Should You Pay Fees on Checking Accounts?

If you’ve ever ordered one too many lunch deliveries, then you know that small amounts of money can add up fast. It’s not just true for food and shopping. Your regular small expenses, like checking account fees, can add up quickly, too. Those small dollar amounts can go a long way if you could save or invest them instead. With other possibilities available, should you pay checking account fees, or should you look for no-fee checking accounts?

The good news is that not all checking accounts are the same, and you don’t necessarily have to pay maintenance fees. Here’s what you need to know.

Types of Checking Account Fees

Checking accounts are vital in this day and age. They provide the simplest way to keep track of your funds, and they give you a single resource to keep your money safe, receive payments, and pay bills.

But are checking account fees worth these benefits? Not for everyone. For many, no-fee checking accounts can fit their needs much better. These fees hit some people harder than others, especially when checking accounts come with multiple fees.

Monthly Maintenance Fees

Monthly maintenance fees are the most straightforward type of checking account fees. These fees often hover around $10-$12 per month but they can be as high as $20 per month in some cases. That’s $240 per year just for using a checking account. A lot of people who do the math search for no-fee checking accounts instead.

Transfer Fees

If you move a lot of money around between accounts, then you may deal with transfer fees. However, transfer fees are much more common with savings accounts than with checking accounts.

Low Balance Fees and Overdraft Fees

Low balance fees and overdraft fees are perhaps the most infuriating type of checking account fees.

Many financial institutions require account owners to maintain a minimum balance. When the amount of money in a customer’s account dips below that balance number, the bank takes extra money out of their account as a “low balance fee.”

Overdraft fees follow the same concept. When customers overdraw from their account, the bank may charge a fee for that overdraft.

The absurdity of low balance fees and overdraft fees is that they charge people for not having enough money. They put accounts even deeper into a low balance or overdraft, making it more difficult for account users to dig themselves out. The people who have to pay most of these fees are the ones who can least afford them. In other words, these checking accounts pose challenges for financially burdened customers.

Who Gets Impacted the Most?

Checking account fees can harm some people more than they harm others. Just because two people pay the same checking account fees doesn’t mean that both will be impacted in the same way. Some benefit from no-fee checking accounts more than others.

People with Financial Struggles

We’ve already covered the bizarre nature of low balance and overdraft fees, but all checking account fees impact people with financial struggles more than people without them. $240 per year in maintenance fees will mean a lot more to someone who’s barely making ends meet.

Financial struggles tend to snowball, as many people unfortunately learned during the COVID-19 crisis. Those extra checking account fees can be the financial straw that breaks the camel’s back.

People Who Receive Irregular Payments

Some banks do waive maintenance fees for people who set up regular direct deposits into their checking accounts. For these customers, having a no-fee checking account is as simple as having the right job.

However, not everybody can set up direct deposits, even if they’re ultimately making the same amount of money as someone who can. Freelancers and gig workers get paid per project instead of per month, so their incomes don’t always have a regular schedule. Because they get paid more sporadically, they can’t remove checking account fees with direct deposits.

Freelancers already pay extra taxes to the US government just for the privilege of being freelancers. Checking account fees are yet another way to charge gig workers for being gig workers.

For that matter, many freelancers deal with financial challenges, which means that checking account fees can impact them in several ways at the same time.

Can Banks Make Money Without Checking Account Fees?

When it comes to no-fee checking accounts, people often have the same question that they have about receiving interest payments: how can banks make money this way? The answer is that they can’t because that’s not how banks make their money.

The idea of no-fee checking accounts can seem too good to be true if you don’t realize that banks make most of their money from loans. The majority of their profits comes from the interest that they charge on people’s loan payments. Banks provide those loans from people’s savings accounts, which is part of the reason why they can also afford to give you interest on your savings. Essentially, when you open a savings account, you’re loaning money to the bank so that they can loan it back to others, and then the bank repays you with interest.

Compared to the money that banks make from loan payments, the money that they make from checking account fees is minimal. That’s why a lot of banks these days have no problem staying afloat while offering no-fee options.

When Should You Pay Fees on a Checking Account?

With all the benefits of no-fee checking accounts, is there ever a good time to choose an account with fees instead? For many people, a no-fee account is the best option, but for others, the pros of a particular account outweigh the cons that come from paying fees.

