I decided to break the checking account posts up into smaller chunks since they are a larger part of the total scope of banking products (and where I have more expertise).

Once again I do work for a financial institution, and no, they didn’t ask me to write this.  This blog is 100% separate from my work.

There are two things that come to mind if I were to set up a checking account somewhere, fees and interest.  I want low fees and I want to earn interest.

Fees- Fees are how banks make money, they are essentially arbitrary charges that customers receive when they do something that the bank doesn’t like.  Fees can also be assessed for just having an account, doing cashiers checks and other services, or any number of clever things bankers think up (and we’re all good at being clever). 

The big fee associated with a checking account is an overdraft fee or NSF (Non-sufficient funds).  The lowest I’ve seen is $25 a day for one of these, and the highest $32 at the beginning and end of the day.  You will get one of these fees if you write checks for more than is in your account.  Remember, the bank can close your account for writing checks that won’t clear and can charge you the difference, so don’t ever overdraw your account.

Also, the “service fee” for checking accounts is total bunk.  Don’t put your money somewhere if you have to pay $3 a month.  Remember, that bank needs you more than you need that bank.

Interest- Depending on how much money you have you may or may not be able to earn interest on your checking account.  If you do, it won’t be very much (less than 0.7% typically).  When you earn interest, the bank is paying you to put your money there and that’s a good thing.

There are two ways I’ve seen where financials give you interest on a checking account:

1. Minimum balance requirement- Essentially, you don’t earn interest unless your account stayed above $xxxx.xx all month. (replace x’s with arbitrary amounts.) This provides security for a bank while tying up your money.  For checking accounts, Minimum balance requirements can be a bad thing, unless they are a backup for number 2.
2. Services Requirement- This is where a bank rewards you for having a variety of things (savings, checking, CD, money market, debit card, credit card, online statements, loans, lines of credit, etc.) and because you take advantage of all those other things they offer, you also get interest on your checking as a bonus.  You get more benefit in this situation, because being someone with so many services means that bank staff know you and your account, and actively look for ways to improve your experience there.

Next we’ll talk about managing a checking account effectively, and additional beneficial products that make a checking account even more convenient.  (Aside from being able to write checks) 

What fees do your institutions charge on your checking accounts?  Can anyone beat the beginning and end of day charge of $32 for an overdraft?