Picking the best checking account types lets you optimize benefits while decreasing the charges you pay to the bank. There are many checking account types that are available, so prior to you registering for one, it pays if you know the difference between them.
What is a checking account?
A checking account is a bank deposit account that you can use to save and withdraw cash. Checking accounts allow easy access to your funds in many ways.
Your cash can be accessed through ATM or branch withdrawals, writing a check, sending out an e-check, setting up an automated transfer, or by the use of your debit card. These accounts are usually used for everyday spendings.
Checking Account Types
1. Basic checking account types
This basic account is the simplest checking account types, and it is available in most of the brick-and-mortar banks and cooperative credit unions. It supplies a little set of functions and appropriates for day-to-day banking.
Features of Basic checking account:
- Easy access and move your cash
- Funds can be withdrawn from an ATM
- Debit card use
- Checks can be written and deposited
- Pay expenses
- Accounts can be viewed and managed online, sometimes through a mobile app.
Monthly maintenance fees come with a basic checking account. If you spend more than what’s in your account or have some returned checks, you may also need to pay overdraft fees or returned checks fess respectively.
You may also incur other charges too, so carefully read the fine print.
Account maintenance fee is waived by some banks if you sign up with your employer, pay some bills online, or maintain a regular account balance.
These checking account types don’t normally bear interest, so you will not be generating profit on your balance. Prior to you opening basic checking account types, always inquire what needs to be paid and what you will get in return. Who knows, you may find a better option with different checking account types.
2. Free Checking account types
Although it may be difficult to find these checking account types, free checking account still exists. Free checking accounts are still offered by banks to run their business, especially at smaller banks, some online banks, and credit unions.
The features of a free checking account and that of basic checking accounts are very similar, except that free checking account types don’t have a monthly maintenance fee, although other fees may be imposed, such as fees for using other banks’ ATMs, or when a paper statement is received.
Don’t think free checking account types are totally free, this is because they may make up for a free maintenance fee with other fees.
Also, you normally get what you spend for (or maybe, do not spend for) with these accounts.
Some basic checking account features may lack, in fact, checks don’t come with some and they generally do not pay interest on checks. Still, if an account is needed for depositing paychecks and bill payments, a free checking account is still the perfect option.
3. Online-Only Account
Although some brick-and-mortar banks have an online-only account, these checking account types are generally available at online banks that do not have physical branches you can visit.
The features of these checking account types are similar to that of basic checking accounts, but they offer you the convenience of handling your transactions online and on the phone since a bank representative can’t be visited in person.
A direct deposit can be set up with your employer if deposits are needed to be made. You might have the ability to deposit checks by taking a picture with your mobile phone or sending the check by mail to the bank.
The funds can be accessed in your online account in many different ways:
- Using your debit card
- Withdrawing money from an ATM
- Online bill payments with Bill Pay
- Sending an electronic transfer or wire
- Sending a P2P payment
With all these functions, online-only checking account types still lack some features of basic checking accounts types such as ATM deposit.
However, due to the fact that they do not have the overhead of brick-and-mortar areas, they can pass along the cost savings to clients in the type of no regular monthly maintenance costs and high-interest rates on their deposits.
Brick-and-mortar banks that provide online bank account might permit you to physically visit their branch and open the online account in person, although the management of the account will be done online thereafter.
4. Interest checking account types
Interest-bearing checking account types, known as high-yield checking account or interest checking account, resembles the basic checking account in all features, but it pays interest on your deposits. This generates a small amount of interest on your deposited money every month.
The amount of interest your deposit will generate depend on the annual percentage yield (APY), which shows just how much interest will be paid to you based upon the rates of interest and the frequency of compounding. The interest may be small, but it is still something, considering that most basic checking accounts do not generate any interest at all.
Interest checking account types are most frequently found at online banks, which have very little overhead, although, some brick-and-mortar organizations offer them too. As these accounts are shopped for, notice the APY together with any limitations for account use (such as how frequent you are permitted to write checks and the dollar quantity limitations for any checks you write).
Also, make sure the account fee schedule is reviewed. Many interest checking accounts charge monthly maintenance fees, while others don’t charge at all, such as online interest checking account types.
Also, money market accounts can be considered if you want to be earning interest and writing checks together. Although those accounts are not checking accounts, they let you rite limited checks and may sometimes come with a debit card.
They are perfect for large, infrequent expenses or emergency fund savings.
5. Reward Account
As the name implies, these checking account types offer the basic checking account features with added benefit features to lure their customers into the opening and using the account.
They often pay interest at higher APY, sometimes more than the bank’s interest checking account.
Some banks likewise provide reward account holders the advantages of preferred rates of interest on new loans or discount rates on fees like overdraft protection.
Sometimes, you will need o qualify for the higher interest rates paid on the rewards account and this may be difficult to achieve.
Among the different checking account types, this charges the highest monthly maintenance fee. However, these fees could be waived if you meet the minimum required balance. Read their terms before you register with them.
Conclusion on checking account types
When searching for checking account types, understand that there are various kinds of checking accounts that cater to various customers.
The perfect checking account types are those that satisfy your banking needs and personal budget plan.
If you can’t use the account the way you want or need to, then it doesn’t worth it. Don’t be tempted by sign-up bonuses and higher interest rates alone.
Compare and contrast among the competing checking account types and choose the account type that provides what you need at rates you can easily afford in the long run.