For example, maybe using a particular bank is convenient for you, and the associated checking account fees won’t have a big financial impact on your life. In that case, dealing with checking account fees may be worth it.

For that matter, if you’re in a position where you can get your fees waived or discounted, then you might stick with a fee-based checking account if that account works for your needs. If you’re a student, military member or veteran, or someone who can receive direct deposits, then you may be eligible for discounts.

No matter who you are, you also always have the option of getting overdraft fees waived. The trade-off is that your debit card may be declined if you have insufficient funds to pay for a purchase, so make sure that you keep that in mind as you think about your options.

What to Do with the Money that You Save

Again, the average checking account fee is close to $10 per month. If you do choose a no-fee checking account, you can save roughly $120 per year. It may not seem like much, but depending on how you handle that money, you can make it work for you in one way or another.

Of course, it’s important to acknowledge that some people can’t save or invest that money. You may be in a spot where any “extra” money goes straight toward rent and bills, and that’s absolutely understandable.

Having said that, if you do have a little wiggle room, you might consider doing one of these things with your extra funds.

Transfer the Money to Your Savings Account

One thing you can do with an extra $120 is put it in your savings account. This is by far the simplest thing that you can do with the money. The more money you have in your savings account, the more interest you’ll earn on your money. If you don’t need that money right away, then it’ll do more work for you in a savings account than it would in your checking account. You might even use that money to start a savings account if you don’t already have one.

Invest the Money

Speaking of making money work for you, another option is to invest that extra money. Some people avoid this option because they find it intimidating, but you do have some beginner-friendly investment options. Do a bit of research and see if investing money may be a good choice for you.

Pay Down Debts

If you’re like a lot of other people, you have some kind of debt in your life. It may be student loan debt, credit card debt, a car loan, or a combination of things. Whatever type of debt you’re dealing with, any amount of money that you put toward paying it off can help. Why not put yourself that much closer to financial freedom?

Donate to Charity

Have you always wanted to donate more money to charity but didn’t have the budget for it? With an extra $120 per year, you might allocate some of that money to a generous cause. Think about what causes matter most to you, and then choose one to support financially.

Buy Something for Yourself

Of course, you can always buy something for yourself, too. If you don’t get to splurge much, those extra funds may give you a chance.

Where to Look for No-Fee Checking Accounts

Before you figure out what to do with the money you’ll save on your no-fee checking account, you’ll have to find that no-fee account in the first place. You can always google “no-fee checking accounts” to see what comes up, but we have some other suggestions on where to start.

Community Banks

Community banks, like bigger banks, are businesses. However, they do business differently. While megabanks are impersonal and don’t always have the best customer service, community banks take a smaller, more focused approach to business. They invest in their own communities, so you can know that your dollars are making an impact.

Community banks often take a people-first approach to business, which means that they generally offer the things that clients truly want and need. In this case, that can mean free checking accounts.

Credit Unions

Next, there are credit unions, which provide the same services as banks but don’t use the same business structure. In fact, credit unions aren’t businesses at all. They’re nonprofit organizations. Because credit unions have no concern over making a profit, they won’t try to squeeze every penny they can out of their members, which generally means no checking account fees.

Start with Bundlefi

By now, you’ve seen the benefits of free checking accounts, some options for what to do with your savings, and a starting point for finding your account. Feeling a little overwhelmed by now? We understand. That’s why our Bundlefi team is here to make things simpler. Let us help you find your free checking account.

All from One Place

When you’re looking for something as important as a checking account, regular search engines can get a little overwhelming. That’s because your options are so broad and because the megabanks use advertising tricks to compete for your attention. Bundlefi makes the search easier by curating a relevant list of options. We connect people to the kinds of banks that respect their needs. We provide a single simplified source where you can see all of your options in one place.

Take All of Your Considerations into Account

You may be looking for a free checking account, but a lack of fees isn’t your only need. You might also be looking for accounts with no minimum balance, accounts with rewards, or other specific types of checking accounts. You should be able to check off more than one box. With Bundlefi, you can compare and contrast all of the benefits of your banking options instead of just focusing on one thing.

Check Out Bundlefi Now

You don’t have to get stuck with a megabank. Take a look at Bundlefi instead. With Bundlefi, you can make sure that the big banks don’t drown out the banks that can really serve your needs. Find no-fee checking accounts, business loans, and more.