Yes, You Can Afford a Checking Account

If it seems like free checking accounts are becoming a thing of the past, you’re not totally wrong. A number of large banks have either given them up altogether or started charging a fee if your account balance doesn’t exceed a minimum level.

Bank of America was the latest domino to fall. In January, it announced the end of its popular eBanking account, which waived the maintenance fee for customers who received electronic statements and did all their banking online. The bank moved those customers into accounts that charge a $12 monthly fee unless you maintain a balance of at least $1,500 and have direct deposits totaling at least $250 a month. For many working-class consumers, that’s hard to do.

Free Accounts Do Still Exist

Ironically, free and low-cost banking services are harder to find in low-income areas, where customers need them the most. According to the research firm Moebs Services, you can find free checking accounts 65% of the time if you live in a city where bank usage is prevalent. In areas where customers tend to avoid banks – in other words, those with a less-affluent population – free accounts are available just 51% of the time.

That doesn’t mean it’s futile to look for a no-cost checking account. A number of depository institutions still offer products that are free of monthly fees. To find one, you might have to look at less conventional options. However, the effort will show that you can afford a checking account and benefit from its offerings – especially if you’re accustomed to using prepaid debit cards, which often have lots of hidden fees. (See 8 Ways to Avoid Getting Burned by Prepaid Debit Cards.)

Look Beyond the Big Banks

While completely free accounts are harder to come by at larger banks, some make it easier than others to steer clear of their service fee. Wells Fargo, for example, lets you avoid a $10 monthly charge for its Everyday Checking account if you maintain a $500 balance or receive direct deposits totaling $500 a month. Customers must be between the ages of 17 and 24.

Online banks like Ally and Discover may be an even better option, since they forgo monthly fees altogether. They also tend to offer higher interest rates than their brick-and-mortar competitors. Discover is particularly generous in this regard, with several 5% “cash back bonus” programs.

Since more customers are using online and mobile apps to do their banking, the lack of physical branches is less of an issue than it used to be. And if you need cash, finding an ATM usually isn’t much of a problem.

Discover offers some 60,000 no-fee teller machines around the United States. Ally, meanwhile, lets customers use any Allpoint ATM for free and reimburses customers up to $10 a month on any fees they generate from a machine outside their network. By contrast, prepaid debit cards often charge you for withdrawing funds from an ATM or even using an ATM to check your balance.

If an online-only account still makes you nervous, you might want to consider community banks and credit unions, which are more likely than big banks to offer free checking. In a recent survey, Bankrate found that 82% of credit unions marketed these accounts, while only 38% of banks did.

These days, joining a credit union is easier than you might think. While there are still plenty of company-sponsored credit unions that only serve their own employees, others simply require that you live within a certain geographic boundary. And even if you don’t meet eligibility requirements on your own, you can often participate if a close relative is a member.

How to Dodge Overdraft Fees

Even if you are not charged a monthly service fee on your checking account, you could end up paying through the nose with various other charges. But there are ways to make sure your “free” account remains free.

Overdraft fees are among the biggest culprits. According to Bankrate, the average overdraft fee is $33.38 per transaction at banks and $28.20 at credit unions. When you consider that some accounts can charge multiple fees per day, they can add up quickly. (See also How Overdraft Fees Work and How to Avoid Them.)

When you’re shopping for an account, be sure to check the fee schedule. Online banks tend to win out in this regard, too. While Ally charges a $25 fee to cover purchases when your account balance goes negative, they limit them to one per day. That ensures you won’t get dinged for a quick succession of purchases when your funds have run dry.

Another compelling option: the GoBank account being offered at Walmart. The product, which combines mobile banking capabilities with the ability to deposit cash at its retail locations, won’t charge overdraft or bounced check fees. GoBank does charge an $8.95 monthly membership fee, although that too can be avoided if your account receives direct deposits worth at least $500 a month.

For those banking elsewhere, the best way to avoid hefty fees is to regularly check your balance online and ask the bank to turn off overdraft protection. (For more read Pros and Cons of Overdraft Protection.) As a result, retailers will decline your debit card purchase when you don’t have enough funds – but at least you’ll avoid paying through the nose to have the bank cover the difference.

The Bottom Line

Online checking accounts may not offer the personal touch that you can find at a traditional bank, but it’s hard to argue with their low-cost approach. For those who like to see a banker in person from time to time, you’re more likely to find free offerings at community banks and credit unions than at the big-name banks. Either way, there are low- to no-cost options that will likely make a checking account affordable.