Check Again: A Look at Current Checking Account Options

After finishing a harrowing first year of graduate school, I finally have time to pick up Money Under Your Futon again. Kathy and I both had crazy (academic) years, but we are glad to be back here, learning and writing about personal finance tips for people with entry-level jobs (or stipends) who want to live the good life.

Kathy posted her “I am back” post a few weeks ago, in response to some of the craze going on over TLC’s Extreme Couponing show. As for myself, this is my “welcome back” post.

I reviewed some checking accounts a long while back and, given all of the regulatory changes in the banking system over the last year or two, I think it is time for an update. Here is a summary of the most basic checking accounts offered by some of the largest brick-and-mortar banks. While banks warned that the recent and ongoing regulatory changes might translate into the end of free checking accounts, not all of them have actually banished free checking yet. Some, such as Chase, HSBC, and Wells Fargo, have certainly delivered on the warning, putting stringent requirements on customers, who otherwise must pay up a monthly fee for their accounts. Other banks, however, have come out on top. PNC’s Free Checking does not have any monthly fees at all, while Bank of America makes it fairly easy to avoid its maintenance fee.

  • Bank of America’s eBanking account: this account is great for young, internet-savvy customers with uncomplicated finances. There is no monthly fee nor minimum balance as long as you don’t use a teller for any of your transactions. And BofA has one of the best ATMs that I know of, since the machines actually count your cash and scan your checks when you make a deposit, and the amount posts to your account immediately. If the range of your checking needs is usually limited to withdrawals and deposits, this is a great option for you. And when you do need a teller, the monthly fee is $8.95.
  • Chase Total Checking and Chase’s College Checking: the Chase Total Checking account has a monthly fee of $10 which is waived only with (a) a direct deposit for $500 or more, (b) a minimum daily balance of $1,500, or (c) an average daily balance of $5000 or more in all of your Chase deposit and investment accounts. Personally, I think this is a pretty bad deal given other options. Even if you can satisfy the requirements now, consider the worst case scenario – you don’t want to lose your job, have to deplete your account, and then also get hit with a fee. If you’re in college or grad school though, you can avoid that through the College Checking account. With this account, the $6 monthly fee is waived for 5 years while you’re in school, though after graduation you’ll need to set up a monthly direct deposit to continue the fee waiver.
  • Citibank’s Basic Checking account: there’s no minimum balance for this account, but you have to jump some hoops to avoid the $8 monthly fee. The fee is waived for every month you have 5 transactions in the account, including direct deposit, ATM withdrawals, debit card payments, and automatic payments. This may seem like an easy set of hoops to jump, since any 5 transactions in a month count, be it 5 ATM withdrawals, 2 direct deposit and 3 debit card payments, or any other combination of transactions. However, keep in mind that while on a day-to-day basis it may be easy to satisfy this requirement, it might not be the case when you go on vacation. If you travel abroad and don’t use ATMs or your debit card in a given month, you may easily come back to find a fee on your account. But perhaps $8 isn’t all that bad.
  • HSBC’s Choice Checking and Basic Banking: HSBC’s Choice Checking is a less strict version of the Chase Total Checking, also with a slightly lower fee. The $8 monthly fee can be avoided with (a) a monthly direct deposit, (b) at least $1500 in personal deposit or investment balances, or (c) at least $5000 in broader total monthly balances, which includes personal deposits, investments, and certain credit balances. On the other hand, if you don’t want to bother with the requirements or can’t meet them, HSBC also offers a Basic Banking account. With this account, you are always charged a $3 monthly fee, but at least there are (almost) no other surprises. That is, as long as you write less than 8 checks per month. If you go over that, there’s another $0.35 fee per check you write.
  • PNC’s Free Checking: this is a truly free checking account, with no minimum balance or transaction requirements. Although PNC does not have as many ATMs as other big banks, it makes up for that by reimbursing ATM fees when you use a non-PNC ATMs as long as you maintain a balance of at least $2000. As I see it, this is a great deal. If you’re going to meet a minimum daily balance, instead of just doing that to avoid a monthly fee, you might as well get something out of it. Here, PNC rewards you by making every convenient ATM a free one too.
  • U.S. Bank’s Easy Checking and Student Checking: there are two ways to avoid the $6.95 monthly fee on the Easy Checking account: (a) having direct deposits with a combined value of at least $500, or (b) maintaining an average daily balance of $1500 in the account. This is a pretty standard, middle-of-the-road account nowadays, with average requirements and an average fee as well. You could do better – but you could certainly also do worse. If you are a college or grad student, though, you may also want to look into U.S. Bank’s Student Checking account. There is no minimum balance or transaction requirement for this account, and you get reimbursed for up to 4 ATM fees a month when using a non-U.S. Bank ATM.
  • Wells Fargo Value Checking: to avoid the $5 monthly fee on this account, you must either (a) have a direct deposit of at least $250 a month, or (b) maintain an average daily balance of at least $1500. While I think one should avoid any account that requires direct deposit or minimum balances since these are the first to go when your finances go under, this checking account does have the one of the lowest monthly fees out of those reviewed here. So if you find you are going to be inevitably hit with a fee, then this might be a good option for you.

