You probably don't budget hundreds of dollars per year for checking-account fees, but according to the results of our 2009 Checking Study, if you're paying them, it's money draining out of your account.
Here are six steps to ensure you don't fall into that trap.
1. Think about what you needBefore opening a checking account, think about what services you need. If it's just simple checking, bill pay, ATM or debit card transactions, then look for a free checking account.
Seventy-six percent of noninterest accounts in our survey qualify as free checking accounts.
2. Check out the differences onlineMost banks offer three or four checking-account options. Visit the Web sites of several banks and see the differences between accounts. Do you really need free checks if you're going to have to pay a fee for the account? If you pay most bills online, perhaps you need only a couple of paper checks per month and it would be cheaper to buy them yourself.
Carefully review what each account offers and see if it's worth the price of admission or if you'd be better served by a free account. The average minimum deposit needed to open a free account is $68.32 versus $473.12 for an interest-bearing account.
3. Consider high-yield if it fitsInterest on the balance in your account may sound good, but unless it's a high-yield account, you'll be stuck with a service that probably requires a hefty balance and pays very little interest. You'll have to pay a service fee any month in which you don't maintain the required balance.
Some high-yield checking accounts allow you to maintain a very low balance but require you to adopt certain behaviors, such as using a debit card for 10 or 15 transactions per month, having a monthly direct deposit or automatic bill payment and accepting electronic statements.
If those stipulations fit your lifestyle, then a high-yield checking account can be an excellent choice.
4. Don't bounce checksOverdrawing your account is the single biggest way to rack up fat fees. The average nonsufficient funds (NSF) fee rose more than 2% this year to $29.58. The key to not bouncing checks is simply to know how much money is in your account. It can take a bit of coordination if two people are drawing from the same account. But even just one person having access can be problematic if you're using checks, a debit card and scheduling automatic bill payments.
Check your balance daily if you're going to be making several debits throughout the day. Keep your receipts until you've reconciled debits and credits with what's been posted to your account. If it helps, maintain a paper register -- banks still hand them out for free -- so you don't have to log on every time you want to check your balance. Keeping a cash cushion in the account is also useful.
5. Set up overdraft protectionIf overdrawing is unavoidable, then set up overdraft protection with the bank. You'll need a savings account, credit card or home equity line of credit that will be linked to your checking account and debited when you overdraw. This is not an automatic bounce-protection program; you'll need to sign an application.
Though there is a moderate fee associated with this service, it will save you costly NSF fees -- especially if you're a serial check bouncer.
6. Use your own bank's ATMAlmost all banks impose a surcharge if you use an ATM that doesn't belong to your bank. The average fee rose this year by more than 12% to $2.22. ATM fees can be avoided by assessing your cash needs daily or weekly and withdrawing money when you have access to your bank's ATM.
Sure, there are times when you're out of town or you make last-minute plans and you need some cash. But most withdrawals can be planned. If you travel frequently to areas where there is no access to your bank's ATM, consider an account with a credit union or a community bank that doesn't have an ATM network and will reimburse a certain number of fees each month.
Published Dec. 3, 2009