Karen has $800 to open a checking account. She wants an account with the lowest fees. She only writes about five checks per month and her employer has direct deposit. She does not plan on using the ATM or online banking.
Bank Account Terms and Conditions
| | Minimum Balance | Online banking | Check Limits | ATM Fees | Monthly Fee |
|---|-----------------|----------------|--------------|----------|-------------|
| A | $500 | yes | unlimited | $0 for all ATMs | $5 |
| B | $250 | yes | 15 per month | $0 for ABC bank ATMs | $10 |
| C | $50 | yes | $0.08 each | $2 per transaction | $0 with direct deposit |
| D | $100 | no | over 10 $0.12 each | $3 per transaction | $2 |
Which checking account would be best for Karen?
A. Account A
B. Account B
Answer (2)
Karen should choose Account C, which has the lowest total monthly fees of $0.40. This account requires no monthly fee with direct deposit and the costs for checks are minimal. Therefore, Account C offers the best solution for her banking needs.
;
Karen meets the minimum balance requirements for all accounts.
Account A costs $5 per month.
Account B costs $10 per month.
Account C costs $0.40 per month with direct deposit and check fees.
Account D costs $2 per month.
Account C is the best option. A cco u n tC
Explanation
Problem Analysis Karen has $800 to open a checking account and wants the account with the lowest fees. She writes about five checks per month, has direct deposit, and does not use the ATM or online banking. We need to evaluate the fees for each account based on her banking habits.
Checking Minimum Balance Requirements First, let's check if Karen meets the minimum balance requirement for each account with her $800 deposit:
Account A: Minimum balance $500 . Karen meets this requirement.
Account B: Minimum balance $250 . Karen meets this requirement.
Account C: Minimum balance $50 . Karen meets this requirement.
Account D: Minimum balance $100 . Karen meets this requirement.
Calculating Monthly Fees Now, let's calculate the monthly fees for each account based on Karen's banking habits:
Account A: Monthly fee is $5 . There are no other fees since she writes unlimited checks and doesn't use the ATM or online banking.
Account B: Monthly fee is $10 . There are no other fees since she writes 5 checks (less than 15) and doesn't use the ATM or online banking.
Account C: Monthly fee is $0 with direct deposit. She writes 5 checks, so the check fees are 5 × $0.08 = $0.40 . Total monthly fee: $0.40 .
Account D: Monthly fee is $2 . She writes 5 checks, which is not over 10, so there are no additional check fees. Total monthly fee: $2 .
Comparing Total Monthly Fees Comparing the total monthly fees for each account:
Account A: $5
Account B: $10
Account C: $0.40
Account D: $2 Account C has the lowest fees at $0.40 per month.
Final Answer Therefore, the best checking account for Karen is Account C.
Examples
Understanding different bank account options and their associated fees is crucial in personal finance. For instance, choosing the right account can save you money on monthly fees, check fees, and ATM fees. By carefully evaluating your banking habits and comparing the terms and conditions of various accounts, you can make an informed decision that aligns with your financial needs. This is similar to choosing the best cell phone plan or insurance policy by comparing costs and benefits.
