The foundation of most people's finances is their checking account. It is usually the account where paychecks are deposited and from which most checks are written. Spending a little time to choose the right account can make your financial life simpler, probably save you a little money and maybe help you earn a little more dividend.

 Consider how you "use" your checking account:

  • How many checks do you write each month?
  • How large of an average balance do you maintain?
  • Do you make extensive use of ATM access to the account? If so, at which ATMs?

Most institutions offer a variety of accounts with different levels of fees, transaction limits and dividend bearing terms.

  • Accounts with no (or very low) minimum balance requirements may charge a monthly maintenance fee or have a per check charge. Be sure to ask.
  • Accounts that pay attractive dividend rates probably have higher balance requirements. Be sure to find out how the "minimum balance" is calculated. Some institutions use a monthly average, some look at the lowest level during the month and others may look at the total of all your account balances to determine if you are subject to the monthly charge.
  • You should also pay attention to fees that are charged for ATM usage. Usually, the institution will allow almost unlimited usage at their ATMs, but may charge a fee for transactions at other institutions' ATMs.
  • Some institutions also may provide a "no-fee" checking account.  Some will only do so if you use direct deposit for your paycheck.
  • Also, be sure to understand "bounced check" fees and the costs for the checks.

The key is to find the account (or accounts) that matches how you use your checking account with the lowest costs and that pays the highest dividend on your balances.

Some Guidelines

If you keep a very low balance in your checking account and write few checks, your primary consideration should be fees. A "basic" checking account with no monthly fee that does not pay dividend may be your best option. Although it may sound nice to earn dividend on an average balance of $500, at today's low dividend rates, earning 1 ½% ($7.50 for the year) doesn't justify paying a monthly fee of $5.

If you keep larger balances, say over $1000, then you need to consider how much dividend you will be earning on your balances in addition to fees that may be charged. Some institutions may offer dividend bearing checking accounts that charge a monthly fee, but waive it if your balances exceed a certain amount.

Some Other Issues

  • ATMs have become a great convenience for many. Be sure to know where your institution's ATMs are located and try to avoid using others where you may be charged a fee. A $3 fee to withdraw $50 is very expensive.
  • Take advantage of direct deposit for your paychecks or government checks. It saves time, it is safer and it puts your money to work faster.
  • Ask about different forms of over-draft protection. This type of "stand-by" provision may help you avoid some embarrassment and a "bounced check" fee.


This information has been provided by Financial Wisdom Marketing Services, Inc. and is for educational purposes only.  Content from Financial Wisdom and/or Redwood Credit Union is not, in any way, intended to provide legal, tax, or financial advice.