Many people think of a bank as a safe place to hold their extra savings that gradually grows with a monthly interest payment. What many people do not realize is that their bank might actually be costing them money instead of earning money through fees. When that happens you are almost better off storing your savings underneath your mattress. Thankfully, there are many checking account options that will not cost you a dime.
Traditional Banks Don’t Only Make Money From Loan Interest
Like any other business, banks only remain in business by making a profit. They do this by lending money deposited by you the customer and charge a monthly interest payment. A portion of that interest paid is rewarded to the banking customers as the bank uses their money to underwrite these loans. The bank keeps the remaining interest to pay expenses such as salaries and the electric bill.
Another way banks make money is by charging fees for various services like ATM withdrawals or insufficient account balances. In 2016 alone, the three largest banks, J.P. Morgan Chase, Bank of America, and Wells Fargo earned $6.4 billion in banking fees!
These are some of the fees that most banks charge, although, the traditional brick and mortar banks are more likely to charge fees than online banks or your local credit union. Perhaps you have paid some of these fees yourself with your checking account.
ATM Withdrawal Fees
When you walk up to an ATM machine to make a withdrawal, your bank might not charge a fee if it’s an “in-network” machine that belongs. But, if you withdraw from an out-of-network ATM (i.e. you bank with Wells Fargo and want to withdraw from a Bank of America ATM), you might have to pay a withdrawal fee of up to $5.
Overdraft Fees
Another common fee charged by banks is an overdraft fee when you withdraw more money than is currently in your checking account. Banks will automatically transfer the difference from your savings account to complete the transaction and keep an additional $35 as an overdraft fee. To the surprise of some, the three largest banks collected $5.4 billion in overdraft fees in 2016 and were only paid by approximately 8% of their customers and overdraft at least 10 times per year.
Account Maintenance & Service Fees
One final common fee charged by traditional banks are monthly maintenance and service fees. The fee can range anywhere from a $5 to $30 each month you keep a checking or savings account open. Banks will often waive these fees if you meet specific criteria like maintaining a minimum account balance of at least $500 or $5,000, use your debit card several times each month, or enroll is Direct Deposit.
Alternatives to a Fee-Heavy Traditional Checking Account
If you are tired of encountering a bank fee around every corner with your current checking account, it’s time to know that no-fee checking accounts do exist. Many of the account choices listed below are from online-only banks, but, others do also have physical branches for the times you still need a human bank teller to complete a cash deposit or have a document notarized.
All these free checking account options listed below offer similar features like complimentary bill pay and mobile deposits, and a mobile banking app. It’s also possible to earn interest as well. Beneath each banking option are a few highlights to help you decide which bank is your best option.
Many people think that credit unions only offer membership if you live in a specific geographic region or work for a certain employer. Alliant Credit Union is one of the exceptions.
- Earn 0.65% APY (distributed monthly) on all deposits when you enroll in electronic statements and at least one monthly electronic deposit
- First $20 in ATM withdrawal fees reimbursed each month
Ally Free Checking offers two different interest rates depending on your daily balance. They pay 0.10% for balances less than $15,000 and 0.60% for daily account balances greater than $15,000.
- First $10 in ATM withdrawal fees reimbursed each year
- Send money to family or friends with their Popmoney feature regardless of their bank
- 24/7 Customer Service
With the Aspiration Summit Account, you can earn 1.00% APY on your checking account balance higher than $2,500 and 0.25% APY on the first $2,499.99 deposited.
- Interest rate is higher than most high-yield savings accounts
- No ATM withdrawal fee for any machine in the world
- Minimum initial deposit of $10
Launched in January 2015, BankMobile is a relative newcomer to the online banking world, but, it currently has more than 2,000,000 customers.
- Access to 55,000+ no-fee ATMs (3 times larger than Bank of America’s network according to BankMobile)
- Current interest rate of 0.75% APR
- No overdraft fees checking account is linked to BackMobile savings account
BBVA Compass Clear Choice Free Checking is one of the banks that has physical branch locations for select cities.
- $25 opens an account
- No withdrawal fee at BBVA ATMs
- Have 4 non-network ATM withdrawals fees waived per month when you pay $5 per month
- Can add personalized photo to VISA Debit Card
Capital One 360 Checking (formerly ING Direct), has a three-tier interest rate payout depending on your account balance:
- 0.20% APY with account balance of $0-$49,999.99
- 0.75% APY with account balance of $50,000 to $99,999.99
- 0.90% APY with account balances greater than $100,000
In addition to having one of the highest interest rates for high account balances, a 360 Checking account also provides the following perks.
- No minimum opening deposit requirement
- Free withdrawals at all Capital One and Allpoint-network ATMs
If you have at least $5,000 to deposit, the EverBank Yield Pledge Checking might be a good option for a high-yield interest checking account.
- Earn 1.11% APY on $250,000 in deposits during the first year of account opening
- All ATM fees reimbursed when daily balance is above $5,000
First Citizens is a smaller bank that offers a free checking account, but, it can be more expensive than some of the others listed here.
- Free ATM withdrawals from 475 First Citizens ATM machines
- Must enroll in e.statements within 60 days of account opening to keep free checking option
- $25 Minimum Initial Deposit
Many banks pay the best interest rates for high account balances. With a Northpointe Ultimate Account, you can earn up to 5% interest for the first $5,000!
- Earn 5% interest on first $5,000 by (1) enroll in eStatements, (2) 15+ monthly debit card transactions totaling at least $500, & (3) setup direct deposit or automatic withdrawal of at least $100.
- First $10 in ATM fees reimbursed monthly
Radius Hybrid Checking pays interest on deposits greater than $2,500.
- No ATM Fees
- 0.90% APY on account balances greater than $2,500
- $10 Minimum Initial Deposit
If you already invest with Charles Schwab, banking with them can make it easier to have all your money in one place.
- All ATM fees reimbursed
- 0.10% APY on all deposits
- Links to free Schwab brokerage account
USAA has one of the most loyal followings in the finance industry. If you qualify for membership by serving in the military or an immediate relative to a servicemember, USAA free checking might be a good option.
- First $15 in non-USAA network ATM fees are reimbursed monthly
- Free overdraft protection when linked to a USAA savings account or credit card
- Minimum $25 initial deposit
The Best Free Checking Account for You
You may have never known that so many free checking options existed. When choosing the best option for you, take into consideration how you use your checking account & how much money you keep in it on a daily basis. The best option for you might be the one with the highest interest rate or it could be one with the most generous ATM fee reimbursement policy. Either way, it’s nice to know that alternatives to fee-based checking exist.
So, what’s your favorite (and free) checking account? Help us add to the list and share it in the comments below.
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