paperless statements. For these, it is especially important to understand how the minimum daily balance is calculated. Just because you have the minimum at the end of the billing cycle, there is no guarantee you've met the institution’s definition of their minimum balance requirement.

 

You're more likely to find monthly fees on interest checking accounts that pay a small percentage on your checking account balance. Lucky for you, there are options nationwide with friendly community banks and local credit unions that offer interest-earning checking accounts with no monthly service charge.

2. Overdraft fees

The overdraft fee is usually the most expensive fee banks charge. If you spend more than is in your account, you can be charged up to $35 for a single overdraft. If your account balance is zero when multiple automated payments go through or you're out shopping, you'll have to pay that $35 for each additional processed transaction.

 

The best ways to avoid expensive overdraft fees are to:

 

If you are worried about the possibility of possibly overdrawing your account, ask for overdraft protection before it happens. With it active, your bank automatically transfers money from your savings account to your checking account to cover overdrafts. The transfer fee is usually much less than the overdraft fee.

 

In 2021, U.S. financial institutions earned a whopping $33.4 billion in overdraft fees. These fees are now slowly being pulled back as megabanks are facing stiff competition from fintech companies offering lower-to-no overdraft charges for Americans fed up with ridiculously high penalties.

3. Non-sufficient funds (NSF) fees

Similar to overdrafts — and just as expensive — you can be hit with an NSF fee if you do not have enough money in your account. This happens when the check you wrote, the card you swiped, or the transaction you scheduled amounts to more than your available balance. These are similar to overdraft fees, but with an NSF, you can take a double hit if you are also charged a fee by the business where you made the purchase as your financial institution won’t “cover” for you by paying the remaining amount due.

 

You can avoid NSF fees by proactively balancing your checking account, ensuring you have plenty of funds, setting up low balance alerts, and signing up for automatic transfers from other accounts to cover NSF charges. Many financial institutions will only assess overdraft fees if you are enrolled in overdraft protection. (That way, the business where you spent the money will still get paid.)

4. ATM fees

Fees for using an ATM are charged any time you try to withdraw money from an ATM not connected to your bank (or your bank's network). You can even be charged twice for a single ATM withdrawal: once by your financial institution and again by the ATM operator.  

If you're a frequent international traveler, you could be charged a separate international transfer fee for ATM withdrawals, usually up to $10 per transaction or 3% of the amount you withdraw.

 

With so many checking accounts refunding ATM withdrawal fees (either from the ATM owner or your own financial institution), these become an easy fee to avoid, regardless of where you withdraw money.

5. Wire transfer fees

If you frequently move money between accounts or send money to others, wire transfer fees can add up fast. Institutions typically charge $5 to $30 for domestic transfers and up to $50 for international services.  Those fees can multiply if the transfer goes through more than one institution, like an intermediary bank or clearing house. Many financial institutions also charge a fee to receive wire transfers.

 

To avoid wire transfer fees, look for a local bank or credit union that doesn't charge them or that uses the Automated Clearing House (ACH) network. You might also consider digital payment apps like Venmo® and Zelle®, which allow you to send money directly to others easily.

6. Paper statement fees

Banks and credit unions often charge a paper statement fee of up to $5 but waive it if you sign up for e-statements. In addition to protecting the environment by reducing paper, you often get your statement sooner — and more securely — than waiting for it to arrive in the mail. 

 

To avoid a paper statement fee, simply opt for a digital or electronic (aka “e”) statement. You can always download and print it for free at home if you need it. 

7. Other fees

In your search for a checking account with lower fees or no fees, there are other less frequent but possible fees that you should check, such as:

 

  • Balance inquiry fees 
  • Check printing fees 
  • Stop payment fees 
  • Dormant account fees 
  • Account closure fees 

Ask the bank or credit union if any other possible fees are associated with their checking accounts. They will provide a list when you open an account, but it makes sense to ask questions while you’re at it to make sure you understand what costs you might have.

Does opening a checking account affect my credit score?

 

Generally, no. But there might be a slight dip in your credit score if the bank makes a hard inquiry to a credit bureau to see if you qualify for overdraft protection. Bank account information doesn't appear on your credit report, but lenders will check it when you apply for credit.

You can have a free checking account and avoid fees

 

Now that you’re aware of common fees, you can avoid them by carefully researching your checking account options. Knowing what fees might be lurking and which accounts help you hold on to your money, will be the best way to choose an account you can be proud of. 

Tags: Rewards banking, Banking

About Kasasa

We believe your money should do more... for you and your community. Founded in 2003, Kasasa is a financial and technology services company working to help empower consumers to take control of their finances and be proud of their money by banking locally with community banks and credit unions in your neighborhood, that you know and trust.

These local institutions have roots in their communities, care about people over profits, and are actively invested in local businesses to help keep the economy strong (unlike some of the megabanks we could name).

We believe you shouldn't have to choose between the best banking products, the best customer experience, or keeping your money local, where it can do more good. We've created ethical banking products and partnered exclusively with community banks and credit unions. So you can have it all.

Kasasa accounts are available at community financial institutions around the country. Find one near you at Kasasa.com to get free checking that pays cash rewards, the only loan with Take-Backs, and more. All while keeping your money in the community, so you can always be proud of your money.