by Benjamin Miller

Created on: January 31, 2009

Checking accounts enable you to deposit and write checks...but more than that, they are most people's first opportunity to really budget their money. Checkbooks, when used properly, provide a written record of your income and expenses. However, for many people bank fees become an unnecessary monthly expense.

It is an unfortunate truth that I have seen many people lose money to their bank every year, by setting up dangerous account options. Sometimes it'ss just a matter of picking the wrong bank. Here are some things to consider when choosing a bank and setting up your checking account.

Minimum balance. Usually, checking accounts that give interest on your money require a balance. Some online banks are not requiring this currently, but whether a bank requires a minimum balance or not, its more important to know what they do if the balance is not met. For example, do they simply downgrade your account to a non-interest bearing one for that month, or will they charge you a fee? This is very important, because some banks will charge you $25 to $35 if your account dips below the minimum balance even once during the entire month. You can end up spending a lot in these cases.

An attached savings account. This can be helpful, to have a savings account tied in to the checking account. What this can do for you is give you better interest by leaving the majority of your money in savings, and provide overdraft protection so if money is needed in checking, the bank will automatically transfer it. Again, I have seen people get hit with continuous $35 fees for each time they overdrafted on their account (usually by using their debit cards), and not even know it until they got their bank statement. Be careful. Some banks also offer an option to pay for overdraft protection outright, similar to insurance.

Look for banks that are not fee-hungry and provide ways for you to protect yourself. Interest is mostly an after-thought, because even high-yield checking accounts only provide between .75% and 1.50% currently. It's nice to get some interest on your money, but not if it's quickly wiped out by the fees they charge. Remember that this information is for personal accounts only, business accounts do not get interest (although they can get credits towards fees).

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