Most banks let you open a checking account for free, but some charge a monthly fee if you don't meet their requirements
You can open a checking account at most major banks without paying an upfront fee. However, many banks charge a monthly maintenance fee — typically $5 to $15 — unless you meet certain conditions. Those conditions might be keeping a minimum balance, setting up direct deposit, or maintaining a certain number of debit card transactions per month. A few banks have no monthly fee at all, regardless of balance or activity.
The real cost depends on which bank you choose and whether you can meet their requirements. Some online banks charge nothing and have no minimum balance. Traditional banks often waive the fee if you use direct deposit or keep $500 to $1,500 in the account. Credit unions typically have lower fees and lower minimums than big national banks.
Key Takeaways
- Most banks do not charge to open a checking account, but many charge a monthly maintenance fee unless you meet specific requirements.
- Common fee waivers include setting up direct deposit, keeping a minimum balance, or making a certain number of debit card transactions each month.
- Online banks and credit unions often have lower or no monthly fees compared to traditional brick-and-mortar banks.
- You should compare the fee structure and requirements of at least three banks before opening an account, because the cheapest option depends on your income and spending habits.
- Overdraft fees, ATM fees, and foreign transaction fees are separate from monthly maintenance fees and can add up quickly if you do not understand the bank's policy.
How monthly maintenance fees work
A monthly maintenance fee is charged every month unless you meet at least one of the bank's waiver conditions. The fee is usually $5 to $15, though some premium accounts charge more. The bank deducts it automatically from your account on a set day each month, usually the first or the last day.
Common ways to waive the fee include: setting up direct deposit (your paycheck or benefits deposited electronically), keeping a minimum balance in the account, making a certain number of debit card purchases per month, or maintaining a linked savings account. Some banks waive the fee for customers under 25 or over 65. A few waive it if you have a credit card with them or a mortgage.
The easiest waiver to meet is usually direct deposit, because it costs you nothing and happens automatically once you set it up. A minimum balance waiver is harder if you live paycheck to paycheck, because you have to keep that money sitting in the account and cannot spend it.
Banks and credit unions with no monthly fee
Some banks charge no monthly maintenance fee under any circumstance. These include most online banks — Ally, Charles Schwab, and Discover all offer checking accounts with no monthly fee and no minimum balance. Some regional banks and credit unions also have no-fee accounts.
The trade-off is usually that online banks have fewer physical branches and ATMs. If you need to deposit cash or speak to someone in person regularly, an online bank may not work for you. Credit unions often have shared branching networks that let you use other credit unions' ATMs and branches, which can offset the lack of physical locations.
Before opening an account, check whether the bank reimburses out-of-network ATM fees. Some no-fee banks reimburse these fees automatically, which means you can use any ATM without paying extra. Others do not, which can add up if you use ATMs frequently.
What happens if you do not meet the waiver requirements
If you open an account at a bank with a monthly fee and you do not meet any of the waiver conditions, the fee will be charged every month. Over a year, a $10 monthly fee costs $120. Over five years, it costs $600. These fees are real money that comes out of your account.
Some banks allow you to close the account and move to a different bank if you realize the fee structure does not work for you. There is usually no penalty for closing a checking account, though some banks require you to wait a certain number of days after opening before you can close it. You can move your money to a different bank by transferring it electronically or by writing a check to yourself.
If you fall behind on payments or overdraw your account, the bank may charge overdraft fees on top of the monthly maintenance fee. An overdraft fee is typically $25 to $35 per transaction and is charged when you spend more money than you have in the account. This is separate from the monthly fee and can happen multiple times in a single month.
Comparing accounts before you open one
Before opening a checking account, write down your monthly income and spending habits. Then look at three to five banks and note their monthly fee, minimum balance requirement, direct deposit waiver, and overdraft fee. This takes about 30 minutes and can save you hundreds of dollars over a few years.
If you receive a paycheck or government benefits by direct deposit, choose a bank that waives the fee for direct deposit. If you do not have direct deposit, choose a bank with no monthly fee or a very low minimum balance. If you use cash frequently and need to deposit it, make sure the bank has branches or ATMs near you or has a no-fee policy for out-of-network deposits.
Pay special attention to overdraft policies. Some banks automatically decline transactions that would overdraw your account, which means you cannot spend money you do not have. Others allow the transaction and charge you a fee. Some let you opt in or opt out of overdraft protection. Understanding this before you open the account helps you avoid surprise fees.
Other fees beyond the monthly maintenance fee
A checking account can have fees other than the monthly maintenance fee. Overdraft fees are charged when you spend more than your balance. ATM fees are charged when you use an ATM that is not owned by your bank. Wire transfer fees are charged when you send money electronically to another bank. Cashier's check fees are charged when you request a check from the bank.
Foreign transaction fees are charged when you use your debit card in another country or withdraw cash from an international ATM. These fees are usually 1 to 3 percent of the transaction amount. If you travel internationally or do business with people in other countries, look for a bank that does not charge foreign transaction fees.
Some banks charge a fee to speak to a customer service representative by phone. Others charge a fee to close your account within a certain time period after opening it. Read the fee schedule on the bank's website before you open an account so you understand all the ways you might be charged.
Credit unions as an alternative
Credit unions are nonprofit organizations owned by their members. They often charge lower fees and offer better interest rates on savings accounts than traditional banks. Many credit unions have no monthly maintenance fee on checking accounts and no minimum balance requirement.
To open an account at a credit union, you usually have to become a member. Membership requirements vary — some credit unions are open to anyone in a certain geographic area, while others require you to work for a specific employer or belong to a specific organization. You can search for credit unions near you using the CO-OP Network or Shared Branch locator on the Credit Union National Association website.
Credit unions are insured by the National Credit Union Administration (NCUA), which means your money is protected up to $250,000 if the credit union fails. This is the same protection that banks have from the Federal Deposit Insurance Corporation (FDIC).
Frequently Asked Questions
Can I open a checking account with no money?
Yes. Most banks do not require you to deposit money when you open an account. However, if the bank has a minimum balance requirement to waive the monthly fee, you will need to deposit at least that amount within a certain time period (usually 30 days) to avoid being charged the fee.
Do I have to use direct deposit to avoid the monthly fee?
No. Direct deposit is one way to waive the fee, but most banks offer other options, such as keeping a minimum balance or making a certain number of debit card transactions per month. Check the bank's website to see all available waivers and choose the one that works best for your situation.
What if I close my checking account and open a new one at a different bank?
Closing a checking account usually has no penalty or fee. You can move your money by transferring it electronically to the new bank or by writing a check to yourself. Make sure to close the old account after you have moved all your money and updated your direct deposit information with your employer or benefits provider.
Are online banks as safe as traditional banks?
Yes, if they are FDIC-insured. Most online banks are FDIC-insured, which means your money is protected up to $250,000 if the bank fails. Check the bank's website to confirm they have FDIC insurance before you open an account.
What is the difference between a checking account and a savings account?
A checking account is designed for frequent deposits and withdrawals, while a savings account is designed to hold money and earn interest. Checking accounts usually have no limit on the number of withdrawals per month, while savings accounts may limit you to a certain number. Checking accounts typically pay little or no interest, while savings accounts pay interest on your balance.