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What Are “Free” Checking Accounts?
A “free” checking account is a type of bank account that doesn't charge monthly fees or require a minimum balance to be maintained. This means that you can use the account for everyday transactions without incurring additional costs. Free checking accounts may also offer other benefits, such as unlimited check writing, free debit cards, and free online bill payment.
However, it's important to note that some free checking accounts may still charge fees for certain transactions, such as ATM withdrawals or overdrafts. Additionally, some banks may require customers to meet certain criteria to qualify for a free checking account, such as setting up direct deposit or maintaining a minimum account balance.
Free Checking Accounts Pros & Cons
Free checking accounts seem to be an ideal option, but there are drawbacks to consider. Here are the main benefits and drawbacks:
No Monthly Fees And Minimum Balance
Access To Basic Banking Services
Easy To Open And Use
Fees For Certain Transactions
Usually No Branches
Free checking accounts typically do not charge a monthly maintenance fee or minimum balance, making them an affordable option for those who may not have a lot of money to keep and open their account.
Free checking accounts give you access to basic banking services such as online bill pay, mobile banking, and ATM withdrawals, allowing you to manage your money easily.
Free checking accounts are often easy to open, and most transactions can be done online or through a mobile app, making them convenient to use.
Free checking accounts often have fewer restrictions than other types of accounts, such as savings accounts or CDs, allowing you to make as many withdrawals and transactions as you need.
Free checking accounts may not offer the same perks and benefits as other types of accounts, such as higher interest rates or cashback rewards.
Not all banks offer free checking accounts, so you may need to shop around to find a bank that offers this type of account.
While free checking accounts don't typically charge a monthly fee, some may charge fees for certain transactions, such as ATM withdrawals outside of the bank's network or overdrafts.
Most free checking accounts are online only, so if you're looking for a personalized service at a branch you may be disappointed.
You may have to rely on self-service options like phone, online chat or FAQ pages.
Which Fees You'll Pay Also With A Free Checking Account?
Although free checking accounts don't typically charge a monthly maintenance fee or require a minimum balance, there are still some fees that you may have to pay with this type of account. Here are some fees you may encounter:
Overdraft Fees: If you overdraw your account by spending more money than you have available, you may be charged an overdraft fee.
Non-Sufficient Funds (NSF) Fees: If you try to make a purchase or withdraw money from your account but don't have enough funds to cover it, you may be charged an NSF fee.
ATM Fees: If you use an ATM that is not in your bank's network, you may be charged a fee by both the ATM owner and your bank.
Check Fees: Some banks may charge a fee for ordering checks or for replacing lost or stolen checks.
Stop Payment Fees: If you need to stop payment on a check or electronic transaction, your bank may charge a stop payment fee.
It's important to note that not all free checking accounts charge these fees, and some banks may have different fee structures depending on the account. Before opening a free checking account, it's a good idea to carefully review the account terms and conditions to understand any potential fees.
How Do Banks Make Money On Free Checking Accounts?
Even though free checking accounts do not charge monthly maintenance fees or require minimum balances, banks can still make money from these accounts in several ways:
Other fees: When customer overdrafts their account, they may be charged an overdraft fee, ATM fees etc. These fees can add up quickly, providing a source of revenue for the bank.
Merchant fees: When a customer uses their debit card to make a purchase, the merchant typically pays a fee to the bank that issued the card. This fee, known as an interchange fee, can be a significant source of revenue for banks.
Support Bank's Balances Sheet: any amount the customer carries in their bank account is good for the bank's balance. Despite the bank can't use it to lend money to other customers (such as savings accounts or CDs) it supports the bank's stability.
Cross-selling: Banks may use free checking accounts as a way to attract customers and cross-sell other products and services, such as credit cards, loans, or investment accounts. By offering free checking, the bank can establish a relationship with the customer and potentially generate revenue from other products and services over time.
How To Compare Free Checking Accounts?
When comparing free checking accounts, there are several factors to consider to help you choose the account that best meets your needs. Here are some things to keep in mind:
Fees: Although free checking accounts generally do not charge monthly maintenance fees, some may charge fees for other transactions. Be sure to review the fee schedule carefully to understand any potential costs.
