Opening a bank account is one of the first and most important steps toward starting your life in a new country. It’s your gateway to paying bills, receiving your salary, and managing your money safely.
But when you start looking, the number of checking account options can feel overwhelming. From free checking to interest-bearing to second-chance, what do all these terms mean, and which one is right for you?
At Remitly, we believe in empowering our community with the knowledge to make confident financial decisions. In this guide, we’ll explore the most common types of checking account, pros and cons, and the tools you need to make a decision.
What is a checking account?
Before we dive into the different types of account, let’s start with the basics. A checking account is a type of deposit account offered by banks and credit unions that provides you with safe, easy, and frequent access to your money for daily transactions.
The core purpose: Access and transactions
Think of a checking account as your primary financial tool for everyday life. Its main purpose is not to grow your money through interest (that’s what a savings account is for), but to facilitate the flow of money in and out.
It’s where your paycheck gets deposited, and it’s what you use to pay for groceries, rent, utilities, and other regular expenses. Because it’s designed for high-volume transactions, it offers the most flexibility for spending.
Common features
Most modern checking accounts, regardless of the type, come with a standard set of features designed for your convenience:
- Debit card: A card linked directly to your account that you can use to make purchases anywhere that major credit cards are accepted.
- Online and mobile banking: The ability to check your balance, transfer funds, and pay bills from your computer or smartphone.
- ATM access: The ability to withdraw cash from a network of automated teller machines (ATMs).
- Direct deposit: The option to have your employer send your paycheck directly into your account electronically.
- Check writing: While less common today, most accounts still offer paper checks for certain payments.
Most common types of checking accounts
Now that we’ve covered the basics, let’s explore the different types of checking account you’ll encounter. Each one is designed for a different kind of user, so understanding their features is key to finding the best fit for you.
The traditional checking account
This is the standard, all-purpose account offered by most large, traditional banks. It comes with all the features mentioned above, including access to a large network of ATMs and physical bank branches for in-person service.
Pros: Very convenient, wide availability, robust online features, and the ability to get in-person help from a teller.
Cons: Often comes with a monthly maintenance fee, between $10 and $15. This fee can usually be waived, but it requires meeting certain conditions, such as maintaining a minimum daily balance or setting up a certain number of direct deposits each month. If you can’t meet these requirements, the fees can add up.
Who it’s for: Someone who values the convenience of a large bank with many physical locations and ATMs, and who can consistently meet the requirements to waive the monthly fee.
Free or no-fee checking accounts
As the name suggests, a free checking account does not have a monthly maintenance fee or a minimum balance requirement. These accounts have become very popular and are often the main offering of online banks and local credit unions.
Pros: The biggest advantage is saving money. You don’t have to worry about your balance dipping below a certain level or paying a fee just to have an account.
Cons: While the monthly fee is gone, be aware of other potential charges, such as overdraft fees, out-of-network ATM fees, or fees for paper statements. Some free accounts from smaller institutions may have less advanced mobile apps or fewer features than those from large banks.
Who it’s for: This is arguably the best checking account for most people, especially those who want to avoid fees, don’t keep a very high balance in their account, or prefer a straightforward, no-strings-attached banking experience.
Interest-bearing checking accounts
An interest-bearing checking account, sometimes called a high-yield checking account, is like a hybrid between a checking account and a savings account. It allows you to earn a small amount of interest on the money you keep in the account.
Pros: Your money works for you, earning interest that it wouldn’t in a standard or free account.
Cons: The interest rates are usually very low compared to a dedicated high-yield savings account. More importantly, these accounts almost always require you to maintain a very high minimum balance (often thousands of dollars) to earn interest and avoid steep monthly fees.
Who it’s for: Individuals who consistently maintain a large balance in their checking account and want to earn some interest on it, without needing to frequently transfer money from a savings account.
Student checking accounts
These accounts are specifically designed for high school or college students, usually between the ages of 17 and 24. They are meant to be a simple, low-cost introduction to banking.
Pros: Student accounts are about accessibility. They almost always have no monthly fees and no minimum balance requirements. They may also offer perks like several free out-of-network ATM withdrawals per month.
Cons: These accounts often convert to a standard (and potentially fee-based) checking account once the student graduates or reaches a certain age. The features may also be more basic.
Who it’s for: High school and college students who need a simple, fee-free account to manage their money while they are in school.
Second-chance checking accounts
This type of account is designed for individuals who have had trouble with banking in the past, such as a history of bounced checks, overdrafts, or an account that was closed with a negative balance. These issues can get you listed in a consumer reporting database like ChexSystems, making it difficult to open a standard account.
