Most Americans own a checking account. And most of the banks who offer checking accounts charge a variety of fees for account holders to use them. What are these fees? Is it possible to bank with paying them? Are there alternatives to traditional banks? We will take a close look at these questions and also compare one of the major multinational banks, Chase, with a new online banking option, Chime, to see who comes out on top in the game of checking account fees.
Checking Accounts – What Is The Purpose Of Having One?
A checking account is a kind of deposit bank account that allows withdrawals and deposits. It can be accessed using checks, setting up an automatic transfer, or using your debit card. Consumers use this account for paying bills and making most financial transactions. For this reason they are referred to as demand accounts or transactional accounts. Another factor that sets this account apart from a saving account is the fact that there are no limits on the number of transactions you can complete in a month. Also, it allows you unlimited deposits.
How Checking Accounts Work
There are two ways of setting up a checking account – at a bank branch or through a financial institution’s website. Once they are set up, you are able to deposit funds. Account holders can use ATMs, direct deposit and over-the-counter deposits. As we have already mentioned, accessing funds is a lot easier with a checking account. Account holders can write checks, use ATMs or use electronic debit or credit cards connected to their accounts.
Even easier, they can set up internet or smartphone applications for making deposits or transfers.The majority of consumers are already informed about the advantages of electronic banking. Advances in this field of banking have made checking accounts more convenient to use. Paying bills via electronic transfers eliminates the need for writing and mailing paper checks. Also, it is possible to set up automatic payments for routine monthly expenses.
What To Consider Before Opening A Checking Account
First, it is good to know that banks often offer different versions of the account for different types of clients. This is the first thing that makes a difference in finding the right bank. There are many features to consider before opening a checking account.
Fees: The best account will have no fees or low fees, if possible. Try to find accounts with little to no monthly maintenance fees and large ATM networks tol help you avoid becoming a victim of fine print and ending up with hefty fees.
Service Charges: Banks make much of their money by charging fees, and they can charge you for any number of things. For example, there are charges for duplicate bank statements, PIN generation, demand draft, and account balance updates, among other things.
The best solution to avoid paying non-recurring fees is to explain the situation to the bank. This is a potential option in the case that you are a customer of a big bank. Customer service representatives at big banks are often authorized to overturn hundreds of dollars in charges if you ask them to cancel the charge. However please be aware of one thing – these are usually one-time deals.
Overdraft Protection: Why is it important to choose an account with a lenient overdraft policy? In a situation where you have spent more money than is in your account, the bank may cover the difference. This is known as overdraft protection.
Overdraft protection is one way in which banks make a lot of money to the detriment of its account holders. The less you know the better for the bank. Many banks don’t tell customers about charging for each transaction that leads the account to use an overdraft. For example, if you overdraft your account, you will be charged an overdraft fee for that particular purchase as well as for each subsequent purchase after you’re in the red.
This is not all, be aware of something else. According to the account holder agreement, many banks have provisions stating that in the event of an overdraft, transactions will be grouped in the order of their size, regardless of the order in which they occurred. At the end of the day, the bank will charge a fee for each of the transactions on the day the account is overdrawn. If you do not cover the amount, your bank may also charge you daily interest on the loan.
You can avoid these fees if you choose to link your checking account to another one of your accounts, such as a savings account or line of credit. Another way is by opting out of overdraft coverage.
Electronic Funds Transfer: With an electronic funds transfer (EFT), it’s possible to have money directly transferred into your account without having to wait for a check to come in the mail. Additionally, when you use your debit card to make a purchase at a store or online, the transaction is processed using an EFT system. Most banks no longer charge to make an EFT.
Direct Deposit: Direct deposit is another form of electronic funds transfer and another feature from which banks are able to benefit. This feature allows your employer to electronically deposit your paycheck into your bank account. Direct deposit is important since it gives the bank a steady flow of income to lend to customers. Because of this, many banks will give you free checking if you get direct deposit for your account.
