Here’s a question you have to ask – if there are banks with free checking accounts, then why are most of us paying for them?
Does a Free Checking Account Exist, Really?
For a checking account to be classified as a free, obviously it should not cost you anything. This means there should be no account fees, no fees to use an ATM or write a check, no fees to use Internet banking or make online payments and no fees if your balance falls below a certain threshold. These are the basic free services; anything in addition to this could attract a certain fee as it would be classed as an optional extra feature on your account. For example if you need a second check book issued, or you wish to have an overdraft facility on your account, these could end up costing you extra.
More often than not you will not be able to earn interest on the balance of your free check account. Sometimes banks with free checking accounts may allow you to link the free account to a savings account which can have interest benefits but some require you to operate it completely separate to any other accounts.
Photo by heidielliott (flickr)
Usually free checking accounts are linked to some sort of promotion; the ‘free’ side of things doesn’t usually last forever, although it is not unheard of – with conditions. If it is promotions offering a free checking account make sure you are aware of the cost to run that account if/when that promotion comes to an end. You could end up paying more for the account after the promotion than you would have with a standard checking or a 2nd chance checking account all along. Banks have clever ways to recruit new customers or to get them to move over from other financial providers with flashy promotions like offering a second chance checking account. Some promotions are a sneaky way to rope you into their most expensive products by offering them for free. Providing free checking accounts can be a great ongoing promotion banks offer, just make sure you are familiar with the entire fine print first.
Another popular way to secure a free checking account is when it is offered as an incentive to another product offered by the bank. The most common scenario here is say you have a mortgage with the bank, they may offer you a free checking account for as long as your mortgage is held with them. Or another scenario may be if your savings account maintains a certain balance then your checking account will be free. They are all very clever ways to ensure customer loyalty but at the same time give the customer a very good deal.
Banks with free checking accounts are usually the bigger banks who can afford to provide the service for free. Smaller financial providers used to offer the same sort of thing until the financial trouble put a stop to that, however now we are seeing more smaller providers come up with great unique ways to win back their customers. Before signing up make sure you have a comprehensive list of what you are getting for free, what will cost you money and any other conditions linked to the account.