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Hidden Fees and Charges Associated With Free Checking Accounts

written by: Olivia Emisar•edited by: Michele McDonough•updated: 8/16/2013

As a parent looking to get my 16 year-old her first checking account, I am forced to read tiny print and legal jargon that seems to have been written by sadistic Lilliputians on a type font available only to banking institutions. However, reading and asking questions is a major requirement.

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    What Does "Free" mean?

    To most bank customers, "free checking account" means that they will have full access to their money when they need it and there won't be any bank charges for doing so when they receive their statements. Some "free" offers are for a limited period of time, and others carry recurring fees disguised as account maintenance and transaction fees. Accounts that were designed for college students are quickly disappearing from the banking landscape and this is forcing young adults with limited funds to sign up for checking accounts designed for older adults that have greater financial resources that allow them to bypass the fees less affluent customers are forced to pay.

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    Cost of Checks

    The cost of checks at banking institutions can vary vastly based on which bank is printing the checks and what type of check you are willing to have. Decorative checks can cost upwards of $20 for a box of checks with those having licensed cartoon characters being more costly. "Free" generic bank checks will cost money if the monthly balance drops below a certain limit. The average cost can be between $10 and $15 per box.

    DEBIT CARD In this day and age, most people don't write checks since the plastic debit card serves the same purpose at the grocery store or anywhere our debit cards are allowed to be swiped to make instant purchases and have the amount instantly deducted from our checking accounts. However, for some transactions only a paper check will do and having a box of checks somewhere in a drawer desk is necessary. We've all run into instances where only check or cash are accepted, including small businesses, individual contractors and landlords.

    A paper check is sometimes a necessity for convenience, legal reasons and for safety purposes. Carrying enough cash to pay for everything can result in losing your wallet, getting robbed or being scammed. Searching for the nearest ATM can be inconvenient, dangerous and costly in terms of fees.

    Must Know:

    Banking institutions will allow you to download copies of your checks for a specific period of time. You can print the front and back of the check to verify signatures and dates, however, most will charge you fees if they have to research and send you a copy of a cancelled check beyond the time the electronic copy is available to you. In many cases, they can't find it and if you need a copy to prove payment to a company or in a court of law, you are out of luck. Without proof, it did not happen and you may be forced to pay the same obligation twice.

    Example: You made child support payments in the amount of $5,000 that were not recorded by the collecting agency, or were sent directly to the custodial parent who claims he/she never got the payment. Not only is the burden of proof on you, but you are being charged 10 percent a year on the missing amount. These fees on arrears will add up quickly and without being able to prove payment, the financial hole will become deeper and wider.

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    ATM Fees

    Do free checking accounts still cost you money? The answer is yes if you are going to access your cash through ATM services.Westpac ATM  A lot of banks allow you to keep your money in their institution for free, but withdrawing your funds will cost you several dollars per transaction.

    • Your banking institution charges fees for ATM Withdrawal that exceed a certain amount per month, typically three.
    • Your banking institution charges fees for using the ATM to make deposits.
    • Your banking institution charges fees for just checking your daily balance.
    • Your banking institution charges fees for using other bank's ATMs.
    • Other banks charge your account additional fees for withdrawing funds through their ATMs.

    ATM fees can range from $1.50 to $5.00 per transaction with some banks piling on fees for insufficient fund charges and/or fees for going below the monthly amount. A twenty dollar withdrawal can cost a costumer an additional $1.50 for using the ATM and an additional twenty dollars for going under the limit. The $41.50 in fees is a conservative amount since the bank could charge a lot more for going below the limit, more for ATM withdrawal and additional charges if the withdrawal was made at another institution.

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    Insuficient Funds

    As stated earlier, student checking accounts are quickly disappearing and those that remain can be a financial savings for most young adults who may not be able to maintain a minimum monthly balance of $100 or $1,000. Even if the monthly balance drops below the agreed amount for only one day, the fees will be charged to the account regardless. These charges will add up quickly with each statement cycle and it is not unusual to find more than one charge for dropping below the required amount because other fees will pile up.

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    Paper and Paperless Fees

    Get answers to these questions before making a commitment to any banking institution.

    • Inactivity fees - if your account is not active, they charge you every month until you end up owing them money.
    • Do they charge for stopping payment on a check?
    • Does the bank charge you for not having direct deposit?
    • Does the bank charge for talking to a real person to resolve issues?
    • Does the bank charge you for making payments electronically? Going over a specific amount of payments?
    • Does the bank charge for paper statements?

    There are charges for just about anything they can come up with and disguised as "service fees", "maintenance fees", "out of network fees" and more. I can't stress enough how important it is to read the terms of service (TOS) on each potential account for consideration to get the best option for you.

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    Explore Your Options

    In conclusion, I would like to suggest comparing fees among major national banks and local credit unions as well as online banks such as ING. There are many offers to entice new customers that will deposit $100 to $300 in the customer's account provided they make a specific amount of purchases during a certain period of time. If you are a conscientious individual that knows what you are signing and getting into, these offers can actually make you money.

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    Banking Advice:


    USAA Free checking account:

    Images: Westpac ATM by Andrew Garrett CC-BY-SA-2.5 ; Debit Card by Worradmu /