5 Ways to Save Money With Your Checking Account

With banks adding fees here and there, it's harder, but not impossible, to minimize what you pay for checking account services.
By Barbara Marquand

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Banks are looking for ways to recoup revenue lost in the process of meeting new federal regulations, such as new rules on overdraft fees, but that doesn't mean you have to get stuck with paying for a checking account.

Here are five ways to save money:

1. Look for free checking account alternatives

If your bank starts charging a monthly maintenance fee - or you've been paying one - check if a less expensive alternative exists. You might find that your own bank offers a cheaper account that still meets your needs. Bank of America customers, for instance, who do all their banking online or through ATMs get free checking with an ebanking account as long as they don't use the teller service, which costs $8.95 a month.

2.Make sure you meet free checking account requirements

Your bank might add requirements for you to keep free checking, such as raising your minimum balance level, using direct deposit and automatic bill pay or getting paperless statements. If these changes are easy to make, why not meet the requirements? If the restrictions are too difficult to meet, shop around for a checking account with less stringent requirements.

3. Take advantage of free checking account services that help you manage your account

Your bank probably adds a number of free services that can help you keep track of your account, such as transaction alert services that send you an e-mail or text whenever your checking account balance is low. Others include text banking, which lets you send a short text message and get a balance total within seconds. If you have a smart phone, a variety of cell phone apps can make banking easier as well.

4. Set up cheap overdraft coverage if you're at risk of overdrawing your checking account

You have three alternatives for covering overdrafts: opting in for your bank's debit card overdraft protection service, linking your checking account to your savings account, or linking your checking account to a line of credit.

Not all banks offer all three options, and fees for each vary among banks. However taking the time to explore your overdraft options is well worth it as the typical debit card overdraft fee is $35 at most big banks according to the Consumer Federation of America.

You might be able to get free transfers from your savings to your checking account for occasional overdrafts at one bank. At another, you might pay a fee every time a transfer is made for an overdraft. Fees for a line of credit vary widely, too. HSBC is charging a $19 annual fee to open a line of credit and another $10 every day you use it to cover overdrafts from a checking account.

The bottom line is that you should read account disclosures carefully to compare fees, and choose the least expensive option.

5. Use free ATM machines

Use ATMs in your bank's network to avoid fees. If there are no ATM machines in sight, use your debit card to make a small purchase at a store and get cash back.

Checking accounts don't have to cost a lot of money. Stay alert to bank fees and services to save money.

Frequently Asked Questions

Q: I keep hearing that bank fees are going up, but on the other hand, I keep seeing free offers from banks - a $100 bonus for starting a new account from one, 0 percent interest on credit card transfers from another, etc. Would it make sense for me to keep jumping from bank to bank to take advantage of these offers, or is there a catch?

A: Banks in recent years have been looking for more ways to squeeze fee income out of their customers, but they know that first they have to get those customers in the door, which is why they run special promotions.

The question is, to what extent can you take advantage of those promotions without paying extra fees or interest charges? That depends on steering clear of two things:

Hidden fees and penalties

What banks promote as "free" might come at a cost. For example, 0 percent balance transfer deals may waive credit card interest for a period of time, but they might cause you to incur a balance transfer fee. That fee might come from the new credit card or the one from which the balance is transferring. In either case, on a card with a 12 percent interest rate, three months of free interest will save you the equivalent of 3 percent. If you incur a 3 percent balance transfer fee in the process, you really haven't gained anything.

Another example is if the special offer subjects you to a penalty if you don't meet certain commitments. For example, a $100 incentive to open a checking account might require you to keep the account in place for a full year, or else pay a termination penalty. If the monthly fee on that checking account is $15, then over the course of a year, it would cost you $180 to earn that $100 incentive.

Inertia

Even if there isn't a direct cost associated with special bank offers, what the banks are counting on is a certain amount of inertia from customers - that once in the door, they won't be quick to change banks even after they are no longer benefiting from the special offer. For example, if you take advantage of a free balance transfer offer but pay a higher interest rate in the long run, unless you switch again after a few months, you will soon be paying more on your existing balance and new purchases than you would have otherwise.

With checking accounts, if you switch to an account with higher fees just to earn an incentive, before long you will probably be paying more in extra fees than you received for starting the account, unless you switch again. Banks count on most customers not doing that, and in most cases they are right.

Considering the pluses and minuses of bank offers, the best advice is to be selective. Don't jump at every offer you see, but if you see a good incentive from a bank that you could live with for a while anyway, go for it.

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