A free checking account sounds like a no-brainer, offering easy access to your money with no annual fees. But “free” sometimes comes with strings attached.
Some checking accounts waive fees only if you meet specific conditions. Others may skip monthly maintenance fees, but still charge you for things like overdrafts, ATM withdrawals, or even paper statements.
If you miss the fine print and don’t meet the account’s terms, a free checking account could cost more than expected. Here’s how you can tell whether a free checking account lives up to its name.
[SEE: Best Free Checking Accounts]
What Is a Free Checking Account?
A free checking account is a bank account that has no monthly maintenance fees. These often come with certain requirements, such as enrolling in direct deposit, maintaining a minimum balance or meeting a quota on debit card usage. For many free checking accounts, overdraft, ATM and other service fees may still apply.
“Just because an account is labeled ‘free’ doesn’t necessarily mean there are no costs involved,” says Nate Crayton, consumer area manager for Bank of Albuquerque.
If you want a free checking account that genuinely doesn’t have a cost, look for one with no maintenance, overdraft and ATM fees, and doesn’t have any balance or deposit requirements.
Fee-free checking accounts are common among online banks, which typically have lower costs without physical bank branches.
[Read: Best Online Banks.]
Free Checking Accounts to Consider
— Ally Bank Spending Account: Ally Bank’s Spending Account has no monthly maintenance fees, low daily balance fees or overdraft fees, and comes with access to more than 75,000 no-fee ATMs. Balances less than $15,000 earn 0.10% APY or while higher balances earn 0.25% APY.
— Axos Bank Essential Checking: Axos Essential Checking has no monthly maintenance fee with no minimum opening or daily balance requirement. Accounts aren’t subject to overdraft or non-sufficient fund fees.
— Capital One 360 Checking: Capital One 360 Checking doesn’t have a monthly fee, minimum balance to open or overdraft fees. You can access more than 70,000 fee-free ATMs, and balances earn 0.10% APY.
— Discover Cashback Debit: Discover Bank’s free checking account has no monthly fee with no balance or activity requirements. There’s no fee for insufficient funds, bank checks or overdraft protection. It comes with access to some 60,000 no-fee ATMs across the U.S., and you can earn 1% cash back on up to $3,000 in debit card purchases each month.
Questions to Ask Before You Open a Free Checking Account
Want to make sure that a free checking account is genuinely free? Get answers to these questions first.
— Is there a minimum balance to avoid a monthly maintenance fee?
— Are there ATM fees or overdraft penalties?
— What happens if I miss a direct deposit?
— Is there early access to paychecks?
Choosing the Best Free Checking Account
While many banks offer low-cost checking accounts, you should consider options that avoid the fees that matter most to you.
For example, you might not want an account that requires a minimum balance, but could be comfortable with a direct deposit requirement. Maybe you’re fine without overdraft protection, but don’t want to pay ATM fees.
Also, understand that cost isn’t the only factor to consider when opening a bank account. For example, if you prefer to have in-person customer service, you may be willing to pay a fee on a checking account at your local community bank.
“Don’t blindly open an account with a financial institution solely because they’re the cheapest option,” says Gates Little, president and CEO of The Southern Bank Company. “In the long run, it might be worth opening an account with a more trustworthy institution if the cheapest option you found doesn’t instill the most confidence.”
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Not All Free Checking Accounts Are Created Equal originally appeared on usnews.com
