9 QUESTIONS YOU SHOULD ASK BEFORE OPENING A CHECKING ACCOUNT

5 March 6 MINS READ
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Yes, the world is becoming more and more digital by the day but banks continue to play an important role in financial management. A checking account provides you with a convenient place to manage your everyday family expenses. However, with so many banks and credit unions to pick from, there are a few questions you should ask before opening a checking account.

Whether you're new to banking, relocating to a new town, or simply unhappy with your current bank, these 9 questions will help you find the right balance of fees and features to help you make the best decisions when considering a checking account.

Let's get right into it.

1. Do I Need A Physical Branch Location?

Your local bank or credit union is no longer your only option for banking. With the rise of online banks, you have a lot of choices when it comes to opening an account. Unless you don't mind doing all of your banking online or over the phone, you could look for a bank with a location near your place of business or residence.

However, an online bank would be a good fit especially if you're a digital native who already does almost everything online. These banks use their sophisticated online tools and savvy mobile apps to cater to people who prefer to bank on the go and don't require the reassurance of a physical location.

It can be worthwhile to spend some time on the bank's website to learn how to get help if something goes wrong. Unauthorized withdrawals from your account or a deposit that does not clear your bank in time to cover scheduled withdrawals can be scary and expensive. So, knowing how your bank will work with you in the event of an issue can help you get to a resolution much faster, giving you more confidence in your bank choice.

2. What Type Of Checking Account Do I Need?

You must first determine the type of checking account you need before opening one. Would you like a personal checking account in which you are the sole account holder, known as an individual checking account? Or would you want a joint checking account? Knowing this will allow you to compare features amongst banks that provide the same account type.

3. Does The Account Pay Interest?

One of the most defining characteristics of high-yield checking accounts is their interest rates, which can vary greatly. If interest is offered on checking accounts, the rates are generally lower than savings accounts, and you must have a larger balance to qualify for the best rates.

Savings accounts provide greater interest rates, but they are subject to various laws because they are intended for saving. The number of withdrawals you can make from your savings account each month is limited by federal restrictions, which apply to all banks, and some banks may charge you for frequent withdrawals.

While many national brick-and-mortar banks pay a minimal interest rate on personal checking accounts, online banks usually pay a higher rate. Check your bank's deposit agreement and any disclosures to see what interest rate levels they offer, as well as any criteria you'll have to meet to earn those yields,  such as getting direct deposits or making a certain number of debit card transactions.

4. What Are The Minimum Balance Requirements?

Some checking accounts require a minimum monthly balance in addition to a minimum opening deposit. You'll need to meet the minimum to avoid a monthly account fee. If you meet specific criteria each month, such as agreeing to receive your paycheck via direct deposit, banks may eliminate the minimum balance requirement.

Make sure you read the tiny print to avoid opening a checking account with balance criteria you won't be able to satisfy.

5. Can I Use An ATM For Free?

You use ATMs to withdraw money from your checking account without having to go to a bank. Now, here's where the battle between physical and online banks heats: Fees charged by ATMs.

Although most banks offer free ATM access, your bank may not always be the most convenient option to get cash when you need it. Using an out-of-network ATM may result in fees from your bank, the ATM owner, or the network. As a result, you may be charged twice, and these charges add up quickly. However, some banks are members of ATM networks that provide free access to all ATMs inside the network. So, you can avoid fees by using an ATM that is part of your bank's ATM network (you can usually find these via your bank's mobile banking app or on the bank's website). But, how will your bank charge you if you use an out-of-network ATM while you're in a pinch? You should inquire.

In a nutshell, if you use a lot of cash, find a bank that has friendly ATM fees. And oh, certain banks may repay you for ATM fees.

6. Do I Want Rewards or Cash Back?

Different banks offer different checking account features, such as loyalty rewards and cashback offers, as well as varied incentive programs. If these benefits are important to you, look for a bank that offers a rewards program that allows you to get the most out of your checking account.

Make sure you understand how any cashback is earned and read the small print to learn about any fees or restrictions for activating bonuses or other rewards.

7. What Happens If I Spend More Than I Have In My Account?

The last thing you want to do is bounce a check, yet even the most careful individuals can get into financial difficulties. That's why you should compare each bank's features for protecting you if you overdraw your account.

An overdraft occurs when you withdraw more money than you have in your account. If this happens, your bank may decline the withdrawal and charge you fees, which may apply to subsequent overdraft attempts. Some banks restrict you from overdrawing your account when you swipe your debit card and allow you to request that all transactions be declined if your account is insufficiently funded. Other banks offer optional overdraft protection, which allows you to cover an overdraft with money from a different account, such as a savings account or a credit card. They let you link your checking and savings accounts so that an automatic transfer occurs whenever one of your accounts becomes overdrawn. These automated transfers may incur a fee though.

If you pay for your overdraft using a credit card, you may be charged interest. Others provide you with a grace period during which you can pay a deposit to make up the difference.

8. Are There Fees?

While a no-fee checking account is ideal, there are some fees that you may incur as a result of using your checking account. Some banks charge you a monthly fee to keep your account active. However, they frequently waive those fees if certain requirements are met, such as regular payroll direct deposits.

Knowing how the banks you're considering calculate fees will help you compare checking accounts fairly. Some common fees for checking accounts are monthly maintenance fees, ATM fees for using an out-of-network ATM, cashier’s check fees, check reorder fees, foreign transaction fees, minimum balance fees, overdraft fees, non-sufficient funds fees, and wire transfer fees.

9. What's The Bank's App Like?

When it comes to choosing a checking account, a user-friendly mobile app may make all the difference, from mobile check deposits to ensuring your paycheck reaches your account. Even if you won't be doing all of your banking on your phone, it's worth checking out the app's features. Don't be afraid to dig information from bank websites to see what features their mobile banking apps have to offer. You can always call the bank's customer support line or chat with their customer service team on their website if you're looking for certain features in the mobile banking app. Also, look at the app's star rating on the App Store or Google Play.

You should also ask if you can make free mobile deposits with the mobile app. Although most banks provide this service for free, some may charge a fee for convenience. Some others offer free mobile deposits but place a hold on the money for many days. However, the bank may subsequently offer you faster access to a given deposit for a fee.

BOTTOM LINE

The better the bank's total package meets your needs, the more comfortable you will feel entrusting your hard-earned money to them. The 9 questions above might help you narrow down your selections and choose the best checking accounts for your needs and lifestyle.

A checking account is only a small portion of your entire financial picture. Check out savings account alternatives and how other bank services will help you achieve your financial goals.