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A checking account reality check

A checking account reality check

Several megabanks are eliminating unrestricted free checking accounts, but that doesn't mean you should resign yourself to paying monthly "maintenance" fees. Plenty of financial institutions continue to offer free checking.

Bank of America, Chase, Citi and Wells Fargo have said they eliminated or might soon eliminate free checking in response to government regulations that have cut off or reduced some of their sources of fee income. Monthly fees for checking accounts vary but are typically about $10.

"Don't believe the hype," said Richard Barrington, spokesman for MoneyRates.com. "Free checking isn't going away as quickly as some large banks would have you believe."

Either way, loss of income is the bank's problem, not yours.

If your bank is slapping fees on your checking account, don't continue to pay. Instead, insist on free checking at your bank, or fire your bank and move elsewhere, money experts suggest.

Here are tips and tools to hunt down the best free checking account:

AGREE TO RESTRICTIONS: The easiest solution is to stay at your current bank. Find out specifically what you need to do to keep a free checking account — maintaining a minimum balance or directly depositing your paycheck into that account, for example. The good news is that while many banks are instituting restrictions on free checking accounts, they are typically setting the bar pretty low, said Greg McBride, spokesman for Bankrate.com.

"Free checking continues to be within the reach of the majority of Americans," he said.

Keep in mind that savings accounts pay virtually nothing. So leaving extra in your checking account to meet a minimum-balance requirement and avoid a fee is probably a better idea than earning meager interest in a savings account, Barrington said.

Another tip is to simply ask your bank for free checking, especially if you have other big accounts at the same institution.

"The point is, sometimes you have to ask," he said.

CREDIT UNIONS: Joining a credit union is a great idea for a number of reasons, including that you're likely to get a free checking account without restrictions. Most people qualify to join a credit union nowadays, through their employer, associations they belong to or simply by living or working in a certain area.

"We like to say, 'Anybody can join a credit union; just not the same one,' " said Bill Cheney, chief executive of the Credit Union National Association.

Banks are obligated to make as much money as they can for shareholders, while credit unions are beholden only to their customers, Cheney said. About 80 percent of credit unions offer free checking with no minimum balances, he said.

Credit unions have aggressively tried to address their biggest shortcomings, namely a lack of branches and ATMs. They've done that by joining networks, meaning you can use other credit unions' branches and ATMs free of charge. Government-insured deposits at credit unions are protected to $250,000, the same level as banks.

"Even smaller credit unions have Internet banking and bill-pay systems and all the services you come to expect from a modern banking system," Cheney said.

SMALLER BANKS: Many community banks traditionally have offered unrestricted free checking, as well as some of the advantages of credit unions, such as a focus on the customer and superior savings and loan rates. But they're grappling with the same loss of fee income as big banks are, thanks to the new government regulations. So it's unclear how long they'll continue to offer free checking without restrictions. As long as your account at a small bank is FDIC-insured, it's as safe as at a big bank.

MEDIUM-SIZE BANKS: Another option is a regional bank, which might have more than 100 branches but fewer than 1,000. That way you get some of the best of both worlds: more customer-focused attention and potentially free checking, with a more robust system of branches and ATMs, Barrington said.

ONLINE BANKS: Online banks typically have no branch system to maintain, so they can offer more lucrative accounts, including free checking. However, you'll probably have to do most or all of your banking by computer, phone and ATM.

COMPARISON SITES: Several online sites will recommend a bank for you. Try a few. Among them are Bankrate.com, MoneyRates.com, FindaBetterBank.com, BankFox.com and MyBankTracker.com. Sites don't include credit unions in results.

An example of a bank that pops up in many searches for customer-focused features is USAA Federal Savings Bank, which often tops many lists for superior customer service. For most of the bank's offerings, you need an affiliation with the U.S. military. But free checking accounts are the exception; everyone qualifies. Examples of others are Ally Bank, EverBank, ING Direct and Charles Schwab Bank.

SPECIALTY ACCOUNTS: If you're a senior citizen or student, seek out accounts designed for you. They often feature free checking accounts. "It helps if you're fairly old or fairly young," Barrington said. Often, the definition of senior is generous: 50 or older.

SWITCH KITS: Checking accounts are integral to your financial life, especially if you have a number of automatic deposits and bills paid directly from your checking account. So switching can be a hassle. To help, many banks and credit unions offer switch kits that help remind you of all the changes you need to make. Don't close your current account until all your pending transactions clear.

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