A checking account, also called a demand account or a transactional account, is an account held with a bank or other financial institution for the purpose of depositing and withdrawing funds. In the US, you can access your checking account by using a check, an electronic debit, and an automated teller machine (ATM), among other methods. A checking account allows you to make as many deposits and withdrawals as you wish. A standard savings account usually limits the number of deposits and withdrawals you can make.
The best checking accounts have features that cater to your preferences for managing daily transactions. A good checking account offers a healthy mix of low fees, low minimums, conveniently located ATMs, and high interest earnings.
How to Choose a Checking Account
Banks, credit unions, and other financial institutions offer a wide range of checking accounts to choose from. Shop around. Look at account fees, minimum balance requirements, and the required number of monthly transactions. You want a flexible account that meets your needs. To find the best checking account, consider the following questions.
1. How many transactions do I need to make each month?
Generally, checking accounts have few limitations regarding when you may access your money. As long as you have enough funds in your account to cover your needs, you can conduct as many transactions as you wish. The only limitations may be those that are imposed on ATM or debit card withdrawals.
2. What should my minimum balance be?
Financial institutions make money from checking accounts by investing the deposits or by charging account fees, e.g., a monthly service charge. You can avoid paying a monthly service charge if you keep enough money in your account. Different financial institutions require different minimum balances that you need to maintain in order to avoid the service fee. They may also waive such fees if an employer or other payor sets up a direct deposit to your account each month.
3. What checking account fees will I have to pay?
If you do have to pay fees for your checking account—because you are unable to maintain a required minimum balance or to arrange for a regular direct deposit to the account—checking account fees will usually also be charged in relation to a minimum balance. If the fine print specifies a “minimum balance” but does not clearly describe the terms, the balance restrictions will probably be high. If your balance drops below the specified amount by even a penny, you will be charged the full monthly service fee.
You may also incur a charge if you do not meet your minimum daily balance, which is how most checking account balances are measured. If your balance drops below the required minimum balance at any time of the day and you do not top it up to the required daily balance before close of business (usually 5 p.m.), you will be charged the service fee. But so long as you top up the account before close of business, you will not be charged the fee.
The following considerations will also help you choose the right checking account.
Is This Your First Checking Account?
If you are a college student or a parent who wants to open a student account, a starter checking account may be best. Starter checking accounts are offered by many banks and credit unions for customers of a certain age, perhaps between 17 and 24. Banks will usually waive monthly fees for these accounts as long as the student complies with specified requirements. These requirements may include a certain number of monthly debit transactions or setting up automatic bill payments. Once you open the checking account, keep careful track of the balance to make sure that you do not incur overdraft fees. Such fees are often very high.
Do You Prefer Branch Banking Or Internet Banking?
If you prefer dealing with a teller face-to-face when you deposit and withdraw cash, consider opening a checking account at your local bank branch. In any case, even traditional banks give you the option of using sophisticated tools for online and mobile banking. So you will be able to use both online and physical banking as necessary.
But if you especially prefer banking online, consider signing up with an online-only bank. Online-only banks usually have lower account fees and pay higher interests because they have no branches to maintain. As long as your internet connection is secure, you will be able to handle all your banking needs from the comfort of your home.
Also important is whether you prefer to pay bills by writing checks. If so, you may wish to choose traditional banking. But you can also consider digital banks, which also provide certain advantages. Your can obtain your first checkbook with Capital One’s 360 Checking free of charge. But Chime, an online-only bank, will post payment checks for you.
Do You Prefer A Checking Account That Earns Interest?
If you can maintain a balance of several thousand dollars or more in your checking account, you should choose a high-yield checking account. Many online banks, credit unions, and community banks offer checking accounts that earn interest comparable to that offered by traditional banks. In order to qualify for the highest annual percentage yield, maintain a minimum balance, make use of your debit card ten to 15 times a month, and arrange for a recurring direct deposit.
Do You Use Overdraft Protection Or Out-of-network Atms?
If you tend to overdraw on your checking account or to use ATMs that are not in your bank’s network, look for a free checking account or one with low fees. Overdraft and out-of-network charges can be steep.
Do You Need A Smartphone App To Help You Monitor And Manage Your Account?
If your main purpose is to control your spending or to monitor the spending of a child attending college, choose a checking account that provides a well-reviewed app. Many mobile banking apps track your spending and can help you to set up a budget, move money to savings, and receive account alerts. Versatile apps for your smartphone are provided by traditional banks and credit unions as well as by online-only banks like Chime and Varo.
Has Your Checking Account Ever Been Closed By Your Bank?
If you have a history of mismanaged accounts due to overdrafts, unpaid balances, or bounced checks that resulted in the closing of a checking account, you can sign up for a second-chance checking account as a way to rejoin the banking system. But you will probably have to pay higher fees or maintain a minimum balance.
Do You Want A Checking Account That Gives You Rewards?
If you often use a debit card, look for a checking account that rewards certain activities. Some banks give you an interest-rate bonus when you maintain high balances, often use debit cards, or set up regular direct deposits. But if you only now and then use services that earn rewards, stay away from reward checking accounts in favor of standard checking accounts that charge no fees or low fees.
Best No-Fee Checking Account
A good checking account charges no fees or low fees.
Capital One 360® Checking Account
Capital One 360® Checking Account allows you to conduct transactions anywhere and anytime without being charged a dime. You can make deposits, pay bills, or transfer cash free of charge. Nor does this checking account require a minimum balance.
Best Student Bank Account
Although college students do not usually work full-time, they need their own bank accounts, especially if they receive financial aid or loans. Most financial institutions have bank accounts designed especially for students: accounts that have no maintenance fees and no required minimum balance but that do provide free ATM withdrawals and apps and software that help students prepare a budget. Students need a bank account that is flexible, convenient, and affordable.
Chase College Checking Account
The Chase Bank College Checking Account provides everything a student needs for banking. College students between 17 and 24 do not need to pay a monthly charge until after they have graduated, which may be up to five years after the account is opened. This account requires no minimum deposit to open, and it offers a signup bonus of 100 dollars. To qualify, students must agree to receive paperless statements and must make ten qualifying transactions within 60 days of opening the account. Qualifying transactions include direct deposits, debit-card purchases, and online bill payments.
Best Rewards Checking Account
A rewards checking account allows you to earn cash back on your debit-card purchases. In this way, you can earn interest on your account balance. In some cases, you will also be reimbursed for fees charged by out-of-network ATMs. Among the banks offering the best rewards checking account are Radius, Discover, Meriwest, and All America.
Radius Bank Rewards Checking
The Radius Bank Rewards Checking offered by Radius Bank is one of the best for account holders interested in a checking account with earned benefits. If you maintain a minimum balance of $2,500, you can expect a high cash-back rate on debit-card purchases, free checks, and unlimited reimbursement of ATM fees. The account also provides budgeting tools and the option of receiving your paycheck two days in advance.
Best Checking Accounts for Most Americans
To get the most out of a checking account, look for banks that offer low fees, excellent customer service, and free ATMs in your neighborhood. If the checking account earns interest, so much the better. Today, one of the most in-demand checking accounts in the US is the Citi ElevateSM Account package.
Citi ElevateSM Account Package
The Citi Elevate Account Package is a digital account that offers electronic delivery of statements and all other legal notices and communications. So you can track your checking account from the comfort of your home. To access its services, customers must register using Citibank® Online, the Citi Mobile® app, or Citiphone Banking. No minimum deposit is required.