Choosing a Low-Cost Bank

When everyone is paying more and getting less, here's how to get what you want.


In the days when our parents opened a checking or savings account at their local bank, savings and loan, or credit union, they used to get toasters, and their kids -- okay, we -- would get lollipops. Nowadays, at some financial institutions, we're lucky if we don't have to pay to get a teller to talk to us.

If you think you're paying more today for banking services and getting less, you're probably right. Instead of full-service banking at one set price, you're much more likely to pick and choose the services you need from an "a la carte" menu. And fees for these services can add up.

But you don't have to be totally at the bank's mercy. To find the best checking account for your money, follow these steps:

Think small. The price spread between the banking behemoths and the little guys can be astounding. "The big banks sell a lot of convenience. They offer a lot of ATMs and branches," says Sara Campbell, senior vice president at Bankrate, an online financial information center. "The smaller banks don't have a branch around every corner, so they provide better prices." That means you have to decide how much convenience you want -- and how much you're willing to pay for it.

Maintain a minimum balance. Some financial institutions will offer you free checking if you don't dip below a certain balance, say $500 or $1,000. That's great if you keep a comfortable cash cushion in your account. But double-check how the minimum balance is calculated. At some institutions, you'll trigger a fee if you dip below the minimum balance for just one day. Look for an account that requires you to maintain an average daily balance, not a daily minimum balance. Also, some banks will waive the minimum balance requirement and any fees if your paycheck is directly deposited into the account.

Don't bounce checks. If you don't have overdraft protection, a single bounced check could cost you up to $60. That includes a financial institution penalty of $20 to $30, and a penalty from the receiving party of an additional $20 to $30. Overdraft protection is a lot cheaper, but still costs $20 to $30 per year. An even better idea is very simple: Keep track of your balance and don't bounce checks.

Buy your own checks. If you don't get free checks, you may be able to save money -- as much as 50 percent -- by not purchasing your checks from the bank. You can get your first box of 200 checks for less than $7 -- and pay even less for additional boxes -- when you order from companies such as Artistic Checks, Checks In The Mail, Checks Unlimited or The Check Gallery. You also get a pretty nifty selection of check designs. Another way you may be able to save money is to let your financial institution keep your canceled checks rather than returning them to you. Many banks now charge for returning checks.

Artistic Checks

Checks In The Mail

Checks Unlimited

The Check Gallery

If you maintain a savings account, keeping your costs low is key. Why? With the yields on these accounts paying an average of only a little more than 2 percent, a monthly fee could wipe out all your interest earnings, and then some.

Look at the minimum balance. Before opening an account, find out if you will pay a monthly fee if your balance falls below a certain amount. A typical minimum is $100. You may want to avoid an account with this built-in penalty if you don't intend to park much money in it. Also be aware that some financial institutions will penalize you for making too many withdrawals during a month.

Double up on accounts. You may be able to cut costs by opening a savings account with the bank that handles your checking account, personal loans or certificates of deposit. Ask about multiple-account discounts.

With an ATM card, you're no longer a slave to regular banking hours. Remember bankers' hours? But many financial institutions appear to be taking advantage of the addiction to convenience. You can pay a high price for pulling money out of your account with an ATM card.

Be loyal to your bank's ATMs. If you regularly use an ATM card, make sure your financial institution offers free unlimited ATM transactions at its own machines before opening an account. If you want to cut down on fees, don't extract cash from another financial institution's ATM: The fee for this can cost as much as $2, which is automatically deducted from your account. Also, your own bank may tack on another surcharge for using an outsider's ATM. So one $20 withdrawal could cost an extra $4 in fees. If you must use an outside ATM machine, find one at a financial institution, such as a community bank or credit union, that won't charge you for withdrawing some quick cash.

Reduce your ATM use. You can save money by withdrawing money less often with your ATM card. Instead of taking $20 out of your account several times a week, consider withdrawing $100 once a week instead.

Get a debit card instead. A growing number of financial institutions are replacing their standard ATM cards with ATM debit cards that allow money to be immediately withdrawn from your account for purchases. You may be able to avoid ATM transaction fees by withdrawing a little extra cash when you make a debit purchase. Make sure you won't pay a surcharge each time you use the debit card.

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