Recent consumer-friendly credit-card legislation limiting pesky fees and new rules that put a lid on overdraft charges have put a damper on banks' bottom lines. The downside: Banks used those revenues from fees to subsidize free checking. Now when you open a checking account, you'll likely pay a monthly service charge unless you keep a minimum balance, use your debit card a certain number of times each month or meet some other condition.
One way to avoid a service charge -- and the hassle of keeping close tabs on your account -- is to bank online. Because online banks don't have the expense of maintaining brick-and-mortar branches, they can offer lower fees and higher interest rates on your cash. And you can usually use any ATM free because most online banks rebate the fees.
Small community banks and credit unions sometimes do a lot of business online, offering higher-yielding, online-only accounts for anyone who has Internet access (search for one at www.checkingfinder.com). To qualify for these accounts, you must use your debit card ten to 15 times a month, arrange for one automatic payment or direct deposit, and receive your monthly statement online.
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To find the best online checking accounts, we asked Informa Research Services, a financial-services research firm, to search its database for accounts with free online-banking and bill-paying services, low fees, and high rates. Then we trimmed the list to six standout banks. In this low-rate environment, bank yields can drop quickly, so recheck the particulars before you sign up (for more ideas, see www.bankrate.com).
High yield
Evantage Bank, Mustang, Okla.
As of early November, you could earn 3.75% on balances up to $10,000 (1% on excess balances) in Evantage's Rewards Checking account, with no minimum-balance requirement and no monthly fees. To qualify, you had to use your debit card ten times a month (not including visits to the ATM) and receive your monthly statement online. You can open an account with just $1. The bank refunds all ATM fees worldwide.
High yield on big balances
Westfield Bank, Akron, Ohio
Open a no-fee Dream Big Checking account with $100 and receive 3.5% interest on balances up to $25,000 (0.75% on excess balances). You must use your debit card 12 times a month, arrange for one automatic payment or direct deposit a month, and receive your monthly statement electronically. The bank reimburses up to $12 in ATM fees per month.
No fees, no strings (tie)
Ally Bank
Ally Bank, a subsidiary of Ally Financial (formerly GMAC Financial), charges no monthly fees on its Interest Checking account (current yield: 1.04%). You can open an account with as little as $1, and there's no minimum-balance requirement. Ally rebates all fees at any ATM nationwide.
No fees, no strings (tie)
ING Direct
ING's Electric Orange checking account comes with a nice incentive for new customers: You earn $50 if you make three debit-card purchases, three free Person2Person payments or a combination of the two within 45 days of opening your account. ING offers free access to the Allpoint network of 35,000 ATMs. Plus, its overdraft-protection line of credit has an easy-to-take interest rate: prime plus four percentage points (currently 7.25%).
Mobile banking
USAA Free Checking
Anyone can open a free USAA checking account. There are no monthly service fees, checks are free, and you get free unlimited fund transfers to any bank. USAA rebates $15 a month in ATM fees. Qualifying USAA members (see the Web site for details) can deposit checks using a computer and scanner and access their account from a mobile phone. If you have an iPhone or Android phone, you can download an app to deposit checks: Just enter the amount of the check and take a picture of the check with your phone.
Combination checking and savings
PNC Virtual Wallet
Virtual Wallet combines a checking account, a reserve account from which funds are transferred when you overdraw your checking account, and a savings account (current yield: 0.1%). You can open an account with $25. There are no monthly service charges and no minimum-balance requirements. Keep a total of $2,000 in your accounts and PNC will reimburse your ATM withdrawals if you go outside its 3,900-ATM network. You're limited to three free paper checks per month (you pay 50 cents per check for more), but online bill-pay is free.
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