ATMs: Be aware of fees that may be associated with the use of ATMs. ATMs make it convenient to access cash from your checking account or savings after hours. However, sometimes using an ATM from another bank could result in surcharges from both the bank that owns the ATM and your bank. Nevertheless, surcharge-free ATMs are becoming even more popular. They can be as much as $5 or more in different parts of the country.
Cashless Banking: The debit card provides the ease of use and portability of a major credit card. Anyone who uses a checking account knows how important it is to keep it safe. Many banks offer zero-liability fraud protection for debit cards. This is one way of fighting against the identity theft and a good way to protect your account.
Interest: Those who were thinking about opening an interest-bearing checking account should be prepared to pay plenty of fees. If you can’t maintain a minimum balance, you’ll have to pay a monthly service fee. This minimum amount is typically the combined total of all your accounts at the bank, including checking accounts, savings accounts, and certificates of deposit.
Chase vs. Chime
Chase is the consumer and commercial banking subsidiary of JPMorgan Chase & Co. It is one of the four largest banks in the United States. Chase does offer basic checking and savings accounts that may be an option for second chance banking customers. The opening deposit fee is $25, and the maintenance fee is $12.
However, you can waive the monthly fee if you meet the required criteria:
- Direct deposits totaling $500 or more made to this account
- OR, a balance at the beginning of each day of $1,500 or more in this account
- OR, an average beginning daily balance of $5,000 or more in any combination of this account and linked qualifying deposits/investments
Chase ATM Fees
That’s just the beginning. When it comes to ATM´s, the situation is pretty much the same. If you have a checking account at Chase bank you will have to pay these fees when using ATM from a different bank:
- $2.50 for any inquiries, transfers or withdrawals while using a non-Chase ATM in the U.S., Puerto Rico and the U.S. Virgin Islands. Fees from the ATM owner still apply
- $5 per withdrawal and $2.50 for any transfers or inquiries at ATMs outside the U.S., Puerto Rico and the U.S. Virgin Islands. Fees from the ATM owner still apply
Chase Overdraft Fees
What will happen in case you don’t have enough money in your account, or it is already overdrawn? Chase will charge a fee. In case of insufficient funds, Chase pays an item and then will charge you $34 for each item (maximum 3 Insufficient Funds and Returned Item Fees per day). However, they will not charge you in certain situations:
- If your account balance at the end of the business day is overdrawn by $5 or less
- They will not charge these fees for any item that is $5 or less, even if your account balance at the end of the business day is overdrawn
Chase will return an item when your account doesn’t have enough money and charge you $34. In the case where they return the same item multiple times, you will be charged the Returned Item Fee only once for for that item within a 30-day period. The good thing is that these fees do not apply to withdrawals made at an ATM.
It is important to know that you can avoid overdrawing your account by making a deposit or transferring funds to cover the overdraft before the business day ends. Here are the options, the places where you can do it:
- At a branch before it closes
- At an ATM or when using the Transfer Money option on chase.com, Chase Mobile, or using Chase QuickPay, with Zelle, before 11 p.m. Eastern Time (8 p.m. Pacific Time)
Chime is an online-based account. There are no brick and mortar locations. Rather, all business is conducted through the internet platform or mobile app. It is free to open a Chime account, with no monthly fee required. That means you aren’t required to put any money in to start or to keep a certain amount of money in your account to avoid a monthly fee.
There are no ATM fees to use a Chime issued Visa debit card, so long as you use one of the 60,000 approved machines around the country. There are also no overdraft fees to worry about. If an account is in danger of going into the negative, Chime will simply decline the transaction. No charge, no punishment.
You Can Find A Way Around Banking Fees
This world is full of opportunities. Advances in electronic banking and banking, in general, should make our lives easier. So it makes sense to consider the option of online banking, like Chime. There is convenience as well as the benefit of no banking fees.