Any checking account you have to pay for is a raw deal: banks make their real income off of money deposited, by lending it out. That means that any fees you pay for your personal checking account are just icing on the cake. You may think that it’s just a few dollars every month, but think about how long you plan to have a checking account for. It’s pretty likely that you’ll have an account for your entire life — and five bucks a month for the rest of your life will add up to far more than pocket change.

Getting That Free Account

The banking business is competitive enough, even with the continuing trend of banks buying up one another, that every bank and credit union offers at least one free personal checking account. It can take a little effort to get it, but it’s more than worth the savings. A common tactic at some banks is to direct customers to accounts with fees when ever possible: it’s up to you to act as your own advocate and keep asking for a free account until you get it. Remember, there are worse things than moving your money to another bank, and one of them is a monthly fee just to offer a bank the privilege of using your money.

Bluffing can get you in trouble here. You want to be ready to withdraw your money and head to the next bank if your current financial institution can’t help you out. There is always a next bank, by the way. In the past, you may have been limited to those banks in your area, but with the growth of online banks like ING Direct, you can get banking services just about anywhere. In fact, it’s definitely worth considering online banks: ING offers a free checking account, and better interest rates than most brick-and-mortar banks can match. Another good option is likely to be the local credit union. Most credit unions do not charge fees for their accounts, and can actually get you better deals on mortgages and other financial products.

Don’t Limit Yourself to Banks

While you can’t find a free option for every type of financial account under the sun, you do have plenty of low fee options. Consider your IRA — you may not be in the driver’s seat for a 401(k) but you certainly are if you have an IRA — you can often use a discount broker with minimal fees to buy and sell your securities. Unless you do a lot of active trading, you don’t need the expensive offerings that many banks or insurance companies offer. Even if you do a higher level of trading, a discount broker may be able to cut your costs.

Spend some time looking at your financial service providers: take a look at their fees and those of the competitions. I’m not suggesting you switch service providers — but take in those lower fees and see if you can get a matching rate.

Popularity: 10% [?]

When your bank hits you with an overdraft fee, it’s actually a fee from the bank for extending you a loan of the money necessary to cover the difference between what’s in your account and the charge on your account. The practice originated when everyone was still relying entirely on checks: it may be the norm now that we can check our balances online, via text messages or at an ATM, but that’s a recent development. The fact that almost any business that accepts debit cards can process a transaction on the spot is equally modern.

The Problem With Overdraft Fees

If it could be days before a bank found out that an account holder had written more checks thank his account could cover, and even longer before the account holder could be made aware of the situation, overdraft fees could be a blessing in disguise. As long as a person was able to cover both the overdrafts and the fees, a short-term loan from a bank could be worth the money.

But the fact of the matter is that these days, overdraft fees have a certain resemblance to predatory loans. Assuming that you rely on your debit card, rather than paper checks, your bank can tell you when a purchase would trigger an overdraft. At an ATM or a business where you swipe your card, the transaction typically goes through immediately — if you were informed that completing a transaction would drop you to a negative balance, you could avoid any overdraft fees.

It doesn’t help that, according to the Center for Responsible Lending, most overdrafts are small: “Most debit point-of-sale overdrafts are small, averaging less than half this $34 fee, meaning that these overdraft loans cost nearly $2 for every dollar advanced to cover the shortfall.” In terms of loans, that makes overdraft fees incredibly expensive.

Talking To Your Bank About Overdraft Fees

Most banks automatically enroll their customers in an overdraft protection program. The typical program includes automatically approving transactions that trigger overdrafts for a fee — on average, $34 but as high as $75 at some banks. But you aren’t actually required to take whatever overdraft options your bank offers at face value. You have several options:

• You can choose to make the switch to a bank or credit union that does not automatically approve transactions that will put you in the hole. As long as you use a debit card, the bank will block transactions that would cause you trouble.
• Link your checking account to your savings account or line of credit. Rather than using the bank as a lender, you’ll just fall back on an already-established (and cheaper) line of credit or use your own money.
• Create alerts for yourself through budgeting programs like Mint that notify you when you’re getting too close to overdrafting.
• Check with your bank for alternatives to your current overdraft protection.

These solutions may not be ideal, but they’re the main options available. The Center for Responsible Lending is working to limit abusive overdraft practices — but not all banks are too interested in losing their lucrative fee schemes.

Popularity: 20% [?]

Not everyone has heard about ChexSystems and, considering how much of an affect this agency can have on your ability to open a bank account, that can be a problem. ChexSystems is a consumer reporting agency, just like Experian, Equifax and TransUnion. Those three are better known, because they report on your credit history and score and can affect your access to credit. ChexSystems, instead, reports on your banking.

How ChexSystems works

Banks usually will check your ChexSystems report before allowing you to open a new checking or savings account. Even one negative item on your report can be grounds for a bank to deny you an account. And since ChexSystems only records bad news, its reports can get you into some trouble. The way ChexSystems works is surprisingly simple: anytime a consumer does something wrong with his or her banking — bounces a check, overdrafts, runs a scam through a bank account — the bank has the choice to report it to ChexSystems. The last five years of reports on an individual makes up his or her overall Chex report.

ChexSystems doesn’t care about good news — even if you have a good overall banking history, your Chex report can be bad. And because banks want to protect themselves, as well as their other customers, they avoid offering accounts to individuals with anything on their Chex reports, when possible.

The situation isn’t entirely dire, though. Not all of your banking information winds up with ChexSystems, because your bank gets to choose what it will report and what it won’t. If, for instance, someone bounces a check but clears it up right away, most banks won’t report the incident. There are also some banks that will allow customers to open banks even if there are serious problems on their Chex reports — as long as those issues are several years in the past and all charges have been paid.