ATM network: Make sure the bank has a wide ATM network, so you can easily access cash without incurring fees. Check to see if there are in-network ATMs located near you and how many out-of-network ATM fees they charge.
Online and mobile banking options: Many banks now offer online and mobile banking options, allowing you to manage your account from your computer or mobile device. Look for a bank that offers easy-to-use online and mobile banking tools, such as mobile check deposit and bill pay.
Interest rates: While free checking accounts generally do not earn interest, some banks may offer interest on balances over a certain amount. Also, check the bank's savings accounts and CD options – managing your savings and checking on the same bank is much more comfortable and can get you even more benefits.
Customer service: Make sure the bank offers good customer service, whether through phone, chat or email. Check out online reviews of the bank to see what other customers have experienced.
Overdraft policies: If you're concerned about overdrawing your account, check the bank's overdraft policies. Some banks offer overdraft protection services or alerts to help you avoid overdrafting your account, while others may charge high fees for overdrafts.
Additional features: Some banks may offer additional features with their free checking accounts, such as free checks or ATM fee reimbursement or other benefits and freebies. Consider these features when comparing different accounts.
Which Banks Offer Free Checking Accounts?
Many banks offer free checking accounts, and the availability of these accounts may vary depending on the location and the bank. Here are some of the banks that offer free checking accounts:
Amex Rewards Checking
Ally Interest Checking Account
Upgrade Rewards Checking
$400 $400 welcome bonus when you start using a new Rewards Checking account and make 3 purchases with Upgrade OneCard
SoFi Checking and Savings
$50 – $250 Minimum deposit of $1,000 – $5,000
Capital One 360 Checking
The American Express Rewards Checking account is accessible to current Amex clients or individuals who have possessed an Amex credit card for at least three months. This account provides access to an extensive ATM network of over 37,000 machines, and it also includes purchase protection for eligible debit card purchases.
Additionally, customers can earn American Express Rewards by using their account debit card to make eligible purchases, which can be combined with their Amex credit card reward points to redeem for travel, experiences, or gift cards.
Upgrade offers a Rewards Checking account that does not charge a monthly fee. While this account does not have its own ATM network, customers can receive a rebate for up to five ATM fees by maintaining a minimum average daily balance or receiving direct deposits into the account.
What sets this account apart is its rewards program. Customers can earn cashback rewards on their debit card purchases, similar to what is available with a rewards credit card.
SoFi is a well-known online bank that provides free checking accounts with no monthly fees, minimum balance fees, or overdraft fees. One of the most noteworthy features of the account is the interest rate offered on balances.
SoFi's checking account provides a high 2.50% APY on balances, making it one of the most competitive rates in the banking industry. Additionally, customers can benefit from early paycheck access, receiving payment up to two days before their scheduled payday
The Capital One 360 Checking account does not require any account minimums, and customers can earn interest on their credit balance. With access to 450 physical locations and a highly rated mobile app, customers can conveniently manage their accounts.
Capital One also offers cafes where customers can complete their banking tasks while enjoying a cup of coffee and receiving advice from a certified money coach. One appealing aspect of this account is the option to activate the Next Day Grace feature.
Ally is an online bank that provides an excellent no-fee checking account. Customers can access a network of over 43,000 Allpoint ATMs with no fees, and they can also receive up to $10 per month in reimbursements for out-of-network ATM usage in the U.S.
As its name implies, the Ally Interest Checking account offers an interest-bearing option with a tiered rate based on the daily balance. Since it is an online bank, customers can manage their accounts through the online platform or app, both of which are excellent. The app also includes a feature for mobile check deposit, similar to Amex.
Can I use my free checking account for direct deposit
Yes, most free checking accounts can be used for direct deposit of paychecks, government benefits, and other payments.
What is the difference between a free and a regular checking account?
The main difference between a free checking account and a regular checking account is that free checking accounts do not charge monthly fees or require minimum balance requirements.
Can I get a debit card with a free checking account?
Most free checking accounts come with a debit card, which can be used to make purchases and withdraw cash from ATMs.
How can I find free checking accounts?
You can find free checking accounts by researching different banks and credit unions in your area, reviewing their account terms and conditions, or using financial websites that summarize the free checking account options.