Steps For Picking a Checking Account

Woman using mobile deposit for checking account
Do some homework before opening an account. You'll save money and enjoy your account more. RyanJLane/Getty Images

No matter how you personally feel about banks, they are a much safer place to stash money than under mattresses, in the freezer or burying cash in the yard. But everyone should be skeptical of banks, their flashy bonus offers, and interest rate deals. Before you sign on the dotted line to open a checking account, follow the six steps below. 

1. FDIC Insurance Is Important

Before you consider a bank, check that it’s FDIC-insured.

This will protect your funds up to $250,000. If the bank goes under, the government will ensure you get your money back. Your mattress can’t say the same.

2. Avoid the Fees, Fees, Fees

While checking accounts provide much better protection than your mattress, you still need to guard yourself against bank fees.

Banks and credit unions alike often work in multiple fee traps for customers: overdraft fees, overdraft protection fees, monthly maintenance fees, ATM fees, minimum opening deposit requirement, extended overdrawn balance charges.

Fortunately, some accounts are better than others.

Bank of America charges Core Checking Account customers $35 for a single overdraft incident with a maximum of four charges per day ($140). Enroll in overdraft protection and BofA will still charge you $10 to move funds from savings to checking.

  • AllyBank charges $9 for an overdraft incident with a maximum of once per day. Overdraft protection is 100% free.
  • Chase bank charges $2 when its customers use non-Chase Bank ATMs. That’s on top of the fee the ATM terminal may charge.
  • Bank of Internet USA, Charles Schwab, Ally and Fidelity do not charge ATM fees and reimburse fees charged by other banks.

So do your due diligence before jumping into a relationship with a bank.

You and your money deserve to be treated well.

3. Read the Fine Print

Who reads the fine print anymore? It’s just massive amounts of text on a page you scroll through before clicking “I agree” and moving on without thinking.

But when it comes to signing documents pertaining to your money, you should take the time to check the fine print. At least review the list of ways your bank could charge you fees and how to prevent them.

4. Beware of Bonus Offers and Interest Rate Deals

A banking relationship is much like a romantic relationship. The bank lures you in with gifts and promises of a lasting relationship. After a year or so the gifts fade away and both parties stop appreciating each other. 

The best way to bank would really be to constantly stay in the honeymoon phase, but most people don’t want to deal with opening up a new account every year or two.

If you’re going to pick a monogamous banking relationship, find one that reimburses ATM fees, offers free overdraft protection and doesn’t charge monthly fees. Don’t just go with the flashiest bonus offer, because that’s just going to set you up for heartache.

The same warning goes for high-interest rates on checking accounts. Your checking account isn’t where you should be hoarding money.

If you become the victim of debit card fraud, it’s really easy for someone to drain your account. Plus, checking accounts rarely receive the interest rates that savings accounts do. Don’t waste your time trying to jump through hoops and get interest on your checking account. Just keep the majority of your money in a 1.00% or higher interest savings account.

5. Consider Easy Deposit Options

Plenty of banks and credit unions now offer the ability to use mobile deposit. You can save time (and gas money) by using a smartphone to snap a picture of your check and deposit it into your checking account.

Even if you enjoy going down to your bank and chatting with the tellers, it still makes sense to look for a checking account with a mobile deposit option.

Internet-only banks offer the most competitive deals on the market for checking accounts by eliminating many of the fees traditional brick-and-mortar banks charge.

However, people who deal primarily in cash would still need a physical bank nearby in order to make deposits. Capital One 360 does offer cash deposit options at select Capital One ATMs, but a majority of Internet-only banks do not accept cash deposits.

6. A Warning About Using Debit Cards

In theory, debit cards are great. They link directly to a checking account so you immediately can see how much money is left in your account. In reality, debit cards are a perfect way to fall victim to fraud and lose hundreds to thousands of dollars.

You lose real money when a thief gets ahold of your debit card information. It’s directly withdrawn from your checking account, unlike fraudulent charges on your credit card.

A thief doesn’t even need your physical card to do this. Skimmers and cameras can be placed on ATMs, gas station pumps, grocery stores, and restaurants to gain access to your information and PIN.

Under Federal law, you can be liable for some of the loss depending on when you report the crime. Before unauthorized charges are made (likely only the case if your wallet is stolen), you have no liability. Report within two business days of fraudulent charges and you can be on the hook for no more than $50. More than two business days, but less than 60-calendar days post-bank statement and you may lose $500. More than 60 calendar days and you might not get any money back.

Typically, a bank or credit union will offer you a credit to cover the lost money while it opens an investigation into your debit card fraud claim. It is possible you will be found liable and owe the money back to the bank. So understand a bank’s debit card liability policy before opening a checking account.

The easiest way to avoid debit card fraud is to use a credit card for all transactions except withdrawing cash. And when you withdraw cash, use a bank ATM in a physical bank branch – even if you’re going to get charged a fee – and cover your hand when you type in a pin number.  Skimmers are far less prevalent on bank ATMs and security camera footage can help you prove you didn’t give your card to someone to withdraw money and then claim fraud.

Credit card companies offer much better fraud protection and detect it quite quickly. You should always ensure you have zero liability for fraud on your credit card.

Don’t Jump In Without Doing Research

Whether you want to give your business to a big-name national bank, a community bank, a credit union or an Internet-only bank – do your research first. Just a couple of hours (or even one) spent doing research could save you hundreds of dollars down the road.