If you are paying $1 for a checking account, you are paying too much. Many banks are getting rich off unfair fees for things like checking accounts, when the reality is that they are not competitive. There are plenty of great banks and credit unions that will give you a bank account without fees, and with great perks to boot.
Go Online, Unless You Need to Deposit Cash
My first choice for great banking is online banks. I personally use Ally, but there are many others. You can get no-fee checking, as well as savings accounts with interest rates of ~1% or better. You also get features like apps and check deposit by taking a picture of the check with your phone, as well as 24/7 telephone service. Also, many of these banks will have overdraft transfer services, where they will automatically transfer cash from your savings account to your checking account, fee-free, to cover any overdrafts. Some banks, including Ally, will refund some of your ATM fees (Ally refunds up to $10 per month). This allows you to use any ATM in the US and not pay fees.
Some people are understandably reluctant to deposit their hard-earned money in a bank that has no physical branches. To that I say: don’t worry. All you really have to do is go to the Federal Deposit Insurance Corporation’s website, and look up the bank. If it is covered by FDIC insurance, you’re good. Your money is insured up to $250,000 by the federal government, just like any brick-and-mortar bank.
However, there are downsides. For example, you cannot deposit cash, and you must (rarely) mail in some checks. If these are dealbreakers for you, I suggest you go with a credit union, unless you have a high enough balance that a physical bank offer you a bank account without fees.
If You Need Cash Deposits, Try Credit Unions
If you need to make cash deposits, I wholeheartedly recommend credit unions. Most have much lower fees than banks, and pay better interest. They also offer loans with better terms than banks. Most also feature deposit insurance to the same extent as banks, via the NCUA. Also, they are usually nonprofit, and you become, strictly speaking, an owner (shareholder) when you open an account.
I’ve been banking with Ally for over two years and with Discover Bank (the same people who issue the credit cards) for a few months. I can recommend online banking with no hesitation; I get close to 1% interest, deposit checks by taking pictures, and withdraw cash at ATMs using the Ally debit card (and get the ATM fees credited back, up to $10 per month). I have not wasted time at a bank branch in over two years.
For an updated list and comparison of online checking accounts, click here.