7 Different Types Of Checking Accounts
Opening a new checking account can be confusing. The options available to today's consumer in terms of maintenance fees, check-writing privileges, and perks vary greatly from bank to bank and product to product. Here is a primer on the various types of checking accounts available to you.
1. Traditional
A traditional checking account used to be the only type of checking account you could get. It came with paper checks, monthly maintenance fees, and an ATM card. While it does everything a checking account needs to do, it does not suit everyone's needs.
2. Basic
A basic checking account is a great starter account for a young person just starting out or anyone that doesn't have many transactions each month. Basic checking accounts are usually free accounts, but they could charge monthly maintenance fees. This type of account often limits what you can do, however. Depending on your individual bank's program, a basic checking account may allow you to write only a few checks each month or have a limited number of ATM transactions.
3. Interest-bearing
While you can earn interest on money kept in savings, money market, and other types of accounts, there are people that like to keep a significant balance in their checking account and prefer to earn interest on the money there, too. Interest-bearing checking accounts vary greatly on what annual percentage yield they pay on checking account balances. It may be higher or lower than their savings account program. It pays to shop around for more information on this feature.
4. Business
If you have a small business, you can now easily open a business account at the same branch as your personal checking account. While you can't always transfer between the two accounts — and probably shouldn't for tax purposes — there are benefits to having the accounts at the same location. Business checking accounts typically have the same perks as a traditional checking account and come with the same monthly maintenance fees.
5. Rewards
A rewards checking account operates similarly to a rewards credit card, you get points every time you use it. The rewards vary by bank, but they could include cash back, airline points, higher interest rates, refunded ATM fees, and even cash sign-up bonuses. There are also commonly free checking accounts. Generally, rewards checking accounts are for people with good credit and high monthly balances who use the account often.
6. Second chance
Second-chance checking accounts became popular after the economic downturn of 2008 and have continued to grow in popularity. They are for people that have had trouble getting a checking account for various reasons in the past. They could have a low credit score or negative remarks on their ChexSystems report. ChexSystems keeps track of bounced checks and other information for banks the same way credit reporting agencies keep track of credit cards, installment loans, and revolving debt payments. Second-chance bank accounts can help, but they do have higher fees and require you to maintain a specific balance each month.
7. Online
The newest type of checking account is online checking. Now you can sign up for a bank account without ever setting foot in a bank. You can have your paychecks direct deposited, pay all your bills online, transfer money to other accounts or people, and even invest in stocks — all for free. If you want paper checks, you can order them, but most online checking accounts do everything virtually. This type of checking account continues to become more and more popular and will likely be the go-to solution for future generations.
Knowing how you use a checking account and what services you need from a bank can help you decide which type of checking account is best for you.
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