What is the Downside of a Free Checking Account?

A free checking account. Wow, that sounds great, right? There might be some factors that you should consider before signing the dotted line. A free checking account, where do I sign up? rnWell, you can really get some good use out of a checking account. They make it super simple to pay bills and access your money whenever you want to. Many people have their employers deposit their paychecks directly into their checking accounts. It is practically the fundamental element of anybody’s financial life.rnWhen you hear of a banking institution offering free checking accounts, it almost sounds too good to be true. But more often than not, those “free” accounts are costing you a bundle of money in hidden fees. Some of the things you end up being charged for may surprise you. • When you open up a checking account, you will usually be provided with a complimentary debit or ATM card to use to pay for you purchases. Those little pieces of plastic can be downright handy; sometimes they are almost too convenient. If you are the kind of person who spends money left and right, this might pose a problem for you. But the real problem comes with the price of the card itself. If you ever need to withdraw funds from an ATM that does not belong to the bank with which you hold the account, you could get charged a transaction fee. Some banks will charge you even if you don’t use the card at all. • With checking accounts that are being touted as “free”, you will probably also have to fork over some money for your starter checks. You might also be required to maintain a minimum balance amount within your account. Should you ever happen to go below that minimum, for whatever reason, you will receive a penalty. • On those occasions that you do happen to overdraw your account, don’t expect the bank to feel any sympathy for you. When you spend more money than you have in your checking account, you get charged. Some banks offer overdraft protection, where they will provide you with a short-term loan to cover any transactions that contribute to an overdrawn account. And with each additional transaction that takes place once the account is overdrawn comes another overdraft fee. You would be surprised how quickly you can rack up debt this way. • All right, so you say you have got it all figured out. You will go ahead and open your checking account. You will pay for your set of starter checks if you have to. You will also purchase that card you read about just a minute ago—but you will only use it at ATMs owned by the bank. You will be very careful, too. You aren’t going to let your account fall below the minimum balance. You have decided that you are just going to basically let your account sit there in the bank, virtually untouched. How can they charge you a penalty for that? They can. Some banks require that their clients consistently use their accounts. Not doing so could result in—you won’t believe this one—a “dormancy” fee. That is a charge that the bank will place on you just to keep your account open. rnSo, are you still interested in that free checking account that was previously mentioned? Nope, didn’t think so.