Why Is It Important To Have a Free Checking Account?

By Jamie Cattanach · July 08, 2024 · 7 minute read

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Why Is It Important To Have a Free Checking Account?

Your checking account is the hub of your financial life, allowing you to safely store your paychecks, withdraw cash, pay bills, use a debit card for purchases, transfers funds, and more. In exchange for this convenience, many checking accounts charge a monthly service or maintenance fee. Though the fees are generally small (running between $5 and $15 a month), they can add up to a significant sum over time.

Fortunately, some banks and credit unions offer free checking accounts. These accounts generally don’t charge any monthly fees. However, that doesn’t mean they are entirely cost-free. Here’s what you need to know about free checking accounts.

What Is a Free Checking Account?

When a checking account is advertised as “free,” it generally means that the account doesn’t charge any recurring fees, such as monthly maintenance or activity fees. This can be a significant benefit, since any money you would have paid in bank fees can instead go towards your financial goals, whether that’s building an emergency fund, paying down debt, or saving for a vacation.

However, free checking accounts aren’t always entirely free. In some cases, you may need to meet certain requirements, such as keeping your balance above a certain threshold or signing up for direct deposit, in order to avoid a monthly fee. Free checking accounts may also charge incidental fees, such out-of-network ATM fees, overdraft fees, foreign transaction fees, and other types of charges or penalties.

According to a 2023 Bankrate study, less than half (45 percent) of checking accounts are truly free, meaning they don’t have a minimum balance requirement or a monthly maintenance fee.

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Common Free Checking Account Features

The features and benefits that come with free checking accounts vary by financial institution, but here’s a look at some of the perks you can often find with free checking accounts.

•   No minimum balance requirement: This means you won’t have to worry about keeping a certain amount of money in the account to avoid getting hit with a monthly fee.

•   No monthly fees: With this perk, you won’t have to pay a recurring fee just to keep the account open.

•   Debit card access: Free checking accounts typically come with a debit card, which allows you to make purchases, withdraw cash from ATMs, and perform other transactions.

•   Online and mobile banking: These accounts usually include access to online and mobile banking platforms, enabling you to check your balance, transfer funds, and pay bills 24/7.

•   Insurance: If the account is at an FDIC-insured bank or NCUA-insured credit union, your funds will be insured up to $250,000 should the bank run into financial trouble or go out of business.

•   Fee-free overdraft protection: In some cases, the bank or credit union will cover an overdraft without charging you a fee if you replenish your account within a certain amount of time.

•   Expansive ATM network: A free checking account (even if it’s at an online bank) will typically allow you to get cash, transfer funds, and make deposits at a wide network of fee-free ATMs.

Potential Drawbacks of a Free Checking Account

Free checking accounts also come with some potential downsides. For example, in order to keep the account free, you may have to make certain tradeoffs. Requirements might include:

•   A minimum number of direct deposits per month

•   A minimum direct deposited amount per month

•   Maintaining a certain minimum daily balance

•   Performing a certain number of debit card transactions each month

Even if you find a checking account with no strings attached, you may still get hit with incidental fees, such as:

•   Overdraft or bounced check fees

•   Fees for using an out-of-network ATM

•   Online bill payment fees

•   Stop payment fees

•   Fees for receiving a paper statement in the mail

•   Fees for getting cash back on debit card purchases

•   Debit card replacement fees

How to Find and Open a Free Account

Finding a free checking account that meets your needs and won’t serve up any surprise fees can take a little research. Here are some steps that can help.

Compare Bank and Credit Union Offers

A good first step is to compare the free checking account offerings from various banks and credit unions. Online-only banks, which don’t have to carry the cost of running physical branches, tend to offer low- or no-fee checking accounts. Credit unions often charge no fees or lower fees compared to traditional banks, as they are member-owned and not-for-profit institutions. Look for institutions that have a strong reputation for customer service and offer convenient access to ATMs and branches.

Look for Account Features That Matter

As you research your free checking options, you’ll want to identify the features that are most important to you. If you frequently withdraw cash, you might look for accounts that offer a large network of fee-free ATMs. If online banking is a priority, you’ll want to ensure the bank’s digital platform is user-friendly and robust. Some banks also offer additional perks such as cash back on debit card purchases or higher interest rates on balances, so you may want to consider these benefits when making your decision.

Consider Digital-Only Banks

If you aren’t someone who visits a physical bank often, consider opting for a digital-only financial institution. Also known as online banks, these institutions typically have lower overhead costs and will pass that savings onto customers in the form of no (or low) fees for checking accounts — some even offer competitive interest on checking accounts.

Digital-only banks also tend to provide superior online and mobile banking experiences. This can make them a good choice for tech-savvy types who prefer managing their finances digitally.

Alternatives to a Free Checking Account

While free checking accounts can be a great option for everyday money management, they are not the only choice available. Here are some alternatives to consider.

•   High-yield checking account: These accounts offer higher interest rates on your balance but may require you to meet certain conditions, such as maintaining a minimum balance or setting up direct deposit.

•   Money market account: Money market accounts combine features of checking and savings accounts. They often come with better interest rates than typical checking accounts (and some savings accounts) but may require high opening and ongoing minimum balances to avoid fees.

•   Rewards checking account: These accounts offer rewards, such as cash back on debit card purchases or points that can be redeemed for travel or merchandise. They may require you to meet certain criteria, like making a minimum number of transactions each month.

•   Student checking account: Tailored for students, these accounts often come with perks such as no monthly fees, no minimum balance requirements, and fee waivers for using out-of-network ATMs.

•   Senior checking account: Designed for older adults, senior citizen checking accounts these accounts may offer benefits like free checks, discounts on certain services, and interest on balances without requiring a high minimum balance.

Open a Checking Account With SoFi

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

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Are there any hidden fees in “free” checking?

There can be. If a bank or credit union is advertising a “free” checking account, it’s a good idea to read the fine print. The institution may only waive fees if you meet a certain minimum balance requirement, make a certain number of debit card transactions, or sign up for direct deposit. Also keep in mind the free checking accounts may still charge incidental fees, such as out-of-network ATM fees and fees for overdrafts or bounced checks.

What if I can’t find a truly free checking account?

Many “free” checking accounts are only free if you are able to meet certain requirements, such as setting up direct deposit, maintaining a minimum balance, or conducting a certain number of transactions each month. To find a truly free checking account, you’ll want to look for an account that has requirements you can easily meet.

You can also explore digital-only banks or credit unions, which often provide more competitive fee structures compared to traditional banks. Comparing different options and understanding what fees may be involved can help you find the most cost-effective account.

Do I need a minimum balance for free checking?

It depends on the financial institution. Many free checking accounts do not require a minimum balance, meaning you can maintain any amount in your account without incurring fees. However, policies can vary, so you’ll want to verify this with your specific bank or credit union.

Some banks may offer free checking accounts that waive fees as long as you meet other conditions, such as setting up direct deposit or making a minimum number of monthly transactions. You’ll want to check the account terms to make sure you understand all requirements.

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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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