The Different Types of Checking Accounts

The Different Types of Checking Accounts

Before opening a checking account, familiarize yourself with the five most prevalent types first.

If you pick the appropriate kind of checking account, you may get the most out of its convenience features while keeping the costs you owe the bank to a minimum. Before opening a checking account, it's helpful to have a good idea of the many options available, since there are many different kinds of checking accounts.

 Account for the Barest Minimums

The "plain vanilla" account is the most basic kind of checking account, and you can open one at virtually any traditional financial institution, including credit unions and banks with physical locations. It only has a few features, but because it's easy to use, it's good enough for day-to-day banking. With a basic checking account, you typically have the ability to:
  • Get access to money and move it around.
  • Take money out of an automated teller machine.
  • Use a debit card.
  • Create checks and make deposits.
  • Pay bills
  • You may check on and make changes to your account online (and in some cases, through a mobile app).
With a standard checking account, you can anticipate having to pay monthly maintenance fees. If you make purchases that exceed the amount of money that is currently available in your account, you may be subject to additional costs, such as an overdraft or returned check fees.  Read the tiny print carefully because there may be additional costs that apply. Certain banks will forgo the monthly maintenance costs associated with your bank account if you pay your bills online, maintain a specific monthly level, or sign up for direct deposit with your job. Standard checking accounts often do not pay interest, which means that you will not make any money off of the balance in your account. Find out what you'll have to pay and what you'll get in return before you establish a basic checking account; you might find a better bargain with a different sort of account. Before you open a basic checking account, find out what you'll have to pay and what you'll get in return.

Register for a Free Account

Free checking is not extinct, despite the fact that it may be more difficult to locate certain types of checking accounts. Free checking accounts are still widely available from financial institutions, notably smaller financial institutions, credit unions, and internet financial institutions. In general, free accounts include services that are analogous to those of basic checking accounts but do not charge a monthly maintenance fee. On the other hand, they might charge you additional fees for using ATMs located at other banks or for receiving printed statements if you have a checking account with them. Don't assume that a free checking account is completely fee-free just because there are no maintenance fees. Some free checking account providers charge other fees on top of the lack of maintenance fees. In addition, when it comes to these accounts, you typically get what you pay for (or more accurately, don't pay for). It's possible that they lack certain features of standard checking accounts, such as: Some of them, for example, do not come with checks, and in general, they do not pay interest on deposits. However, if all you need is a place to put your paychecks and pay your expenses, then a checking account that doesn't cost you anything is an excellent choice.

 An account that is solely online

Although some traditional banks may provide accounts that can only be accessed on the internet, online banking is most commonly offered by virtual banks, which do not have physical locations that customers can visit. You can't meet with a bank representative in person, you'll need to be comfortable managing your finances over the phone and the internet if you want to use these types of checking accounts. Although they offer the same functions as regular bank accounts, they do not allow you to write checks. You have the option of setting up direct deposits with your company should you find that you need to make deposits. It's possible that you can deposit checks by either taking a picture of them with your mobile device or sending them to the bank in the mail. You normally have a number of options for getting at the money in your online account, including the following:
  • Use your debit card.
  • Get cash from an automated teller machine.
  • Online bill payment is available through Bill Pay.
  • Make a wire transfer or send money via electronic transfer.
  • Send a peer-to-peer payment.
On the other hand, online checking accounts typically lack some features that are available on standard checking accounts (ATM deposits, for example). They don't have the same administrative costs as traditional brick-and-mortar banks, they can give their customers higher interest rates on their deposits and don't charge them monthly maintenance fees. You might be able to open an online checking account with a traditional bank in person if that bank also offers online checking accounts, but moving forward, you'll need to handle your online checking account entirely online.

 Accounts with Interest for Checking

Interest-bearing checking accounts, also known as interest checking or high-yield checking accounts, are quite similar to standard checking accounts; the primary difference is that interest is paid on deposits to interest-bearing checking accounts. You will be able to earn a modest sum of money each month simply by having your money in the bank. The annual percentage yield (APY), which indicates how much interest you will be paid and is calculated based on the interest rate and the frequency of compounding, determines the exact amount that you will earn over the course of the year. Even though you aren't making much money, at least it's something, especially when you realize that the vast majority of checking accounts don't make anything at all. Online banks, which have much lower overhead costs, are the most common places to look for interest-bearing checking accounts. Nevertheless, some traditional financial institutions also provide this service. When you are comparing these accounts, be sure to take note of the annual percentage yield (APY) as well as any restrictions for account usage (such as how often you are permitted to issue checks and the dollar amount restrictions for any checks you write). In a similar vein, check out the pricing schedule for the account. There are interest-bearing accounts with no monthly maintenance fees, but most of these are online checking accounts with interest. Consider looking at money market accounts as well, if you like the sound of getting paid interest on your money and having the ability to write checks. Even though these accounts are not checking accounts, you are still able to write some checks with them, and they may even come with a debit card. They are best for saving up for big expenses that don't come up very often or for use in an emergency.

 Make Provision for Rewards

These types of checking accounts, as their names imply, give consumers access to the standard checking account features in addition to additional perks to encourage them to open and use the accounts. In general, they award interest, frequently at an annual percentage yield that is even greater than the bank's interest-bearing checking accounts. Some banks offer customers incentive accounts that come with extra perks, like lower interest rates on new loans or lower costs for services like overdraft protection. It is not always easy to "qualify" for the higher rate that is offered on incentive accounts, as customers are typically required to "qualify" for the higher rate. In order to qualify for the offer, you might have to sign up for a bank credit card or mortgage, keep your investments with the company, or jump through some other hoops. Compared to the other types of checking accounts, these accounts usually have the most expensive monthly maintenance fees. On the other hand, if you maintain the required minimum balance, you might be able to avoid paying these fees altogether. Make sure you read the terms and conditions before signing up for the prize checking account.

 The Crux of the Matter

When looking for a checking account, it is important to understand that there are several different types of checking accounts, each of which is tailored to the needs of a specific customer demographic. The checking account that best suits your financial requirements and your available funds is the one that combines both of these factors. You shouldn't give in to the temptation of high-interest rates and sign-up bonuses on their own because they won't be worth much if you can't use the account in the way that you need to. Compare the features that different competing banks offer, and then choose the type of account that meets your needs at a price that you can afford in the long run.

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