4 reasons to ditch your checking account

We've come a long way from having to bank in person and getting our passbooks stamped with each transaction. Now we're approaching a cashless society and the extinction of paper checks. So there's never been a better time to capitalize on the technological advances in the banking industry and close your checking account for good.

This suggestion may resonate like the idea of using credit cards instead of cash once did. Or like the concept of abandoning your telephone landline to solely use a cellphone. But while it may sound radical, new options have made closing your checking account an option worth considering.

Here are four reasons to make the change:

1. You pay a monthly checking account fee

Many banks and some credit unions charge a monthly checking account fee, anywhere from about $6 to $25 a month, which totals between $72 and $300 a year. Some institutions lower or waive that monthly fee if you meet certain criteria like making one direct deposit into your account per month or maintaining a specific minimum account balance.

Some checking accounts that are called free really aren't. These typically have restrictions attached to them which result in fees if violated. These include limits on how many checks you can write per month, how many times you use your debit card and how often you can withdraw money from ATMs.

And even if your checking account is free, it may not stay that way. More banks have added checking account fees since the Credit Card Accountability Responsibility and Disclosure Act went into effect in February 2010. This law prohibits these financial institutions from charging certain fees like overdraft and over-the-limit charges and caps others like debit interchange fees (the charge imposed on retailers when consumers use debit cards with them). Banks are seeking ways to make up this lost revenue.

From a purely economic perspective, it makes sense to close your checking account. You'd save the monthly check fee in addition to the occasional check-printing costs. For banks that lower your monthly checking fee if you meet certain incentives, you'd no longer have to worry about meeting those requirements, which can be tough in a difficult economy.

2. Your checking account doesn't bear interest

Your checking account may or may not be earning you interest. In the case it isn't, you wouldn't miss any income should you close your account. And even if it is, interest rates for checking accounts are usually low in comparison to other accounts and the missing interest probably won't make a significant difference in your budget.

3. You have other ways to pay bills

You no longer need a checking account to write checks against to pay your bills. Instead, you can use an online bill pay service, preferably a free one, to have electronic checks issued to the people, organizations and companies you owe. Your financial institution can withdraw money for the bills you pay from a savings account or money market account.

And if you didn't want to pay a particular vendor electronically, you could use a money order. They're obtainable at gas stations, check-cashing companies, United States post offices, and convenience and grocery stores, which sell them for a small fee, usually not more than a dollar or two. They're also available at banks and credit unions, where they are sometimes free for customers. However, when they aren't free at the bank, they tend to cost more there than at other outlets.

Another option for paying your bills is with a no-fee, prepaid credit card, which can easily be used online or by phone.

4. You have a savings or money market account

Having a bank account has certain perks, but you can get those benefits with a no-fee savings or money market account. One advantage is having a safe place to stash your cash (other than in a buried chest in your yard or a gutted classic novel on your bookshelf). A second benefit is protection. Savings deposits are insured for up to $250,000 at banks by the Federal Deposit Insurance Corp. and at Credit Union National Association-member credit unions. Also, having a bank account makes it easier and more cost effective to borrow money. Without an account, you'd likely be charged higher interest rates and additional fees.

If you don't have a savings or money market account, open one. If you're not already using a free, online bill pay service, find one and enroll. Then close your checking account and reap the savings.

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