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Selecting the Best Checking Account for You

There are more than half a dozen types of checking accounts offered by most major banks. Selecting the right checking account is not as simple as it may seem. You can certainly find one that fits your needs, but if you are not careful, you could end up with one that does not match your banking habits and may cost you extra in fees. It is recommended to use your checking account for money that you need to access quickly and easily. Keep additional funds in another account with better interest rates, such as a CD or a high-yielding savings account. Here are some of the more common checking account types to consider.

What is a Basic Checking Account?

This account works best for people who use their checking account to pay for daily expenses. A basic checking account is used by millions of people around the world, and is one of the most common forms to choose from. Some banks require direct deposit or a minimum balance to avoid monthly maintenance fees. Users may also be limited to a certain number of checks you are allowed to write per month. If you exceed the limit, you might have to pay a per-item fee for each additional check written.

What is a Free Checking Account?

For many people, this is considered to be an ideal option. Free checking accounts do not have any monthly service fees or per-item charges regardless of your bank activity or account balance. In other words, you can write all the checks you want and keep your balance as low as you like without worrying about paying per-item fees or account minimum fees. However, free checking does not mean you won't have to pay any fees. For instance, if you bounce a check, you will have to pay a nonsufficient funds fee.

What is an Interest-Bearing Account?

People can earn interest income in an interest-bearing account. Banks usually require a minimum balance to open one of these accounts, and you may need to maintain an even higher balance to avoid additional charges. For instance, a bank may require $100 to open an account, but will charge a service fee each month if you do not maintain a $1,500 balance. While interests are paid monthly, these accounts pay a notoriously low interest rate. For some people, the interest-bearing feature is not worth the hassle of maintaining a high balance for a small return.

What is a Student Checking Account?

A student checking account is a great option for many people who qualify. To own this type of account, the general requirements are to either be of a certain age or enrolled in a college or university. While the perks vary from bank to bank, most banking institutions offer free checks, cashier's and traveler's checks, free automated teller machine use, good rates on loans and credit cards, and discounts on everything from travel to prescription medications. Student checking accounts may also offer no monthly maintenance fees to the account owner.

What is a Money Market Checking Account?

A money market checking account combines checking with savings and investment features to help pursue higher earnings. It requires a much higher minimum deposit to open ? usually $1,000 to $10,000. However, it pays more interest than basic checking or savings accounts. This is an account best suited for those who can afford to maintain a high balance and do not write more than three to five checks each month. The resulting investment strategy is therefore similar to a money market fund offered by a brokerage firm.

When you open a new checking account, be sure to consider its interest rates and fees. Most importantly, you need to understand your banking habits. You should assess how many checks you write each month, what your spending habits are, as well as preferences such as auto-pay or the use of a debit card. Whether you choose an internet-based or traditional bank, ask about all fees associated with the account. Banks can charge you for anything from checking-cashing and money transfers to inactivity and low balances, so figure out your costs before you make a final decision.

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