How to find a better bank

No one likes to change checking accounts, but if your bank is one of the many that are aggressively increasing fees and imposing unfriendly new policies, you might save hundreds of dollars a year by switching.

Checking account fees have been climbing for years, but the trend has accelerated in 2008 and 2009 as banks struggle to remain profitable.

Examples: Bank of America now charges a steep $12 monthly fee on its “Regular Checking” account when balances fall below $750… SunTrust’s stop-payment fee rose to an astounding $36 per item earlier this year… many Bank of America, Chase and Wells Fargo automated teller machines (ATMs) now charge non­customers $3 to withdraw cash, on top of the $1 to $3 that the customers’ own banks may charge for use of another bank’s ATM.

Worst of all are overdraft fees. Many banks have increased this penalty to as much as $35 per overdraft and some even higher ($37.50 at US Bank and $39 at KeyBank), while increasing the number of overdraft fees that can be imposed per day.

Example: Bank of America customers now face up to 10 overdraft fees per day at $35 each, for a potential daily penalty of $350.

Some banks impose additional penalties when overdrafts are not repaid quickly — even though a customer might not realize that an overdraft has occurred until he/she gets the next statement.

Many banks let customers avoid overdraft fees by linking their checking account to a savings account, credit card or line of credit so money is transferred automatically when the checking account is overdrawn. Unfortunately, banks are increasing their fees for these transfers, too.

The good news: It is still possible to find low-cost, customer-friendly checking accounts. Some even pay a bit of interest. For the best checking accounts today, check the following…

INTERNET BANKS

Online-only banks are able to offer better terms than traditional banks because they don’t have the high costs of traditional banks with branches. You can make deposits through the mail or by direct deposit… transfer money among accounts online… and withdraw cash through ATMs. Some traditional banks offer attractive terms on Internet-based checking accounts that allow you to use a teller at a branch a limited number of times per month, or for a fee. Before signing up for an Internet checking account, make sure that…

  • The bank is FDIC insured.

  • An online search of the bank’s name does not reveal overwhelmingly negative customer reviews.

  • The bank provides access to a fee-free network of ATMs in your region and/or reimburses ATM fees charged by other banks.

  • You can live happily without teller assistance.

Examples of online checking…

Schwab Bank High Yield Investor Checking (www.schwab.com) pays 0.75% interest and reimburses ATM fees charged by other banks. Account holders must also have a Schwab brokerage account, but they are not required to use it.

Chesapeake Bank Internet-based Clear Sky Account (www.clearskyaccounts.com) currently pays 1.75% interest for accounts containing $10,000 to $24,999 (more for accounts with higher balances) with no monthly maintenance fees. The bank refunds up to $20 each month in ATM fees charged by other banks.

Bank of America’s MyAccess Checking (www.bankofamerica.com/promos/jump/freechecking) waives the standard $8.95 monthly maintenance fee for those who open their accounts online, and they still get full access to the ATMs.

Caution: If you start with a traditional account and then open an online account at the same bank, you may not get all the benefits that someone who starts out online gets.

REGIONAL BANKS

Some regional banks are offering attractive terms on checking accounts to lure away their larger rivals’ customers. Example…

Montana’s Rocky Mountain Bank Cash Rewards Checking (www.rmbank.com) currently pays 4.01% interest on up to $20,000 to state residents who set up direct deposit of salary checks or automatic bill payment… use a bank debit card at least 15 times each month… and accept electronic statements rather than paper statements. Otherwise, the bank pays 0.25% interest.

See my Web site, www.moneyrates.com/rewardschecking.htm, for other banks offering attractive rewards checking rates.

CREDIT UNIONS

Credit unions are owned by their depositors, not shareholders, so they often strive to provide low-cost, customer-friendly checking accounts. To find credit unions in your area, visit the Web site of the National Credit Union Administration (at www.ncua.gov, click “Data and Services,” then scroll down to “Find a Credit Union”).

YOUR CURRENT BANK

Your bank might have an unadvertised lower-fee checking account available for good customers that it doesn’t want to lose. Tell a branch manager that you’re unhappy with your current account’s fees or policies, and cite better terms that are available at a competing bank.

Also, ask for a waiver when an unexpected fee appears. If that fails, find out what you can do to avoid this fee in the future.

SPECIAL DEALS

Selecting the right bank is not the only secret to landing a great checking account deal. It is also a good idea to…

  • Consolidate your banking business at one institution.

    Example: The $8 monthly maintenance fee on HSBC Choice Checking (www.hsbcusa.com) is waived if a customer has direct deposit or maintains an overall $1,500 balance among all of his HSBC accounts… or a $5,000 balance between those accounts and “qualifying credit balances,” including certain mortgages, loans and/or credit card balances.

  • Ask about special age-bracket offers. Some banks offer no-minimum-balance checking accounts to students or minors. Others offer appealing but underadvertised accounts to seniors, occasionally even those as young as 50.

    Example: The TD Bank “50 Plus Club” (bank.tdbank.com) interest-bearing checking account for those age 50 or older requires a minimum balance of just $100 to avoid a monthly maintenance fee, not the $1,000 required with the bank’s standard interest-bearing checking account. The 50 Plus Club account also provides free checks, free money orders and other bonuses.