Free Checking Isn’t Really Free
Does your bank offer free checking? If the answer is no, you need to enter the 21st century and switch to one that does offer free checking (I have a Bank of America My Access Checking account, no fee, no minimum balance requirement, if you want to thank me and have BOA give me a $25 referral fee [you get nothing though], email me because we need to go through their referral process). Now, if the answer is yes, what is the minimum balance you need to carry in order to be eligible for free checking?
That minimum balance times the difference between the checking account’s interest rate (likely under half a percent) and 5% (the going rate for most online savings accounts), is how much that free checking costs you. For example, if you have a free checking account with a $1,000 minimum balance and the interest rate is 0.1%, you’re losing $49 a year in lost interest. That’s the same as paying about $36.75 (25% tax bracket) a year for your free checking.
So, is your checking free or just… kinda free?
9 responses to “Free Checking Isn’t Really Free”
Blaine Moore (First Time Home Owner) responds:
Posted: June 15th, 2007 at 2:30 pm
I just opened a new checking account with no minimum balance, but it comes with a savings account that comes with a guarenteed 5.25% interest on the savings account through the end of the year. You need a minimum balance of $2500, but I’ll just transfer the majority of my online savings into that and get direct deposit set to go there. Then I will not have to wait a few days to transfer money between my savings and checking accounts, and money that is not accounted for will already be in savings without me having to remember to transfer it.
jim says in reply:
Posted: June 15th, 2007 at 2:43 pm
At BOA?
bk responds:
Posted: June 15th, 2007 at 3:30 pm
My checking account is the new HSBC payment account. It has worked well so far, and I’ve switched all my auto payments to it. I keep as close to 0$ in it as possible. I transfer money from the savings account right before it is due (keeping in mind the 6 transfer per rolling 30 days limit). I do have a local bank with free checking and a 0$ minimum if I ever need to deposit a check (rarely ever) and then transfer to HSBC.
CK responds:
Posted: June 15th, 2007 at 4:22 pm
Our checking with National City is free as long as we direct deposit a payroll check with them, no minimum balance. Plus free checks, online bill pay, and a safe deposit box.
keith responds:
Posted: June 15th, 2007 at 7:05 pm
salemfivedirect.com
No minimum balance - 5%+ - $15 atm refund.
Is your checking paying 5% interest, or just…kinda somewhat sort of near 5%?
Tim responds:
Posted: June 16th, 2007 at 11:04 am
mine requires $15k min balance, but any deposits count towards the $15k. so, i have the $15k in laddered cd’s.
Tim responds:
Posted: June 16th, 2007 at 11:05 am
oh, i forgot my point. my point was that you probably can get your minimum counted if deposited into their savings account or cd’s.
Finance Findings For Thursday, June 21, 2007 responds:
Posted: June 21st, 2007 at 11:28 am
[...] Free Checking Isn’t Really Free [Blueprint] [...]
Young responds:
Posted: January 27th, 2008 at 1:38 am
Yup, my free checking is really free. But I am planning on closing my BoA checking, because, while they don’t have a minimum, they seem quite eager to slap on other fees that I can do without!