Key takeaways:
- A checking account helps you separate your ‘everyday money’ from your ‘save for someday money,’ making it easier to set aside funds in a separate savings account
- ‘Free’ checking doesn’t necessarily mean there are no fees. Know what fees your account comes with, and how to avoid them, because fees can add up
- Choose a checking account that offers the features and perks (extensive ATM network, faster access to funds, etc.) that make the most sense for you
While it may have been a while since you sat down and wrote out a paper check, having a checking account is still important. Many people don’t even know if they have some form of free checking, or if their credit union charges them for the account. Having the right type of checking account can make a big difference in your financial life.
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A checking account—even a free checking account—helps you manage your budget by giving you the ability to use a debit card, pay bills online, make deposits and withdraw cash from an ATM, write checks, and use your money for day-to-day living. It also helps you separate your ‘everyday money’ from your ‘save for someday money,’ making it easier to safely set aside funds in a separate savings account.
Some banks and credit unions charge you fees for a checking account or offer free checking accounts with hidden costs. At first it might not seem like a big deal to pay a few dollars every month. But like all things financial, even the cost of little things can add up quickly.
Why does free checking matter
Free checking allows you to avoid monthly maintenance and other fees, so you can keep more of your money. And those savings add up over time. For example, let’s say your bank charges you a $5.00 maintenance fee each month, and then you incur another $6.00 each month in ATM fees. Over a year, this adds up to $132.00. Instead, let’s say you took that money and invested it in an account earning 3%. After 10 years, you’d have more than $1,500.00.
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Free checking accounts at credit unions offer even more perks. Credit unions are not-for-profit, so they can offer lower fees and more competitive rates overall, as well as offer financial support to local community non-profits—so you get the benefits of free checking while becoming part of a bigger, better financial movement.
Benefits and drawbacks of a free checking account
Benefits Drawbacks Free checking means that the bank or credit union cannot charge you a monthly maintenance fee, fees for exceeding a specified number of transactions, fees for not meeting a minimum balance, or any fees to deposit, withdraw, or transfer money. Free checking may still come with certain fees such as ATM fees, overdraft or bounced check fees, balance inquiry fees, fees to stop payment on a check, fees on a dormant account, check-printing fees, and others. Having a free checking account with no monthly maintenance fee keeps more money in your pocket, giving you an easy way to save. Some free checking accounts have a high required minimum balance. Make sure to read the fine print to avoid unexpected fees. Less stress: with a free checking account with a credit union, you won’t be surprised by end-of-the month fees you didn’t expect. Free checking accounts may not always offer helpful features such as automatic overdraft protection.
Even if you have free checking, there may be trade-offs
At its most basic, free checking is an account with no monthly fees. But it’s important to look beyond the basics. Even free checking accounts can have some fees. The trick is to know what they are and how to avoid them.
Some banks will waive the monthly maintenance fee in exchange for other requirements, such as keeping your balance above a certain threshold, or by maintaining monthly direct deposits.
Common types of fees include:
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- Monthly maintenance fees
- Fees charged when your account dips below a certain balance
- Overdraft/non-sufficient funds (NSF) fees
- ATM fees or fees for out-of-network ATM use
- Online bill payment fees
- Stop payment fees
- Fees for receiving a paper statement in the mail
- Charges for things like getting cash back on debit card purchases
- Fees for things like transfers or balance inquiries, or a charge for exceeding a limit on the number of transactions you can make in a month
Tips to get the most out of your free checking account
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Make sure your free checking is really “free.” Even if your current account has no monthly maintenance fee, be sure to look for unexpected or hidden charges or requirements that will be hard for you to meet. For example, do you incur ATM fees each month because a “free” ATM is miles away? Do you pay an annual fee to have a credit card?
Another consideration is account balance requirements. If your checking is only free when you have a high balance, is that the best use of your money? Even if your checking account pays interest, the rate you earn might be limited. A checking account is meant for your daily living expenses. That’s why it’s a good idea to leave just enough money in your checking account to pay your monthly bills, and then transfer the rest to a savings or money market account that will earn dividends. But pay close attention to your balance, to avoid overdrafts or NSF fees.
Free checking account from a credit union may offer extra perks
Many credit unions offer more than one checking account option, giving you the freedom to choose the option that fits you and the way you spend your money. It’s important to compare account features.
For example, Global’s free Core checking account has no monthly maintenance fee, no minimum balance, and no NSF fees. Global’s Latitude checking account has a small monthly maintenance fee which is waived when you have money directly deposited into your account each month. This account also offers an automatic overdraft protection option, which allows you to automatically transfer money from your savings or money market account, or from a credit line or home equity line of credit, if you exceed your account balance.
The right checking account also gives you the ability to manage all your money. For example, the annual fee on your Global Credit Union Visa® Credit Card is waived when you have a Global checking account, and you can easily transfer money from checking to pay your monthly credit card bill to avoid late payment fees. You can link your Global accounts with other financial institutions to get a big-picture view of your money. And Global even gives you access to direct deposit funds up to three days earlier with the Early Payday feature. And if mobile banking is important to you, look for an account with an easy-to-use app that is safe and secure. Finally, choose a free checking account that comes with easy access to customer service support.
Check to make sure your checking account is right for you
“Free” usually sounds good, but make sure that free checking account doesn’t cost you in other ways. Few checking accounts are totally free, without any fees at all, so be sure to look for the account that will work best for you and the way you spend and manage your money.
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