Last week’s outcry over Bank of America’s fee proposal and pilot programs remind us just how difficult it is getting to keep your free checking truly free. Even if you don’t bank with B of A, you’ll probably need to be proactive and meet some basic requirements to avoid fees, which can end up costing you an average of $110 a year at big banks.
Most banks, both big and small, require you to pay a monthly fee for your checking account unless you agree to bank online, sign up for additional accounts and services, or maintain a minimum balance each month. Does that sound complicated? It doesn’t have to be. Of course, you’ll want to review your account terms and conditions carefully for full details, but here are seven of the most common and painless strategies for keeping your checking account truly free at most banks.
1. Bank online. Brick-and-mortar banks cost a lot to maintain. Online-only accounts save banks a ton of money, so they often have the best terms and conditions. Some banks, like Ally and PerkStreet, have no physical branches at all, which allows them to offer better rewards and charge fewer fees. However, many traditional banks have online-only accounts too. Bank of America’s eBanking account has no minimum balance requirement and waives the monthly fee if you agree to do all your banking via the Internet and ATMs. If you’re tech-proficient, and don’t mind speaking with customer service representatives online and over-the-phone only, online banking is a great way to keep your checking account free.
2. Meet the minimum or average balance requirements. This is the most common way to avoid the monthly fee at banks. Better yet, it’s often the only thing you need to do, and it’s a good incentive to save money. Keep that minimum balance as sacrosanct as a savings account: Don’t touch it except in emergencies. Some bank accounts have lower balance requirements, such as EverBank’s Basic Checking account, which has an average daily balance requirement of $50 (instead of $1,500, which is more typical at other banks). If you find yourself lucky enough to have a relatively high balance, consider depositing your money into an interest checking account.
3. Sign up for direct deposit. If you can’t maintain the minimum monthly balance requirement, you may qualify for free checking by authorizing one or two direct deposits to your account each month. If you get a regular paycheck, your employer or sponsoring agency can help you set it up. Like a minimum balance requirement, direct deposit encourages you to keep money in your account, and banks like that. It tells them they can invest your money and use it to make loans, so your account is more likely to be profitable without extra fees.
4. Don’t opt into overdraft protection. Thanks to the Electronic Fund Transfer Act, bank customers must now choose whether or not they want to opt into overdraft protection. You’ve probably received literature from your bank explaining it’s there to protect to you, but don’t be fooled! It’s usually not worth it. Sure, it’s embarrassing when you don’t have enough funds to buy a latte, but is that really more embarrassing than paying $35 bucks for that latte? Remember, when you overdraw your account, you’re still responsible for paying the original cost of your purchase plus any penalty fees. The average overdraft fee is $20 to $30 per transaction. That alone is worth at least four lattes.
5. Switch to a better bank. Don’t like the way your bank is treating you? Can’t set up direct deposit or meet the minimum monthly balance requirement? It’s probably time to switch banks. Take a look at what’s available in your neighborhood; your local credit union or community bank may be able to offer you a better deal.
6. See if your demographic gets a better deal. Are you a college student? A senior? A veteran? Your bank may have a checking account just for you. Chase offers a college checking account that works just like their regular Total Checking account, except it will waive the monthly fee if you’re a student. Bridgewater Savings Bank in Bridgewater, Mass., has an account for seniors 65 or older, which, in addition to being free, also pays a small amount of interest. Navy Federal Credit Union offers free checking for active members and retired members of the military. If you aren’t aware of any special discounts at your bank, it never hurts to call and ask, especially if you’ve been a loyal customer.
7. Pay with a credit card instead. If your checking account balance is getting low, and you need to make an important payment now, consider paying with a credit card instead of your debit card. Credit cards have a payment grace period, which can be useful. For example, the Capital One Venture gives you at least 25 days to pay off a purchase. Just be sure you don’t use your card as a crutch; credit cards always come with the temptation to spend money you don’t have. The cost of interest credit cards can easily outpace that of a checking account.
Long story short: Shop around and ask questions. If you don’t like the account you have now, or don’t like what you’re paying, you don’t have to settle. It’s your checking account. Make sure it works for you.
Tim Chen is the CEO and founder of NerdWallet, a personal finance website dedicated to helping users save money and time finding credit cards, credit unions and deposit rates online.