Get a Better Checking Account

In this post I’ll walk you through the process for opening a high-yield, no fee checking account with great benefits like no ATM fees.

In my last post, Why You Need to Break Up With Your Bank, I described the abysmal interest rates and exploitative fees you might be tethered to with your current checking and savings accounts. By now you might be convinced that the accounts you opened when you started college, or perhaps even before that, aren’t doing you any favors. And you’re ready to make a change. But what comes next?

What doesn’t come next is you spending any time feeling guilty about the accounts you’ve been using. As I’ve noted before in my post about the financial mistakes I made when I started graduate school, I believe one of the important tenants of improving your financial well-being is practicing self-forgiveness. So the first step in the process of opening a new checking account is forgiving yourself if you’ve been using one that charges you fees. Allow yourself a brief moment of self-pity and let’s move on.

The second step is to identify where you’re going to open a new account. I recommend online banks because they typically have lower fees (or no fees!) and pay you more in interest. A credit union may also be a good option for you, so take some time to research accounts both with online banking and credit unions. What you want to look for is an account that won’t charge you fees, and which isn’t littered with confusing caveats that you might not be able to meet each month.

Personally, I use a Schwab Bank High Yield Investor Checking Account®. If you aren’t accustomed to investing, I know that even the name of this account might sound a bit intimidating. But not to worry. This account works just like any other (online) checking account. I learned about the Schwab Bank High Yield Investor Checking Account® from reading one of my favorite personal finance books, I Will Teach You To Be Rich, by Ramit Sethi. It’s okay if you’re rolling your eyes at the title. I rolled my eyes the first time my boyfriend (now fiancé) told me he was reading it. The name comes off as a bit conceited to me. But the advice in Sethi’s book is solid and I recommend it for almost any young person.

So why did I open a Schwab Bank Checking Account? There are five reasons why I like this account:

1. No service fees and minimums.

With this account, you pay no monthly service fees and have no monthly minimum amounts. And those $0 rates are not contingent on you opening a linked savings account with Schwab. I actually have a savings account with another bank that offers higher interest rates. You can also link this account to Apple Pay if you’re an iPhone user.

2. Earn interest on your money.

You actually earn a bit of interest on your money. It’s only 0.06% percent, which, while higher than the rates you’ll get with Wells Fargo or Bank of America, isn’t the highest rate out there. There are higher interest rate checking accounts available, but some of them require a minimum balance, a monthly direct deposit, or a certain number of debit card transactions each month. If you aren’t absolutely sure that you will meet those requirements every single month, you might pay a hefty service fee on your account. For me, getting the highest interest rate on my checking account isn’t a huge deal because the money I don’t need for spending each month gets automatically routed to my emergency savings fund and my Roth IRA investment account.

3. Easy check deposits with your phone.

It takes just seconds to log into the Charles Schwab app and deposit your checks by taking and submitting a photo from your phone. The transfer is usually super speedy too. I enjoy this time-saving feature and love not having to go to a bank to despot checks anymore.

4. Free linked investing account.

Opening a Schwab Bank Investor Checking Account comes with a free linked investing account. This makes it easy to transfer money from your checking account to investments like low-cost index funds or a Roth IRA. I use the linked investment account, but you are not required to. There are no minimums or investment requirements, so if you don’t want to use the linked investing account, you don’t incur any penalties at all. Mr. Frugal PhD has this checking account but runs his investments through Vanguard, so he doesn’t use this feature at all.

5. No ATM Fees. Anywhere. Ever.

Let’s re-read that. No ATM Fees. Anywhere. Ever. With this account, Schwab will reimburse you for any fees that you are charged to use an ATM, anywhere in the world. So for example, if I use the Wells Fargo ATM that’s near where I live, and the ATM charges me a $5 fee because I’m using my Charles Schwab debit card, at the end of the month, Charles Schwab reimburses me that money by depositing $5 into my account. For travelers, or those of you who attend a lot of conferences, this is a nice feature.

Note that with this account you’ll be switching to online banking, so you won’t have the option of going to a physical bank branch in your neighborhood. For me, that’s just fine. I can do everything I want to do online and it saves me the time not going to the bank for things like depositing checks. If you want or need a physical bank branch, consider opting for an account with a local credit union, or keep another account open with a bank that has brick and mortar branch locations in your local area. Just be mindful of unnecessary fees that you’ll want to try to avoid. The important thing is to find an account that works for you. Free yourself from necessary fees.

In the next post in the Break Up With Your Bank series, we’ll cover high interest savings accounts.

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2 Comments, RSS

  1. Karl Steiner November 12, 2016 @ 12:42 am

    Great post! I think folks can definitely get lazy on choosing a bank option. There are tons of different accounts out there with lots of different features. Personally, I like to go with a higher interest rate, and my current account pays 1%. But as you say, there are some details like a high minimum balance. Sounds like you are covering that next, so I look forward to reading it.

    • Frugal PhD November 12, 2016 @ 4:21 pm

      Thanks, Karl. I would absolutely advise readers to seek out a higher interest savings account through an online bank. As you say, there are lots of great options out there now, with different features depending on your circumstances. Thanks for weighing in.

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