I decided that some of our readers are either looking to open their first banking account or already have an account and are looking to open a new bank account. This article describes some of the terminology you will run into and also explains some the current layout of banking.
First, you’ll need to decide what type of account you are looking for. Most banks have two general types of accounts: checking accounts and savings accounts.
Checking accounts are accounts from which you can draw upon when writing checks. Basically there is a sum of money in the bank and every time you write out a check that sum goes down. Nowadays a lot of people aren’t writing checks, but you may still need a checking account. For example, if you use a credit card, you’ll probably want to pay off that amount at the end of the month. You can do this by logging into your account online and transferring money from your checking account. Some people go months without writing a check, but they still use a checking account to pay off their bills.
Some checking accounts accrue interest while others do not. If you keep a large amount of money in your checking account than you may want to consider an interest accruing checking account. If you only keep a few hundred bucks in your checking account, then it probably won’t make much of a difference.
Some checking accounts require you to pay a monthly or annual fee for them. I’m morally opposed to this and I strongly believe that if you look around long enough you can almost always find a checking account that won’t require you to pay for it. Here’s why: you are leaving your money with the bank and they loan your money out to other people for a certain rate. They are making lots and lots of money off of your money as it is. I suppose it makes sense to charge for someone who only leaves a few bucks in their account because the bank can’t make any money off of that.
Savings Accounts will usually have some sort of minimum amount that is required to be left into the account. Again, if a bank is charging you for holding onto your money then you may want to reconsider which bank you are using. This is especially true with savings accounts where larger amounts of money are usually required.
Savings accounts will generally pay you higher interest than checking accounts. This is because usually people leave more money in savings and they don’t withdraw from it as much. This allows the banks to invest your money at higher rates and they can in-turn pay you more interest. Before opening a new savings account with a bank be sure to check on any withdrawal limitations; some banks only allow a few transactions per month.
When opening a new bank account you will want consider the type of bank you are interested in. There are basically two types of banks: local and national.
National banks are great for their reputation and for being anywhere you go. For example if you are a person that moves around a lot and doesn’t want to have to change banks every other year, then you probably want to go with a national chain bank. In addition, when you go on vacations and suddenly need to run by the bank it is nice to belong to a national chain.
One advantage of local banks is that home-town feeling that some people just can’t get enough of. Sometimes it is nice to go to the bank and recognize John and Sally who you grew up with. If that is a draw for you, then by all means use a local bank.
You will want to ensure that your bank has an online presence and that the website is user-friendly. Basically all banks have online banking; it has gone from a cool addition to a requirement. Online banking is very useful because you can check your account online anytime. This makes budgeting easier and it is also a lot easier to track your expenses. In addition, you should be able to pay off your bills (including your credit card) online. Also make sure you can transfer money from your savings account to your checking account online. With direct deposit set up, you may never have to go to your bank!
In summary new bank accounts can either be checking or savings accounts. Try to avoid having to pay a bank growing rich off of using your money. Decide if you want a new bank account with a local bank or a geographic bank. Finally, make sure the bank’s online site is user friendly.
