Most people don't realize how many different types of checking accounts there are until it's time to choose a checking account from among a bank's offerings. By then, consumers are often already deep enough into the account opening process that they just choose one of the checking account options in front of them, even if it's not exactly what they want.
A more methodical approach--determining ahead of time your ideal checking account type--can save you time and pay dividends. Here are five questions to ask yourself before you approach banks:
1. Single or Joint?
The choice of whether to open a checking account in your own name only or with a co-account holder is the first thing you should determine. Even for married account holders, don't assume a joint account is the only way to go--there are pros and cons to each option. If you choose a single checking account, you don't have to worry about your co-account holder overspending and emptying out your account, and there are fewer coordination issues. However, with this control you lose some simplicity. A joint account is probably easier if you want to split monthly bill-paying responsibilities with your co-account holder, for instance.
2. Free Checking or Fee Checking?
Do you want a free checking account, or a checking account with a monthly maintenance fee but offering higher yield? The answer to this depends on your banking behavior. Do you typically carry a low balance in your checking account, which means you don't care so much if you're not getting high interest? Or do you prefer to earn some decent interest income from keeping your money in a high-interest or rewards checking account?
You can make around 5% on your cash just by keeping it in a a high-interest checking account. Depending on how much cash is sitting there from day to day, rewards or high-interest checking may be worth the cost. But if your checking account is regularly at a low balance, you're better off choosing a freebie and avoiding monthly fees.
3. Do You Want or Need to Speak With Human Beings?
The more electronic a bank can make your checking account, the cheaper you are as a checking account customer. This is one of the fundamental rules of modern banking.
Do you need to speak with tellers, or can you just use the ATM and make online transactions? Are you prepared to have your paychecks direct deposited, or do you want to manually walk into the bank and make a deposit? Figuring out how electronically you are willing to bank is a vital consideration when choosing a checking account--and a bank. If you need the human connection, you may want to avoid internet-only banking or checking accounts that only allow a small number of free teller transactions before you have to start paying.
4. Can You Get Free Stuff?
Checking accounts are valuable enough to banks that they are often willing to pay you to open an account, or at least give you a free gift or two. When opening a checking account, ask what the bank can give you as a gift. Maybe it's cold cash, maybe it's a coffee mug, but it more than likely it will be something.
5. Do You Really Want a Money Market Account?
Money market rates can be quite appealing, you have more investment options, and you can still write checks. Maybe what you want is not a checking account, but its first cousin. Money market accounts have become a viable alternative to checking accounts for many bank customers.