Checking Accounts

Since this is a blog about personal finance it only makes sense that we start out by examining the core of personal finance - checking accounts. A checking account is key for anyone interested in personal finance. It serves as the root of virtually all other financial transactions. While it's possible to avoid having a checking account (we'll discuss that in a later post) it's a pretty cumbersome thing to do.

Regarding checking accounts, there are a couple questions you should ask yourself right now:

1. Are you paying for your checking account?
2. Does your checking account pay you interest?

If you're paying for your checking account ditch it. We're serious. You're wasting money if you are paying for a checking account. Sure, the bank may claim that you're getting some benefit by paying for your checking account but that's probably a lie. In reality, all you're doing by paying for a checking account is wasting money.

If you're checking account isn't paying you interest you should also ditch it.

"Wait!" You say. "My bank offers interest checking but I have to pay for it. Does that mean I should ignore the previous paragraph?"

"No." We reply. "You should just ditch the whole dang bank."

Seriously, there are a ton of banks which offer interest checking for free. Sure, most of them are online but they're just as functional as your bank (sometimes more so). And, they pay you to hold your money, just like savings accounts, except usually at a slightly lower rate and without the 6 transaction restriction.

"Okay." You say. "But I don't know anything about online banks. What do I need to know before I decide to commit to one?"

There are six things you should look into before you decide to apply to an entirely online bank:

1. Do I get free checks?
2. Do I get a free debit card (also known as a 'check card')?
3. (Is the debit card a Visa, MasterCard, or (shudder) AmEx (American Express)?)
4. Does the bank reimburse ATM fees?
5. How does the ATM I'm going to use process fees?
6. How do I make deposits?

Presumably, you're going to need to write a check at some point. A bank like Ally (our favorite) offers free checks (50 at a time) while a bank like ING will mail checks for you but doesn't actually give you any real checks (mailing is free). Other banks don't offer any check service.

Most banks will offer a debit card for free. Why not? They love it when you spend money. The only problem will be what network your card is on. Most seem to favor Visa but MasterCard has a strong following. The difference between the two (so long as you stay in the USA) is insignificant. You'll want to be wary of banks offering AmEx cards. It's taken in fewer places than either Visa and MasterCard and it'd be embarrassing to be in a checkout line and discover that you can't because they won't take your card.

If the bank is like Ally it'll reimburse all your ATM fees. If the bank is like ING it'll have a certain 'free network.' Other banks don't reimburse any ATM fees.

Some ATMs (or, I should say, ATM networks) process fees strangely. Local banks, such as Lake Sunapee Bank (as we recently discovered to our chagrin), sometimes don't report the fee as separate from the transaction. Therefore, you won't be getting a reimbursement from any bank because your withdrawal will be reported as, say, $63.73 instead of $60.00 + (fee) $3.73. So, you're going to want to know how your local ATM is going to report fees. (Ed. Note: this last bit of advice applies to all banks, not just online only banks).

Finally, if the bank is online only you're going to want to know how to deposit checks you receive. Unfortunately, most have been rather slow to realize that most of us are loath to deposit a $100 check when we have to deduct the cost of a stamp. Thankfully, some banks (USAA and PenFed (Pentagon Federal Credit Union)) have realized that Deposit@Home is the way to go. Unfortunately, that's not common. But, some others (reportedly) offer to mail you pre-addressed pre-stamped envelopes. We're still waiting to confirm that, however.

Disclosure: Of the banks discussed above we have an interest in both Ally and ING. Our interest is limited to having accounts with both. (Note: If you'd like to open an account with ING you can send us an
email and we'll invite you. If ING accepts your application we are given a small financial incentive. Ally does not currently offer a similar offer).