Start with how you actually use money
The best checking account for you depends on three things: how often you withdraw cash, whether you keep a minimum balance, and how many times per month you write checks or make transfers. No single account wins on all three. A bank that charges nothing if you maintain $1,500 will cost you money if you can't keep that balance but use an ATM five times a week. A credit union with no minimums might charge $3 per out-of-network ATM visit. An online bank with no fees anywhere might make it hard to deposit cash.
Before you compare accounts, write down: Do you need to deposit cash regularly? How many ATM withdrawals do you make in a typical month? Do you prefer talking to a person in a branch, or are you comfortable doing everything online? Do you have $500 sitting around, or $5,000? The answers narrow the field fast.
Key Takeaways
- Traditional banks charge monthly fees unless you meet a minimum balance requirement, which ranges from $500 to $2,500 depending on the bank.
- Online banks typically have no monthly fees and no minimum balance, but you cannot deposit cash in person and may face limits on out-of-network ATM use.
- Credit unions often have lower fees and better ATM networks than banks, but you must be a member and membership rules vary by union.
- The true cost of an account is the monthly fee minus any interest you earn, plus the cost of ATM fees if you use out-of-network machines regularly.
- Switching accounts takes one to two weeks for direct deposits and automatic payments to move over, so test the new account before closing the old one.
Traditional banks: pay a fee or keep a balance
Most brick-and-mortar banks waive their monthly checking fee if you maintain a minimum balance, usually between $500 and $2,500. If you fall below that threshold even once, you pay the fee — typically $10 to $15 per month. Some banks also waive the fee if you set up direct deposit or make a certain number of debit card purchases each month, which gives you an alternative if you cannot keep the balance.
The advantage is access: you can walk into a branch to deposit cash, get a cashier's check, or talk to someone about a problem. The disadvantage is that the fee adds up if you slip below the minimum. A $12 monthly fee costs $144 per year. Over five years, that is $720 you could have kept. Banks also charge overdraft fees ($25 to $35 per incident) if you spend more than you have, though federal rules now let you opt out of overdraft coverage entirely.
Large national banks (Chase, Bank of America, Wells Fargo) and smaller regional banks both use this model. The minimum balance and fee structure vary by bank and sometimes by branch, so call or check the website for the specific account you are considering.
Online banks: no fees, no branches, no cash deposits
Online-only banks have no monthly fees and no minimum balance because they have no physical branches to staff. They make money on the interest they earn from lending your deposits, not from charging you. Accounts at banks like Ally, Charles Schwab, and Discover typically cost nothing and come with a debit card and online bill pay.
The trade-off is that you cannot walk in to deposit cash. You can deposit checks by photographing them with your phone, and some online banks partner with ATM networks so you can withdraw cash for free at thousands of machines. Charles Schwab, for example, reimburses out-of-network ATM fees, which means you can use almost any ATM without paying. Others, like Ally, charge $2.50 per out-of-network withdrawal.
If you rarely touch cash and your paycheck goes straight to direct deposit, an online bank costs nothing and often pays a small amount of interest on your balance. If you deposit cash weekly or need to handle cash-only transactions, the lack of branches becomes a real problem.
Credit unions: lower fees and better rates, with membership rules
Credit unions are member-owned cooperatives, not for-profit institutions. They typically charge lower fees than banks, pay higher interest on savings, and offer better loan rates. Many credit unions have no monthly checking fee and no minimum balance requirement.
The catch is membership: you can only open an account if you meet the union's membership criteria. Some are open to anyone who lives or works in a specific county. Others require you to work for a particular employer, belong to a certain profession, or be related to an existing member. A few have opened their membership to anyone, but that is rare. You find out which unions you can join by searching the CO-OP Network or Shared Branch locator on the Credit Union Association website, or by asking your employer whether they sponsor a credit union.
If you may have access to, credit unions often have the best combination of low fees, no minimums, and access to ATMs through shared branching networks. The downside is that not every credit union has a branch near you, and some are smaller and offer fewer online features than big banks.
