Bank accounts represent the very essence of personal finances. It is the one area we tend to touch on a daily basis, as this is where we deposit our paychecks and gifts, where we take money from, where we pay our bills from, where many of our pre-authorized payments come from and so on. Without question, the importance of having a bank account to manage your finances is absolutely essential. (Surprisingly, many Americans do not have a day-to-day bank account; they opt instead to deal in all cash, using check-cashing stores to get cash — I don’t recommend this tactic, so we will spend some time looking at one of the more common bank accounts out there – a Bank of America checking account).
Finding a bank account that works extremely well for your personal financial situation is not as easy as it may seem. There are many things that you account needs to cover in order to make it work for you, including an appropriate amount of debits and credits and machine accessibility. To illustrate how I would go about sifting through different bank accounts, let’s take a look at what I would do as part of my decision process. To make it simple for everyone, I will look at the Bank of America checking accounts because they have variety and everyone should be able to use this as a benchmark.
As well, I am using checking accounts because we are looking for something that can handle our daily personal finances from an operations perspective. A savings account is more of a cash-equivalent investment.
The Bank of America Checking Account – How I Would Analyze It
- MyAccess Checking
- Advantage With Tiered Interest Checking
- Small Business Checking Bundle.
Stroke that last one off and we are stuck deciding among three different checking accounts. All three of them have monthly fees, with the top two costing $8.95 per month if we do not meet minimum deposit balances and the last one costing $25 per month.
For my personal preferences, I will pass on the expensive one, the Advantage checking account because I would never have $10,000 laying around this way – I can invest the money wiser. Also, when you look at how much in fees it is waiving, your $10,000 only benefits you by 3% (plus the negligible interest it will pay) versus the 7.16% in benefits for the other, cheaper two.
That narrows my search for a bank account down to two options – eBanking and MyAccess Checking. Either will work for me when it comes to having the fee waived – I typically do all of my banking through a machine (its personality mirrors my own) or online, and I also keep a buffer of at least $1,500 in my bank account. Either option would work when it comes to avoiding monthly fees.
For me, I also use the bank machine a lot, so a bank like Bank of America works well in my area since I see one every day during the week and finding one on the weekend is never too tough. Again, either option works – if I use a non-Bank of America ATM, I will get charged $2 in either case, so there is no advantage with one option over the other.
When I scroll down into the fine print, something catches my eye. It has to do with record keeping. With the eBanking option, my checks are imaged free. This is a nifty little option for me; if I forget to write check details, I can pull up a copy when I am looking for hints online; the MyAccess account will see me charged $3 (assuming I use it and I might, maybe once or twice per year).
In both cases, the debit limits are no issue. Also, I don’t plan on writing NSF checks or even asking for an overdraft, so those fees are irrelevant; in both of these cases, the account options I have short-listed charge the same anyway. The only real advantage is the no-fee imaging through eBanking. This is the Bank of America checking account I would go with for my personal needs.
To recap, as I filed through the fees and charges, I looked at these key points (at least with the Bank of America options; it could be different with other financial institutions’ offerings):
- What is the monthly maintenance fee?
- What do I have to do to avoid that fee?
- How much is that fee waiver worth to me in total dollar terms as well as a percentage?
- Do my banking behavior align with the operating conditions of the account?
- If not, how much will it cost me to bank my way?
- Accidents happen; how much will it hurt in terms of fees if I write an NSF or need a temporary overdraft?
- Does this bank meet my accessibility needs (i.e. ATM presence or fee concessions if not?)
These are great starting points and you can see they are exactly the same points I observed when evaluating the Bank of America checking accounts here.
The Main Purpose of Flexibility in A Bank Account
Although we may not think that our daily finances warrant it, choosing an appropriate bank account to help us operate on a daily basis is very important. In my example above, if we did not meet the requirements for the accounts, we would have paid $107.40 simply in bank account fees. Divide that by your average balance and get a percentage cost – is it really worth paying bank fees if you can avoid them?
Yes, it is a rhetorical question. Just as I figured a way to completely avoid paying service fees with a Bank of America checking account, you should also look at how you can use the different bank accounts in your area’s banks to get away without paying a dime to someone else. That $100 or so that you save can be used to increase your monthly investment contributions or debt repayment plan.