A few years ago, during the depths of the credit crisis and new legislation, banks were scrambling for ways to generate more revenue. With there long time friend Mr. Overdraft gone (and the ability to re-order it to increase fee revenue), many experts predicted the death of the free checking account. Now that we’ve exited the credit crisis, was the prediction of the death of free checking accurate?
Some banks instituted fees but then offered easy ways to get out of them, which is like not having them in the first place. So where do you need to go to find free checking?
Online banks like Ally Bank, ING Direct (now Capital One 360), and others like them have always offered free checking with no minimums (or $1 minimums). These are usually your best options if you don’t mind not having a local branch. They often refund ATM fees or don’t charge them in the first place (the bank that owns the ATM may charge a fee and the online bank may refund them).
The best part about online banks is that they often pay you interest as well. It won’t be a lot but it’ll be close to their savings account rate  because they know you can just move between the two accounts or opt for free overdraft protection. For example, as of April 2013, Ally Bank pays 0.40% APY on balances of less than $15k and 0.75% for balances above that. They pay 0.84% on their savings account – so it’s pretty close.
Reward Checking Accounts
Love high rates but really need a branch you can walk into? Look for a reward checking account . These are checking accounts that offer a higher interest rate when you meet their reward requirements (usually 15 transactions on the debit card, online statements, and other similar requirements). One reward checking account we profiled many years ago is still going strong – Evantage Bank offers a 2.00% APY checking account on balances up to $10,000 with a $1 minimum and just 10 check card transactions a cycle. The days of 5.00% APY may be gone but 2.00% is at least twice what you’d get from major online banks.
Brick & Mortar for DD or Min Requirement
If you really want a national brick and mortar bank, you can often avoid a $5-$15 fee if you maintain a minimum balance or have a direct deposit each statement cycle/month. For example, Bank of America will not charge you a $12 monthly maintenance fee if you maintain an average daily balance above $1500 or make one direct deposit of $250+ each month. Wells Fargo waives their $9 a month fee if you maintain a balance of $1500 or make direct deposits totally $500+.
One “hidden” cost is the loss of interest on that money because those checking accounts don’t pay interest. On $1500, 0.4% is approximately $6 a year. So there may not be a fee but there is a cost associated with it.
Free checking is not dead and, if you compare it to what existed before the crisis, it hasn’t really changed that much despite what the experts predicted.
(Photo Credit: RambergMediaImages )