What Do I Look for in a Bank Account?

What to consider when you decide on a checking or savings account.

What Do I Look for in a Bank Account?
March 20, 2013

What Do I Look for in a Bank Account?

To fully answer this question, you first need to consider two other related points: 1) your general attitude towards paying for banking services, and 2) your reason/s for opening an account.

Let's rule out a savings account at the onset. Savings accounts are very safe, but like today's standard checking accounts they offer no interest unless you have a sizable principal. That being said, if you had a chunk of money, you'd be wise to diversify that into a portfolio of stocks, mutual funds, certificates of deposit, and other financial products. You might use a savings account to stash some money away for a rainy day. One other thing to note is that fees may be charged on a savings account if your balance falls below a specific threshold or if you use other services at the bank without holding accounts with a higher dollar value.

Let’s answer two key questions that will help you to determine which banking account is right for you.

1. How do you feel about fees?

In today's tough economic times, banks seldom offer truly "free" checking. Just like airlines, banks are currently looking for ways to make money and stay above water. Services that were complimentary to bank customers ten years ago are now fee-based. For example, a bank may charge a fee for excessive balance inquiries, balance transfers, and stop payment orders. The overdraft protection that was once a perk for keeping your money in a bank is now a revenue-generating event for the bank. Believe it or not, there was a time not long ago when a customer who mistimed a payroll deposit and bounced a check over the weekend could see the bank take care of it for him or her by extending a small loan in the amount of the deficiency until the deposit arrived. Today, that small miscalculation would cost a bank customer a not-so-insignificant charge for insufficient funds and a fee for a returned check.

Nevertheless, a checking account is essential for just about every person who has a job, pays bills, and/or makes purchases. When looking for a checking account, there are still some banks that offer checking services without a monthly fee. However, you need to take a look at the small print on your application or on the bank's website. Fees can still arise in quite a few situations, such as a failure to maintain a balance, a wire transfer (not used by many of us except when perhaps purchasing a home), auto bill pay, not going with e-statements, and the killer — use of an ATM not associated with your bank. They get you coming and going — the other bank hits you with a fee for using their ATM, and then your bank gets you with (many times) an even greater fee for your ATM-wandering eye.

Some of these fees, like the ATM double-whammy described above, are the industry custom. You'll just have to live with them. Other fees may not apply to your account if you are combining your checking account with other services from your bank. For instance, if your home mortgage is with this bank or you have enrolled in direct deposit for your paychecks with your bank, charges such as the minimum balance or the monthly fee may disappear.

Don't forget to check out your local credit unions as well. In many cases, credit unions offer the same types of banking services as banks. The members of a credit union are the owners, so they enjoy the benefits of its earnings in the form of reduced (or no) fees, favorable rates and dividends on savings and investment accounts, and lower interest rates on loans. Depending on your priorities and requirements, this might be a viable option.

If there are no circumstances that get you the perks as we know them today, then you will need to shop around and compare the fees and benefits that each bank provides. Beyond that, examine the purpose of the account you wish to open and its ease of use (e.g., ATM locations, branches, website functionality).

2. What do you plan to use the account for?

Deciding which bank to choose rests mainly with the importance you place on specific criteria. What features and benefits are important to you? Do you write a lot of checks or make a number of debit purchases each month? Do you want an ATM that is close to your home or business? Do you want a branch location with convenient hours of operation? Or perhaps what you need is a bank website that allows you to complete 99% of your banking from your PC.

In addition to the conventional banks and credit unions, investment companies such as E*TRADE are now offering online checking and savings accounts. E*TRADE has what they call the "Complete Online Banking Experience." The company is currently offering a "Max-Rate Checking Account." This service advertises unlimited ATM fee refunds and free online bill pay as well as some interest on higher-balance accounts. American Express (AmEx) also has a "High-Yield Savings Account" currently yielding 0.85%. It's a similar story at Capital One 360's website; the investment company formerly known as ING Direct offers a savings account currently yielding 0.75% and a checking account which offers different levels of interest based on the account balance.

As you can see, there are several questions that need to be answered before you can choose a bank account. Perhaps list your top three priorities for an account and see which of your banking options ranks the best. Read websites and ask bank representatives questions related to your specific needs to get all of the necessary information prior to making your decision.

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