Types of Checking Accounts

Get to know five common checking accounts before you sign up

Woman Signing Blackboard Check
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Choose the right type of checking account, and you’ll maximize convenience and minimize fees at the bank. There are several different types of checking accounts available, so it’s important to learn how each works. With that knowledge and a sense of your banking needs, you’ll make the right choice when signing up for a checking account.

Basic Checking Accounts

This "plain vanilla" account is the simplest type of checking account you can get from most brick-and-mortar banks and credit unions. It provides a small set of features and is suitable for everyday banking.

Basic checking accounts generally allow you to access and transfer money, withdraw funds from an ATM, use a debit card, write and deposit checks, pay bills, and view and manage your account online (and in some cases, through a mobile app).

However, because of the overhead of banks that offer them, these types of checking accounts generally come with more fees. You'll often have to pay a monthly maintenance fee to hold the account. Likewise, you might have to pay an overdraft fee when you make a purchase but don't have enough money in your account or a returned check fee when you cash a check from an account with insufficient funds.

Some banks waive account maintenance fees if you sign up for direct deposit with your employer, maintain a certain monthly balance, or pay a bill, but it may be the case that you don't want to make a large commitment to an unfamiliar bank. 

In addition, these accounts tend to offer no interest on your balance, which means that you won't earn any money on your deposits at the bank. Before you open a basic checking account, find out what you’ll have to pay and what you get in return.

Free Accounts

While it's getting harder to find these types of checking accounts, free checking isn't dead. Banks and credit unions continue to offer free checking accounts to drum up business. However, you'll have better odds of finding one at a smaller bank, a credit union, or an online bank.

Free accounts generally offer similar features as basic checking accounts but don't impose a monthly maintenance fee. However, they may impose other checking account fees—for using the ATMs of other banks or receiving paper statements, for example.

In addition, you generally get what you pay for (or rather don't pay for) with these accounts. They may lack certain features of basic checking accounts (some don't come with checks, for example) and generally don't pay interest on deposits. Still, if you just need an account for depositing paychecks and paying bills, a free account is a good option.

Free checking accounts may make up for a lack of maintenance fees with other fees, so don't assume that a free account is entirely fee-free.

Online-Only Accounts

While some brick-and-mortar banks also offer online-only accounts, online accounts are generally available at online banks, which are those that lack a physical presence. These types of checking accounts offer the features of basic bank accounts but require you to be comfortable with handling your finances over the internet and the phone since you can't visit a bank representative in person. You’ll need to be adept at filling out forms online or through your phone and checking them for accuracy (it’s easy to transfer money to the wrong account or overdraw your account).

If you need to make deposits, you can set up direct deposit with your employer or mail checks to your online bank. Some banks even allow you to deposit checks by taking a photo with your mobile device.

Spending or withdrawing money is also easy: Just use the bank’s online bill payment system to pay bills or write yourself a check. If you need cash quickly, most banks provide a debit or ATM card that you can use at any ATM. You might also be able to use your card for purchases at retail stores and restaurants. Finally, you can transfer money to and from other bank accounts using a wire transfer or by setting up a link between bank accounts.

Online checking accounts are absent some features of basic checking accounts (ATM deposits, for example). However, they lack the overhead of brick-and-mortar locations, which allows them to pass along the savings to customers with no monthly maintenance fees and higher interest rates.

Brick-and-mortar banks that offer online checking accounts often allow you to open the online account in person, although you'll have to manage the account online going forward.

Interest Checking Accounts

In recent years, interest-bearing checking accounts have emerged. Referred to as interest checking or high-yield checking accounts, these types of checking accounts provide similar functions as basic accounts but pay interest on your deposits, which allows you to earn a small amount every month just for keeping your money at the bank.

The specific amount you'll earn depends on the annual percentage yield (APY), which reflects how much interest you will be paid based on the interest rate and the frequency of compounding. Granted, the amount you earn won't be much, but anything is better than nothing; most basic checking accounts pay nothing at all.

Interest checking accounts are most often found at online banks, which have minimal overhead, but some brick-and-mortar institutions offer them as well. As you shop for these accounts, take note of the APY along with any restrictions for account usage (such as how often you’re allowed to write checks and the dollar amount restrictions for any checks you write). Likewise, review the account fee schedule. Some interest-bearing accounts impose monthly maintenance fees, while others (usually online interest checking accounts) don't. 

If you like the idea of earning interest and writing checks, also take a look at money market accounts. Those accounts are not checking accounts, but they allow limited check writing and may even come with a debit card. They're best for large, infrequent expenses or emergency savings.

Reward Accounts

As the name suggests, these types of checking accounts provide basic checking account features plus added benefits to incentivize customers to open and use them. They generally pay interest—often at an even higher APY than the bank's interest checking accounts. Some banks also offer rewards account owners with preferred interest rates on new loans or discounts on closing costs or fees such as overdraft protection.

Unfortunately, you often have to “qualify” for the higher rate paid in reward accounts, and it may be difficult to do so. You may have to open a credit card or mortgage with the bank, hold investments with the firm, or jump through other hoops to qualify.

Moreover, of the different types of checking accounts, these generally impose the highest monthly maintenance fees. However, you may be able to get these fees waived if you meet the minimum balance requirement. Read the terms of the reward checking account before you sign up.

The Bottom Line

When shopping for a checking account, know that there are different types of checking accounts that cater to different customers. The ideal checking account is one that satisfies your banking needs and budget.

Don't be tempted by checking account sign-up bonuses and high interest rates alone; compare the features among competing banks and pick the account type that offers what you need at prices you can afford in the long run.

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