Compare the real costs, not just the headline fee
The monthly fee is only part of the cost. You also need to account for ATM fees, overdraft fees, and any interest the account pays. A spreadsheet helps: list the accounts you are considering, then calculate the annual cost for your actual usage pattern.
| Account Type | Monthly Fee | Minimum Balance | ATM Access | Cash Deposits |
|---|---|---|---|---|
| Traditional Bank | $10–$15 (waived if minimum met) | $500–$2,500 | Free at bank branches; $2–$3 out-of-network | Yes, at branches |
| Online Bank | $0 | $0 | Free at partner ATMs; $2–$3 out-of-network (or reimbursed) | No in-person; check deposit by photo |
| Credit Union | $0–$5 | $0–$500 | Free at credit union branches and shared network | Yes, at branches |
Example: You keep $300 in checking, use an ATM twice a week (8 times per month), and rarely deposit cash. A traditional bank with a $500 minimum would charge you $12 per month because you do not meet the balance. An online bank with ATM reimbursement costs $0 and reimburses your out-of-network fees. Over a year, the online bank saves you $144 plus the ATM fees. But if you deposit cash weekly, the online bank becomes inconvenient, and a credit union with a branch nearby might be worth the membership hassle.
Test the account before you close your old one
Once you have chosen an account, open it but do not close your old account immediately. Set up direct deposit to the new account and let it run for one full pay cycle. Make sure the deposit arrives on time and in the right amount. Update your automatic bill payments one or two at a time, and watch for a few days to confirm they process correctly.
This takes one to two weeks. Once you are confident everything is working, you can close the old account. If something goes wrong — a direct deposit bounces, a bill payment fails — you still have the old account to fall back on. Closing an account is free and takes a phone call or a visit to a branch.
Watch out for overdraft fees and account holds
Overdraft fees are the hidden cost that catches people off guard. If you spend $50 more than you have, the bank covers it and charges you $25 to $35. Do this twice in a month and you have paid $50 to $70 for a $50 mistake. Federal rules now require banks to let you opt out of overdraft coverage, which means transactions will be declined instead of charged a fee. You can usually change this setting online or by calling customer service.
Account holds are another surprise. When you deposit a check, the bank may hold the funds for one to five business days before releasing them, even though the check clears in hours. Online banks and credit unions often have shorter holds than traditional banks. If you need access to deposited money quickly, ask about the hold policy before opening the account.
Frequently Asked Questions
Can I have more than one checking account?
Yes. Some people keep a checking account at a traditional bank for cash deposits and branch access, and a second account at an online bank for bill pay and savings on fees. You can receive direct deposit at both accounts, and you can transfer money between them online. The only downside is tracking two accounts instead of one.
What if I move to a different state?
If you have an account at a national bank or online bank, nothing changes — your account works the same way in every state. If you have a credit union account, check whether the credit union has branches in your new state or whether you can still access your account remotely. Some credit unions are part of shared branching networks that let you use other credit unions' branches, even in different states.
Do I need a minimum balance to open an account?
Most online banks and credit unions require no minimum to open an account. Traditional banks often require a small opening deposit, usually $25 to $100, but this is not the same as a minimum balance. Once the account is open, you can let the balance drop to $0 without penalty — you just pay the monthly fee if you do not meet the ongoing minimum balance requirement.
What happens to my money if the bank fails?
The Federal Deposit Insurance Corporation (FDIC) insures checking accounts at banks up to $250,000 per account holder per bank. Credit unions are insured by the National Credit Union Administration (NCUA) up to the same amount. Your money is safe even if the institution fails.
How do I switch banks without losing my direct deposit?
Contact your employer's payroll department and give them your new account number and routing number. They update their records, and your next paycheck goes to the new account. This usually takes one pay cycle. For automatic bill payments, log into each biller's website and update your account information, or call them directly. Do this a few days before the payment is due to avoid a late payment.