You should never pay a monthly maintenance fee for a checking account

The monthly maintenance fee can be surprisingly expensive, costing more than $10 per month. Most banks have multiple ways to avoid the fee. The most common is to have your salary deposited directly into your account each month. Another common option is to maintain a minimum balance. You can usually trigger the fee even if your account falls below the required balance for just a day. The difference in minimum deposit requirements can be dramatic.

Linking your credit card as overdraft protection can be costly

Many banks encourage you to link your credit card to your checking account for overdraft protection. Although this can be cheaper than being hit with a $35 overdraft fee, it can still be an expensive way to borrow money. First, your checking account will likely charge you an overdraft protection transfer fee, which is typical $10 – $12. Second, most linked credit cards treat the transaction as a cash advance. That means you will be charged a cash advance fee on the credit card, which is usually around 3%. In addition, interest will accrue immediately at the cash advance rate, which is normally above 20%.

Avoid savings accounts at bricks and mortar banks, unless you get excited by a less than 5% interest

We live in a world of extraordinarily low-interest rates. But the interest rates paid by traditional banks for savings accounts are shockingly low. The largest banks are paying 0.01% on savings accounts for entry-level accounts.

ATM fees are getting more expensive, and are completely avoidable

Bank ATM fees continue to increase. If you use an ATM of another bank, you will typically get hit with two fees. You will be charged by the bank that owns the ATM and by your own bank. Those charges can add up quickly.

Apps are replacing branches. You should consider the quality of an app when choosing a bank

Basic banking transactions are increasingly migrating to mobile phones. You can now deposit checks, transfer funds, pay bills, view statements, dispute transactions, and wire money using your mobile banking app. Given the importance of mobile banking apps, you should consider the commitment of the bank to mobile banking when making a decision on where to bank.

Important Must-Knows before you bank

Compare savings interest rates

In many cases, the interest rates for savings accounts paid by traditional banks are low. You may get a higher interest rate if you comparison shop and include online options. Online or internet banks provide you with the same level of FDIC protection, but because they don’t have the same overhead costs that brick-and-mortar banks do, they are more likely to require fewer fees and provide accounts with no minimum balances and higher interest rates. Learn more about internet banks.

Banks don’t use credit scores to open checking and savings accounts

Your credit ratings do not count as to whether or not you can open a current or savings account.

Brick and mortar branches aren’t as important as in the past

In an age where technology is ever-increasing, the most important question on banking is how your bank and not where you bank. One of your most critical considerations before choosing a bank is the quality of its online banking systems or the bank’s mobile app. Basic banking transactions are frequently handled with mobile devices, including the ability to deposit quickly(cash or cheque), transfer funds, pay bills, view statements, dispute transactions, and wire money using your mobile banking app. Given the amount of use and the importance of mobile banking apps, weigh the functionality of the bank to mobile banking when making a decision on where you plan to bank.

Watch out for ATM fees

Automatic Teller Machine (ATM) makes it easy to withdraw cash from your account when you need it. As long as you use an ATM within your bank’s network, the fees to use and ATM are typically included with your account. But ATM fees can take a big bite out of your budget if you regularly withdraw cash at an ATM that isn’t part of your bank’s network. Banks often charge $2-3 to use a different bank’s ATM, then there is usually a separate transaction fee. Beware of those fees that can add up over the course of a year.

Online banking and bill payment are important

For many people, taking care of electronic payments through online banking and bill payment is the easiest way to manage monthly expenses. Electronic bill paying can help you not only with managing your bills, but you can also combine your bill payments with your budget and financial planning. Many banks include the ability to pay bills directly from your account with your checking account services.

Different kinds of banks

Credit Unions

Credit Unions are banks that run as a non-profit organization. They typically are open only to people who are members of the Union (usually, employees of a particular company, members of a church, or residents of a local community). These days credit unions are open to more than just limited applicants. A credit union typically offers better interest rates than banks and given their small, local nature, it’s possible to form a relationship over time with your credit union. The downside to credit unions is typically convenience. They will have limited locations and limited banking hours. So while credit unions offer a lot of advantages over banks, your money will be less accessible.

Rural Banks

Rural Banks are banks that are run in remote communities to support and assist the rural community with financial inclusion. They mobilize deposits and extend credit to farmers, cottage industrialists, and other rural-based economic operators in the defined areas of operation. Until recently, Rural banks had no branches beyond the areas of operation. They worked through a network of agencies and mobilization centers. The establishment of a rural bank is usually an initiation of the people in the rural community where the bank is to be located.

Savings & Loans (S&Ls)

S&Ls are for moderate-income people to grow their savings and borrow from the same. They serve people/small enterprises who typically are not able to get service from traditional high street banks.

Commercial Banks

Commercial Banks serve businesses, giving corporations a place to deposit funds or obtain business loans & lines of credit.

Types of Bank accounts

Savings Accounts

keep your money safe and earn a small amount of interest. Usually below inflation. The funds are available to be withdrawn whenever you need them.

Current Accounts

Let you transfer funds to others by writing checks or using a debit card linked to the account. Bank accounts typically carry a small monthly fee, but that may be waived under the right conditions. In some very rare cases, a checking account might actually earn interest.

Money Market Accounts

Usually require a minimum balance to stay open. The accounts earn a much her interest rate than traditional savings, but the money is less accessible, and you have to be wary of dropping below the minimum balance and triggering penalty fees.

Certificates of Deposit

Certificates of Deposits require you to keep your money untouched for a set period of time. The longer you agree to leave the money alone, the more interest it will earn. For example, a bank might offer traditional savings at 4% or less. If you agree to leave your money in a CD for one year, that deposit might earn 8% or 9%. If you buy a 3-year CD, it might earn 16%. And if you commit to a 5-year CD, you could get an interest rate of 25% (these are just examples—real rates will vary).