When I reviewed checking account options 2 years ago, I had PNC’S Free Checking in a close second place after a Bank of America account. This time, it’s a tie, and the breaker really depends on convenience. If BofA ATMs are convenient for you and you can’t remember the last time you actually stepped into a bank, you can’t go wrong with the eBanking account. On the other hand, if you have a PNC ATM close by or are planning to maintain a balance over $2000, PNC’s truly Free Checking is a great option – not having to ever worry about ATM fees certainly pushes it ahead.

And if you don’t have BofA or PNC ATMs nearby and cannot maintain a balance of at least $2000, think carefully before just choosing the bank closest to you. If you are just starting out and your job isn’t stable – and most aren’t nowadays – it is best to avoid accounts that have minimum balances or direct deposit requirements. The last thing you need is a bank working against you, using fees to chip away the balance you do have. Check your local banks and credit unions as well. As this review shows, despite all warnings, there are still free or almost free checking accounts out there.

Rewards in Checking: Bank of America

Barring the rare interest-yielding accounts, it is hard to get much out of your checking account besides the money you already deposited into it and some checks.  But using programs associated with you bank may get you a little more.  Two weeks ago, I wrote on how to make the most of your Citibank account using the ThankYou network, and today I will cover Bank of America.

Bank of America hosts Add It Up, an online shopping portal offering cash back for purchases you make through it.  Of course, there are several other similar portals, such as ShopDiscover, UPromise, and each of the airline portals, and Add It Up won’t always have the best deal.  However, it is worth a visit when you online shop, since the top cash back offer varies by retailer and the cash back earned through Add It Up is deposited directly into your Bank of America checking account – unlike ShopDiscover, for which there are thresholds for cash back redemption, and UPromise, which has a threshold and only makes transfers quarterly. (Click here for a previous post comparing different cash back offers and here for last week’s NYTimes’ Your Money column’s explanation on online shopping portals).

Moreover, unlike most other online portals, Bank of America has a good range of in-store partners as well – at least until the end of 2009.  Once you register your Bank of America checking account for the Add It Up program, you can get a 5% cash back for purchases you make at Staples, Barnes & Noble, Sephora, Macy’s, and Radio Shack stores and at Olive Garden and Burger King restaurants.  This offer runs until December 31, 2009, and is limited to $250 in cash back.  Once you enroll in the Add It Up program, just use your Bank of America check/debit card when shopping at these stores and the bonus will be credited straight into you checking account.  And don’t forget that you can always combine these cash back offers with store coupons.

With Add It Up, it is almost as if Bank of America is paying you to do your holiday shopping – or at least giving you a discount for doing so.

Shop Around for Miles and Cash Back Too

With so many online portals offering miles or cash back if you shop through their website, it pays to look around for the best rewards out there.  So after you’ve done your research for the item you are going to buy and have found the perfect coupon code, you should look for bonus deals on online portals before hitting the purchase button.  You may need some patience to look through them but you will be duly rewarded for that, as the bonuses differ a lot from website to website and from store to store.  Here are four examples:

The Apple Store:

  • Discover’s ShopDiscover: 5% cash back
  • Bank of America’s Add It Up: 2% cash back
  • Upromise: 1% cash back
  • United’s Mileage Plus Mall: 3 miles per $2
  • American Airlines’ AAdvantage eShopping: 1 mile per $1
  • Delta’s SkyMiles Shopping: 1 mile per $1
  • Amtrak’s Points for Shopping: 2 points per $1

Expedia.com:

  • Upromise: 1% cash back
  • Bank of America’s Add It Up: 1% cash back

Macy’s:

