On the surface, checking accounts may appear similar across the board; however, that’s rarely the case. There are many aspects of checking accounts that vary considerably – especially between big banks and credit unions. Primarily this comes down to how and why these institutions operate, which can ultimately affect how much you pay for the account.
Banks vs. Credit Unions
Banks are for-profit institutions. What this means is they are seeking the greatest returns for their investors and usually design their products and services around this profit-making model.
On the other hand, credit unions are not-for-profit – opting to return income generated back to members in the form of lower loan rates, higher deposit yields, many no-cost services, and lower or eliminated fees.
When deciding where to open your checking account, the benefits of the not-for-profit model become quite apparent, especially regarding fees. Regardless of where you open your account, you must understand the most popular costs associated with checking accounts.
Common Checking Account Fees
People typically don’t pay much attention to fees until they are charged one. Instead of getting caught off guard, it’s essential that you review all the costs associated with the account you’re considering. Even some “Free Checking” accounts can be plagued with hidden fees.
Before deciding on your next checking account, it’s wise to make sure you understand these common fees.
Monthly Maintenance Fee: While “Free Checking” seems to be offered everywhere, it’s often followed by a series of asterisks. For some accounts, the fine print could spell the exact opposite of free if you don’t meet certain conditions:
- Minimum balance requirements
- Using your debit card a specific number of times each month
- Enrolling in direct deposit
- Maintaining a loan or credit card with the institution
If you fail to meet specific requirements, you may receive a monthly maintenance fee. These fees can be upwards of $15 per month, depending on the financial institution. So, while the promotional offer may lead you to the account, it could become quite costly if you don’t understand or cannot meet the requirements.
Error Fees: Other fees you will want to review before deciding on an account are Nonsufficient Funds (NSF) Fees and Overdraft Fees.
An NSF Fee occurs when you make a payment without sufficient funds in your account to cover the expenses, causing your account to go negative. An Overdraft Fee is assessed when your account goes into the negative, triggering a transfer of funds (or overdraft) from another account to bring it back to a positive balance. While neither scenario is ideal, accidents happen – especially in our digital world where you can make payments instantly online or with a debit card.
ATM Fees: When using an “out-of-network” ATM, you will incur two fees – one from your financial institution and one from the ATM provider. If you rely on ATMs regularly, you could end up spending a significant amount of money on these fees. Review all costs associated with ATM usage prior to opening your account.
While credit unions are smaller than big banks and typically have fewer ATM locations, they are cooperative in nature. Many credit unions partner together to create large nationwide networks of surcharge-free ATMs for each other’s members to access – a significant perk of credit union membership.
Teller Fees: As our society moves more towards a digital world, many financial institutions push members to go all digital. Consequently, many big banks charge for simple acts, such as speaking to a teller or conducting a transaction in a branch. It’s always important to review any transaction fees that will impact your account, such as teller fees.
Most credit unions, on the other hand, do not charge to interact with tellers. You can visit a branch as often as you like and speak to whomever you wish without paying a fee.
Takeaway
Your checking account is likely to be your most commonly used account. Transactions hit this account daily, whether by check, debit card, ATM withdrawal, or automatic payments. It’s crucial that you truly understand all costs associated with the account before deciding which option is right for you.
While promotional offers may sound enticing, it’s wise to spend some time researching all your options. Many of those appealing features or incentives may be overshadowed by costly recurring or hidden fees.
We’re Here to Help!
With so many checking account options available today, it can become overwhelming to try and decipher all that each account offers. If you would like to discuss our checking account options, our team is ready to help.
Please stop by any of our convenient branch locations or call 800-782-4899 to learn about our checking options today.
Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.