Get a copy of your Chex report

If you want to know exactly what’s in your Chex report, you can request a copy once a year — just like you can request a copy of your credit history from the three credit bureaus once a year. You can also request a copy of your Chex report if you’ve been denied a bank account in the past two months due to something in your report. To order your report, use Consumer Debit Resource’s tool. The same website provides a form to help you place a security alert on your Chex report if you have been the victim of identity theft.

Fix your Chex report

Unfortunately, improving is harder than improving your credit score. Your first step should be talking to a representative at the bank that issued the original negative report. You’ll have to work with them to settle the problem. Once the problem is settled, the bank will update its report to ChexSystems. Your Chex report will reflect the fact that you’ve paid or settled the account. The bank has the option of removing the issue from your report entirely, but that decision is at the bank’s discretion: you should make a point of requesting that your bank do exactly that — but there is no guarantee that they’ll do so.

Popularity: 16% [?]

If you’ve been watching the news this week, you’ve seen that a number of financial institutions are struggling. Washington Mutual is particularly in the spotlight — while WaMu claims to have enough capital to make it through these difficult times, two ratings agencies have downgraded its debt.

WaMu is the largest savings and loan in the U.S. But with the downgrade of the company’s debt, it’s clear that not all of WaMu’s creditors think that they’ll last. The bank’s stock prices look like a roller coaster — with a major downward trend. So far this year, WaMu’s stock has fallen almost 80 percent.

While investors are particularly worried, those of us with accounts at WaMu may not be too heappy either. Things aren’t dire, but it’s time we start keeping closer tabs on what our particular banks are up to.

Bankrate is a good place to start if you want to check up on your bank’s rating. The site provides you with two different scores for any bank or credit union you look up. The first is the Bankrate.com Rating, a scale of one to five, with five as the best. The second is the Safe & Sound CAEL (Capitalization, Asset Quality, Earnings and Liquidity) rating, a scale of five to one, with one as the best.

If you look up a few banks through Bankrate, you’ll notice that most banks are doing okay and some are doing poorly. Basically, no bank is scoring higher than a 3 and 3 rating. There are multiple listings for some banks that do business in multiple areas. The Washington Mutual Bank (Henderson, Nevada) has a 1 and 5 rating — the worst you can get.

These ratings aren’t perfect indicators — and not all of them have been updated recently. AIG, also in the news today because the company needs as much as $75 billion to stay afloat, still has a rating of 3 and 3.

Despite imperfect ratings, Bankrates remains a good starting point. I wouldn’t pull my money out of a bank just because of their rating, but Bankrate’s information provides a good starting point for further research.

Beyond Bankrate, you have a couple of options for tracking information about your bank. You can stick to newspaper articles — but the nature of newspaper reporting is that they’re talking about something after it happens. Instead, I’d recommend look at the information available to investors considering buying stock in your bank. Information like where the stock is trading can help you determine how investors see your bank. Whether investors are willing to buy a given stock indicates whether experts think that a financial institution is going to rebound. If a stock’s price is dropping, however, you know no investors wants to take the risk.

Can you afford that kind of risk? You’re actually in a better situation that investors. The FDIC probably guarantees your deposits, meaning that if a bank goes under, you will still have your money. Just the same, we should all be keeping a close eye on just how our banks are doing.

Popularity: 39% [?]

So, you’ve been reading up on all the latest schemes and plots that thieves use to steal your money. You’ve read about devices that grab your passwords out of thin air, people who will dig through your leftover spaghetti for a bank statement, and all sorts of other frightening things. Well, I’m here to tell you to relax for a moment. There’s a difference between being vigilant and cowering in a corner of your room, afraid to leave the house. Banks are your first line of defense, and they’re working very hard to make sure thieves don’t get past them.

It used to be that a banks main concern was keeping its money safe. Bigger locks, thicker doors, better alarm systems, all to make sure those dollars in the safe were just that, safe. Now the focus has shifted. Stealing cash from a bank is as simple as asking for the money. Tellers are trained to follow directions of any robber and give up money without protest, even if there is no weapon. They’re told to wait until the robber has left the bank before hitting alarms or even telling supervisors. Robbing a bank is the easiest thing in the world (it’s getting away with it that poses a problem).

So if the bank isn’t trying to keep your cash safe, what are they doing? They’re working very hard to keep your identity safe, which is even more valuable. From high tech online banking security, to simply training employees, banks are focused almost entirely on keeping your information private. Although there are federal regulations in place to keep you safe, most banks go above and beyond this and hire private security firms.

So the next time you’re asked for your identification at the bank, don’t be insulted! They’re doing their best to make sure that your information is safe. Being asked for ID is one of the major complaints I have heard from customers of my bank. They find it rude, and are upset that the bank doesn’t trust they are who they say they are. However at the same time they are extremely upset if an unauthorized transaction happens on their account. You can’t have it both ways, so banks have chosen to ask everyone for ID. It’s simply the world we now live in.

Generally speaking, the only information you will get from a bank will be about accounts you own. Banks are particularly sensitive to people “fishing” for information. Therefore you won’t be told balances on accounts, status of accounts, or even if an account exists unless you’re a signer on them. This might be frustrating to some people, who may have legitimate reasons to ask, but overall the bank will take no risks.

Banks are there to protect your money, and even more importantly your identity. Believe it or not, it is much worse to be the victim of identity theft than to have all your money stolen. That’s why banks are doing everything they can to keep your information safe, but you still have a part to play. Make sure you’re not leaving your bank statements around, don’t give out your pin number to your card or your online banking, and make sure that your checkbook is secure and doesn’t get lost. If you think that any of these things are compromised, tell your bank immediately. If you work together with your bank, your identity will be as safe as your money is behind that big steel door.

Popularity: 14% [?]