  • Upromise: 6% cash back through August 7, usually 3%
  • Discover’s ShopDiscover: 5% cash back
  • Bank of America’s Add It Up: 4% cash back
  • American Airlines’ AAdvantage eShopping: 4 miles per $1 through September 6, usually 3 miles per $1
  • United’s Mileage Plus Mall: 7 miles per $2
  • Delta’s SkyMiles Shopping: 2 miles per $1
  • Amtrak’s Points for Shopping: 3 points per $1

Snapfish:

  • Bank of America’s Add It Up: 15% cash back
  • Discover’s ShopDiscover: 15% cash back
  • Upromise: 9% cash back
  • American Airlines’ AAdvantage eShopping: 6 mile per $1
  • Delta’s SkyMiles Shopping: 6 miles per $1
  • United’s Mileage Plus Mall: 9 miles per $2
  • Amtrak’s Points for Shopping: 5 points per $1

As you can see from the list above, bonuses vary significantly, and some stores even have limited time deals.  So if you have the time, don’t just stick to one portal.  In deciding through which one to shop , consider the size of the bonus as well as in which program you already have some miles or are close to reaching some sort of cash back threshold for redemption.  Either way, you will be turning your good deal purchase into an even better deal.

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Museum Visits, Compliments of Bank of America

Last week, I came across an article on Bank of America’s Museums on Us program, which gives free access to over 100 museums all over America during the first weekend of each month when you show your BofA active debit or credit card.  Even if there aren’t that many options in your own city, remember to check the list of participating museums when planning your next trip – the Met and the Aquarium in New York and the Museum of Fine Arts in Boston, for example, are part of the program.  It may also be a good place to start as you plan your July 4th or Labor Day weekends (both are the firsts of the month).  Be sure to check out the article and the Museums on Us website for more details.

Check It Out: Finding a Checking Account that Works for You

Last week we wrote about savings accounts and encouraged you to look into online ones, which tend to have a better interest rate than brick and mortar banks.  As we explained, these accounts have to be linked to an existing checking account so you can transfer money in and out.  But maybe you don’t have a checking account, or, more plausibly, you are looking to open a new one that’s more convenient than your college credit union account.  Or, most likely, you have a checking account for which you pay a maintenance fee, effectively canceling out the earnings you make on your savings account.

You need a checking account that works for you, not against you.  Look for accounts with a very low minimum balance requirement and no maintenance fees.  I know that many banks waive maintenance fees as long as you set up direct deposit, but, in this economy and depending on your circumstances, I don’t think you can count on that direct deposit protection.  You shouldn’t be paying maintenance fees while you’re looking for a job or if you go back to school, or, even worse, you don’t want to lose your job, and, on top of that, pay for it.

I’ve reviewed some of the main banks in my area, and this is what I’ve found on their simplest checking accounts:

  • Bank of America’s MyAccess: no minimum balance requirement and no maintenance fee for accounts opened online
  • BB&T’s Free: no minimum balance requirement and no maintenance fee
  • Chevy Chase Bank’s Free Direct Deposit Checking: no minimum balance; maintenance fee waived as long as you have at least one direct deposit per statement cycle
  • Citibank’s Access Account: does not include paper checks, which are an important feature of checking accounts for many people (virtually all of us who pay rent); waives maintenance fee with direct deposit
  • Citibank’s Basic Checking: has a fixed monthly fee, which ranges from $3.50 to $10 depending on your state plus fees for the checks you write
  • PNC’s Free Checking: no minimum balance requirement and no monthly maintenance fee; it has less ATM locations than other banks, but reimburses non-PNC ATM fees if you keep a $2,000 minimum average monthly balance

Out of these accounts, Bank of America’s MyAccess probably is the best option (with PNC’s Free Checking coming in second place) – you don’t have to worry about going below a certain minimum balance or losing that direct deposit, and Bank of America has ATMs almost anywhere.  I have that account, and find that it works quite well for me.  To avoid the minimum balance and maintenance fee, you only have to open it online; after that, you can use the branch just like any other customer who opened their account in person.

When I opened my account online last year, I got a $50 bonus for being a new customer.  It seems that Bank of America is offering an even better deal for those of you who already have a BofA credit card: http://www.bankofamerica.com/promos/jump/75ssccheck_olblink/ .  You don’t have to open a MyAccess account, but if you choose to do so, make sure to go through this link to get an extra 75 bucks.  Your checking account should suit your needs, and I think that no fees and perhaps some extra cash matches almost everyone’s needs.