Finding the Right Checking Account for You

You have to make a lot of financial decisions in your life. How much money should you deposit in your 401(k) plan every two weeks? Should you apply for a rewards credit card or a traditional one? Should you sink your dollars into a traditional IRA or a Roth IRA?

With so many big decisions to make, you might give little thought to your checking account. That, though, can be a mistake. Bank checking accounts are rarely alike. Make the wrong decision, and choose a checking account that doesn't mesh with your spending habits, and you could end up paying big fees each month.

And that's far from a financially sound move.

Here's what you should look at before opening a checking account.

Your Spending Habits

Do you want dozens of checks each month? Do you have the bad habit of bouncing checks on a fairly regular basis? Do you frequently find yourself withdrawing money from ATMs that aren't connected to your financial institution?

These can all factor into which checking account makes the most financial sense for you.

For instance, if you write a lot of checks, you'll want to apply for a checking account that allows you to write an unlimited number of them each month. Some checking accounts allow you to write a limited number of checks per month. You'll then pay a fee for every check you write over that limit. If you use checks to buy your groceries, pay your bills and fill up your gas tank, you could end up paying big each month if you don't take out an unlimited checking account.

And what about bouncing checks? You'll pay a big fee from your financial institution every time you bounce a check. If you are habitual bouncer, you might consider taking out a checking account with overdraft protection. If you write a check at your local department store for $200 but you only have $150 in your account, your financial institution will cover that $50 different, allowing you to complete your purchase.

Of course, overdraft protection isn't free. You'll have to pay for the service. But you'll pay much more in overdraft fees.

You can also lose a lot of money each month if you are frequently withdrawing money from out-of-network ATMs. You can solve this problem by taking out a checking account with a bank that boasts a large network of ATMs. If that's not feasible, you might find a bank that covers any out-of-network ATM fees that you incur.

Finally, some checking accounts charge a monthly maintenance fee. Avoid these. There are plenty of free checking account options out there. There's no reason to pay for one.

One of the factors that should have little impact on your decision, though, is interest. Yes, it's nice to earn interest on the money in your checking account. But if you use your checking account to pay your bills, the odds are that you won't have too much money sitting in it at any one time. And if that's the case, you won't make much interest. In fact, checking accounts generally don't perform well as savings vehicles.

When you're deciding on a checking account, then, take a far closer look at the fees you might have to pay. Those are far more important than the interest you'll be earning so little of.