One of the most common reasons for opening a bank account is to keep your money in a safe spot, as trying to keep track of where you store your cash is a recipe for disaster. Banks and credit unions offer many types of services, such as savings accounts, checking accounts and debit cards.
Once you have your own bank account, you get easy access to services such as money transfers, online bill paying, online shopping and more.
Types of Bank Accounts
After deciding to open a bank account, it’s time to find the right type. Here are a few different options available from most banks, credit unions and financial institutions.
Checking Account
A checking account is the most common type of bank account among consumers. It’s a convenient way to keep your money safe while still being able to spend it. When you have a checking account, you don’t need to pay for things with cash. Instead, you can use a debit card or check.
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Your debit card contains a unique combination of numbers specific to your bank account. To use it, you’ll likely set a personal identification number (PIN) to protect you against fraud or theft. Using a debit card provides you with a convenient way to track your expenses. Simply log onto your bank’s website or app to see your spending history.
Savings Account
A savings account helps you – you guessed it – save money! It’s hard to set money aside when it’s combined with your checking account. Most banks and credit unions offer designated savings accounts that accrue interest as an incentive for saving money.
If you keep separate bank accounts for different purposes, you can easily transfer money from a checking account into a savings account. You can also set up automatic transfers that deposit a specific amount of money into your savings account each time you get paid.
Interest-Bearing Checking Account
You earn interest on the money in your account. It is a combination of a savings and a checking account. However, many interest-bearing checking accounts limit the number of transfers each month, have minimum balance requirements and have higher fees.
Things to Consider Before Choosing a Bank Account
There a few factors to consider before you open a bank account. Look at the following list to help you find the right account for your financial needs.
- Opening Deposit: Many banks and credit unions require you to open a bank account with a specific amount of money, known as an opening deposit. This ranges from $10 – $100, depending on the financial institution.
- Minimum Daily Balance: A minimum daily balance is a standard amount of money you must keep in your account in order to forego maintenance fees. This amount also varies between institutions, but you can expect it to be anywhere from $100 – $5,000.
- Electronic Banking: If you’re interested in having your bank account at your fingertips, consider opening an account at a large bank. These financial institutions offer mobile apps, remote withdrawals, instant deposits and other electronic services that small credit unions do not. Electronic banking also makes it easy to pay for things from your smartphone or another mobile device.
- Fees: Some financial institutions have an array of fees that vary between types of accounts. For example, if you withdraw more than what is in your account, you may be slapped with an overdraft fee. This can be as high as $100 in some financial institutions. Other fees include annual account fees, bounced check fees, return deposit charges, ATM fees, minimum balance fees and lost card fees.
Banks vs. Credit Unions
You can choose to open a bank account at a bank or a credit union. Here’s what you’ll get with each type of financial institution.
Banks
Fees and Rates
Banks are for-profit institutions. Thus, there tend to be more fees and higher interest rates on services provided. Interest rates on credit cards, for example, are higher than credit unions because banks must compete with other similar for-profit institutions.
Availability
Banks usually have multiple locations across a region, state or country, some with several locations within the same city block. This makes it easier to access money and deal with bank matters anywhere you go.
Services
Banks are quicker in implementing technology changes than credit unions. Mobile banking, remote deposit, biometric ATM authentication and wearable technology are just a few of the many perks offered with large-scale banking.
Eligibility
Most bank accounts are open to the public. Certain types are reserved for those who meet financial qualifications.
Credit Unions
Fees and Rates
These tend to have lower rates and have fewer fees than banks because they are customer-owned institutions. Checking account options (such as opening a credit card) come with lower interest rates than banks. Fees may also be waived.
Availability
Most have a small number of locations spread across a region. It’s rare for credit unions to have multiple locations across the country. Members can access their money from anywhere, but finding a walk-in location apart from their hometown branch may not be feasible.
Services
Credit unions tend to roll out these technological changes at a slower pace. However, the customer service provided by smaller institutions is typically better. Personal interactions are the most common type of communications, whereas banks are mostly automated or outsourced.
Eligibility
You must meet certain qualifications to open a credit union account.
Opening Your Bank Account
- Gather Documents: If you’re opening a bank account in person, bring at least two forms of identification. These include a driver’s license, valid U.S. passport, Social Security card, birth certificate or state ID. To apply online, use your date of birth, Social Security Number and your driver’s license number. Also, bring proof of your address, such as a piece of mail.
- Complete Application: Download the bank or credit union’s application online or pick one up in person. The bank may run a credit check to evaluate your bank history. You will be notified of approval with an account and routing number.
- Make Opening Deposit: Most banks and credit unions require an opening deposit of anywhere between $10 and $100. Pay with cash or check in person or with a credit or debit card online.
- Set Up Direct Deposit: Submit your account and routing numbers to your payroll department. This allows your paychecks to be deposited into your account. It takes a few days to kick in, so check for any lingering paper checks while you wait.
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