Pros: It provides an opportunity to get back into the banking system, which is essential for modern life. These accounts often come with financial education tools, budgeting help, and a path to upgrade to a standard account after a period of responsible use (e.g., 12 months).
Cons: Second-chance accounts almost always have a non-waivable monthly fee. They may also have more restrictions, such as daily withdrawal limits or no access to paper checks initially.
Who it’s for: Anyone who has been denied a standard checking account due to past banking difficulties and needs a pathway to rebuild their banking history.
Online-only checking accounts
Offered by digital banks or neobanks, these accounts operate entirely online without any physical branch locations. They have become incredibly popular due to their low-cost structure.
Pros: They almost always have no monthly fees and often offer higher interest rates than traditional banks. They also tend to have excellent, user-friendly mobile apps and may offer perks like early direct deposit.
Cons: The biggest drawback is the lack of in-person service. If you have a complex problem or need to deposit cash, you can’t just walk into a branch. Depositing cash often requires using a third-party service that may charge a fee.
Who it’s for: Tech-savvy individuals who are comfortable managing their finances entirely online and rarely handle physical cash.
Business checking accounts
If you’re a freelancer, independent contractor, or small business owner, a business checking account is essential. It’s designed to keep your business finances separate from your personal finances.
Pros: It makes bookkeeping and tax preparation much simpler. It also allows you to accept payments in your business’s name, which appears more professional. These accounts often have features like higher transaction limits.
Cons: They can have higher monthly fees and more complex fee structures than personal accounts.
Who it’s for: Anyone who earns income from self-employment, no matter how small. Mixing business and personal funds can create major accounting and legal headaches.
How to choose the right checking account for you
With all these checking account options, how do you decide? The best account is the one that matches your personal financial situation and habits.
Step 1: Assess your financial habits
How much money will you keep in the account? If you plan to keep a high balance, an interest-bearing account might be worth it. If your balance will fluctuate or stay low, a free checking account is a much safer bet to avoid fees.
How often do you use cash? If you frequently need to withdraw or deposit cash, a bank with a large, fee-free ATM network and physical branches (like a traditional or community bank) is important. If you rarely use cash, an online-only bank might be perfect
Will you have a regular paycheck? If you have a steady direct deposit from an employer, you can likely meet the requirements to waive the monthly fee at a traditional bank.
Step 2: Compare fees and features
Don’t just look at the monthly maintenance fee. Compare the entire fee schedule. Look for:
- Overdraft fees: What does the bank charge if you accidentally spend more than you have? Some banks have eliminated these fees.
- ATM fees: How much does it cost to use an ATM outside of the bank’s network?
- Foreign transaction fees: If you travel internationally, does the debit card charge a fee for purchases made in a foreign currency?
- Wire transfer fees: How much does it cost to send or receive money, especially internationally? For sending money internationally, services like Remitly often provide a more cost-effective and convenient option. Learn more here.
A special note for immigrants: Finding the best bank for your needs
For newcomers to the US, there are a few extra considerations that can make a big difference. The best checking account for immigrants often comes from banks or credit unions that understand their unique needs. Look for:
- Flexible ID requirements: Not all immigrants have a Social Security Number (SSN) right away. Look for institutions that allow you to open an account with an Individual Taxpayer Identification Number (ITIN), a passport, or other forms of foreign government ID.
- Low international wire fees: If you plan to send money home regularly, compare the bank’s wire fees.
- Multilingual support: Does the bank offer customer service, online banking, or in-person assistance in your native language?
FAQ
What’s the difference between checking and savings accounts?
A checking account is made for everyday transactions and spending. It offers high liquidity and easy access via debit cards and checks. A savings account is designed for storing money for short-term or long-term goals. It offers limited access but pays a higher interest rate.
Can I open a checking account without a Social Security Number?
Yes, it is possible. While large national banks often prefer or require an SSN, many community banks, credit unions, and some online banks are more flexible. They may allow you to open an account using an Individual Taxpayer Identification Number (ITIN) along with a form of government-issued photo ID. Call the specific bank branch ahead of time to confirm their ID requirements.
Do I need a checking account to use Remitly?
No, you don’t necessarily need a bank account to send money with Remitly. You can often fund your transfer using a credit or debit card. However, having a checking account can make the process smoother and is essential for receiving money in some countries.
Are online checking accounts safe?
Yes, as long as you choose a reputable institution. The most important thing to look for is FDIC insurance. The Federal Deposit Insurance Corporation (FDIC) is a US government agency that insures your deposits up to $250,000 per depositor, per insured bank. This means if the online bank were to fail, your money is protected. For credit unions, look for NCUA insurance, which offers the same protection.