Don't Pay Fees for a Checking Account

06/12/2010 05:12 am ET | Updated May 25, 2011

Imagine that you're trying to make due on less money than in the past. For too long, you feel like you're treading water just to pay your bills. To make matters worse, your bank piles on the fees. In many cases, your bank can benefit from your lower income. How so? Lower checking account balances mean more Monthly Service Fees and more customers overdrawing accounts... people begin missing minimum balance requirements on checking accounts they've had for years; people with impeccable history begin overdrawing to pay bills. And it's a bonanza for them because only a small percentage of these customers switch their checking accounts or leave the bank.

You can do something though. There are simply too many other options available -- including great community banks and credit unions -- to accept paying fees for a checking account. Here are some simple tips to avoid common checking account fees:

Common Fees Ways to Avoid Good Options to Consider
Monthly Service Fees. Many checking accounts require minimum balance thresholds to avoid a monthly service fee. Some accounts charge as much as $25 per month if you don't meet their requirements. If you need a law degree to understand how to waive the fee, close the account immediately.
  • Investigate whether other accounts you may have at that institution (i.e., IRAs, CDs, loans) can be linked to raise your average balance above the threshold
  • Switch to a checking account with lower minimum balance requirements or no monthly service fees
ATM Fees. Many FindABetterBank users tell us they've had their current checking account forever even though they've moved around a lot (out of laziness, not loyalty). In many cases, they incur two types of ATM fees: One from whoever owns the ATM they've used and another from their bank as a surcharge fee for using another bank's ATM.
  • Plan withdrawals better so you're only using ATMs without fees
  • Find a bank or credit union with more conveniently located ATMs
  • Open an account at an institution that doesn't charge this fee
  • Look for a bank or credit union that rebates ATM fees you incur from ATM operators
  • "Rewards" Checking Accounts. Literally, hundreds of community banks and credit unions provide checking accounts with no fees, CD-like bonus APYs and rebates for any ATM fees you may incur. If you end up spending a lot on ATM fees and can be disciplined to meet the bonus requirements, these accounts are for you. Here are some examples:
Debit PIN-purchase Fees I hate this fee. It's a transaction fee when you use your debit card like a debit card -- by entering your PIN instead of signing. If your bank charges this fee, I hope you love everything else about them.
  • Sign for debit card purchases instead of using your PIN code
  • Open an account at an institution that doesn't charge this fee
  • A Plus Federal Credit Union "Cash-Back Checking" (Austin TX) Check out this credit union if you live near Austin Texas. It provides great personal service, has deep local roots and a checking account that puts $.05 into your savings account every time you use your debt card.
  • PerkStreet Financial "The Checking Account" This online-only account is all about the debit card. For an initial period, they give you 2% cash back on all debit card purchases (1% after 6 months).
Insufficient Funds Fee (NSF). These are budget killers. New regulations will require banks to decline debit card purchases instead of assessing a fee. But forgetting about automated payments can still occur.
  • Go manual -- Keep your account balance, write checks to pay your bills, withdraw enough cash to cover you
  • Sign-up for Overdraft Protection
  • Find a bank that charges a reasonable fee (over $30 is high, over $35 is too high).
  • Arvest Bank "Free Checking" (Arkansas) This bank keeps it simple with a really low NSF fee of $15.93.
  • ING Direct "Electric Orange" If you're the kind of person who wants to handle everything electronically and you're credit-worthy have a look at ING Direct. They do not charge you when you overdraft, but you can't write checks and you must be approved for an Overdraft Line Of Credit.
Overdraft Protection Transfer Fee. I find this fee particularly irksome because in many cases, they're charging you a fee of $5 or more to transfer your own funds from an alternate account. How much does it cost the bank to transfer those funds?
  • Find a bank or credit union that won't charge you to transfer your own money.
  • Sign-up for an Overdraft Line of Credit. In many cases, banks will charge a transfer fee if you're using another deposit account, but not if you have a dedicated line of credit.