6 types of checking accounts – Forbes Advisor
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Even if you don’t usually carry a checkbook or write paper checks, you can still benefit from a checking account. These financial tools are a fundamental part of the banking system. A checking account can serve as the basis for your money. Usually, this is where your paycheck is deposited and is what you use to pay your bills.
But not all checking accounts are the same. Some checking accounts offer high interest or high rewards, while others offer features specific to the needs of a particular group of people.
If you are looking to start a new banking relationship and want a better checking account, or want to get the most out of your checking account, there are several types of checking accounts to consider.
Consider these six types of checking accounts before deciding where to put your money.
1. Traditional current account
A traditional current account offers the possibility of issuing checks. It also provides access to a debit card that you can use to make purchases and withdraw money from ATMs.
Once you have a checking account, you can use your debit card in a mobile wallet or sign up for mobile payment apps. You can also connect your current account to savings accounts, retirement investment accounts and other types of financial accounts inside or outside your bank.
Current accounts may charge a monthly maintenance fee. But many banks will waive these fees if you sign up for direct deposit, maintain an average minimum daily balance, sign up for additional accounts and financial services, or meet other requirements.
If you don’t want a lot of special features, getting a traditional checking account can be a great way to start building a reliable home base for your money.
2. Premium checking account
Premium checking accounts are available for those who can deposit enough money to qualify for a more exclusive banking experience. This type of account can offer special features, rewards and bonuses, usually in exchange for slightly higher monthly fees.
The exact rules and requirements for premium checking accounts depend on the bank. But in general, banks try to convince their best customers to subscribe to additional accounts and services.
The more money you deposit with your bank and the more financial products you purchase from that bank, the more benefits your bank is likely to offer you. Think of it as a frequent traveler banking program: the more you do business with your bank, the more they will strive to provide you with a premium experience.
Here are some big banks that offer premium checking accounts, along with their main benefits and features:
If you already have a lot of money deposited with your bank and potentially want to get a better deal by extending your banking relationship, talk to your bank about checking premiums. But read the fine print and keep in mind that not all of the premium perks are worth it. For example, some checking accounts bearing interest in the current low interest rate environment may only pay 0.01% APY.
3. Current account bearing interest
If you want to charge interest on your checking account balance, some banks offer interest-bearing checking accounts that pay an APY in the same way as a savings account.
Because interest rates are so low, many banks have lowered the yields on their interest-bearing checking accounts.
However, it is still possible to find banks that pay attractive interest rates on checking accounts. Here are just a few:
- Heritage Bank, NA, based in Iowa, offers interest-bearing checking accounts with 1.32% APY, as long as you make 10 or more debit card payments per month, have at least one direct deposit per month and that you subscribe to electronic statements.
- Quontic Bank offers a high interest checking account with 1.01% APY and no monthly fees. This requires you to complete 15 debit card transactions per month and maintain a balance below $ 1 million.
- Simple’s high yield checking account, its Protected Goals account, earns 0.60% APY. This requires that you first open a simple account for daily expenses.
Many credit unions offer interest-bearing checking accounts, and some of them pay higher interest than banks. If you’re willing to donate or pay a nominal fee to join the credit union, you can often get a credit union account even if you don’t live in the state where the credit union is located. For example:
- Illinois-based Consumers Credit Union pays 2.09%, 3.09% or 4.09% APY on balances up to $ 10,000, provided you meet specific minimum deposit and expense requirements .
- Connexus Credit Union, based in Wisconsin, pays 1.75% on balances up to $ 25,000. To get this rate, you must also meet the minimum debit card spending requirements.
Getting the highest interest rates on checking accounts can be tricky. Some banks or credit unions may require you to meet certain monthly transaction or minimum balance requirements to earn interest. Earning a higher APY may not be worth all of these efforts. But if you want to make money on your checking account balance, interest bearing accounts can make it possible.
4. Rewards checking account
Rewards are another type of special feature offered by some checking accounts. Like credit cards that reward you for your daily purchases with cash back, reward points, or special discounts, some chequing accounts reward you for your daily spending.
For example, Discover’s checking account offers a Cashback debit card that pays 1% cash back on up to $ 3,000 in debit card purchases per month. This is a possible annual cashback of $ 360, and at no cost. Keep in mind that checking accounts with cash back debit cards may incur fees or have complicated requirements that may make it difficult to obtain all the benefits of the account.
5. Student checking account
Several banks offer special student checking accounts designed for the needs of students. Whether you’re starting out with your first bank account or having a parent helping your child organize their separate financial life, a student checking account can be a good option.
Some best student chequing accounts include features such as:
- No ATM fees
- No monthly maintenance fees
- Grace periods the next day for overdrafts
- New account opening bonus
6. Second Chance Checking Account
In the United States, 6.5% of households are “unbankedWhich means they don’t have a bank account. Some of these people have already closed bank accounts due to bad banking history, such as excessive overdrafts or improper use of the account.
When you are rejected for a bank account, your name is usually listed in the ChexSystems register of high-risk bank customers. And you might need a second chance to get your name back in the banking system. That’s what second chance checking accounts are for: to help rebuild banking history.
Wells Fargo and a few online challenger banks like Radius Bank and Chime offer second chance checking accounts. Like traditional checking accounts, some second chance accounts may charge a monthly fee. But they differ in that they may have slightly different characteristics or lower limits on how much you can spend or deposit. They can also offer customers options to switch to a regular checking account after a specific period of positive banking history.
If you’ve had a bad banking experience in the past, don’t assume that you’ll never be able to get a bank account again. Second Chance chequing accounts can give you a fresh start and give you access to the protections and benefits of being part of the banking system.
Chequing accounts may seem simple, but there is a wide variety among the different types of chequing accounts. There are chequing accounts that can help you avoid ATM fees, earn interest, earn cash back, send your child to college or get a fresh start in your financial life. Which one you choose depends on your goals. The next time you’re on the hunt for a new checking account, think about your goals and what a checking account can do for you.