Do you want to put your hard earned money in a safe place? If so, consider opening a bank account. If you don’t know where to start, it’s important to learn about the many different types of bank accounts available to you.
So, below is your ultimate guide filled with everything you need to know about opening a bank account. It will cover where to open a bank account, the types of bank accounts, what you need to bring to open a bank account, and tips for having a good banking experience.
Where to Open a Bank Account
It might seem obvious that you should open your bank account at a bank. However, in this modern world we live in, you actually have a few different options.
First, you can open your bank account at a well known traditional bank that has a brick and mortar building. There are national banks that have buildings across the country like Chase or Bank of America. However, there are also smaller regional banks that might only be available in your state or your local area. Sometimes these smaller, regional banks have less to offer in terms of products, but they might make up for it with better customer service and a community feel.
Next on the list are credit unions. Credit unions are slightly different than traditional banks because they are a cooperative. Credit unions are typically not for profit organizations that are member owned. When the bank members are partners in the credit union cooperative, this means they typically have access to lower interest rates and better customer service.
Lastly, you can now bank entirely online. There are banks, like Ally, that don’t have standalone bank buildings where you can walk in and deposit your paycheck. Instead, you conduct all of your banking through your phone or computer. You take pictures of your checks and deposit them with your phone. You withdraw money using other bank’s ATMs, and if you need help from customer service, they are just a phone call away.
Are Bank Accounts Safe?
If you’ve been hesitant to put your money in a bank account, seek out a bank that is FDIC insured. This means that any money you put into a checking or savings account is insured up to $250,000. So, if you belong to small regional bank that declares bankruptcy or goes out of business, your money is backed by the government as long as it’s under $250,000. Keep in mind that the FDIC does not insure against investment losses, like a poorly performing mutual fund.
The Different Types of Bank Accounts
Now that you know the different types of banks available to you and that you should seek one that is FDIC insured, it’s time to learn about the different types of bank accounts.
There are many different types of bank accounts. These include:
- Checking accounts
- Savings accounts
- High yield savings accounts
- Money market accounts
- Certificates of Deposit accounts
- Brokerage accounts
- Specialized savings accounts
A checking account is the most basic type of bank account. This is an account where you can deposit your paycheck. These accounts typically earn very little interest. They are simply a place to store your money. With a checking account, you can use a debit card connected to your account to make purchases. You can write checks connected to the account. You can even set up automatic payments for your bills. Checking accounts are convenient and safe, especially if you bank with a reputable institution.
Savings accounts are different from checking accounts and have different rules depending on the bank you use. Savings accounts don’t let you make as many withdrawals every month like checking accounts. That’s because the purpose of a savings account is to help your money to grow. Savings accounts can have a better interest rate than a checking account. That, combined with it being more difficult to withdraw money, makes savings accounts an ideal place to start saving your hard earned money.
High Yield Savings Accounts
High yield savings accounts are savings accounts that have a higher interest rate than a typical savings account. Many banks offer high yield savings accounts and encourage goal setting by allowing their customers to change the name of the account to be a specific financial goal.
Money Market Accounts
A money market account is like a checking account and a savings account in one. Like a savings account, you can only make withdrawals from a money market account a few times a month. However, like a checking account, you can usually write checks from a money market account. This type of account encourages bank customers to save more. They’re especially helpful when you’re saving for a big goal, like a home renovation, and want to use some of that money for that purpose.
Certificate of Deposit Accounts (CDs)
A CD, also known as a certificate of deposit, is one way to help your money grow. With a CD, you agree to put a certain amount of your money away for a set period of time. Typically, the more money you put in a CD, the better interest rate you’re going to earn. There might be penalties for withdrawing money from a CD early. That’s because they are designed to help you earn money on your money. Most financial experts would agree that you can get a better rate of return by investing in the market than you would by investing in a CD. However, the benefit of a CD is you’re guaranteed a certain fixed interest rate return, which is a guarantee you can’t get when investing in the stock market.
Brokerage accounts are investment accounts where you put money in the account for the purpose of buying investments, like stocks, bonds, and mutual funds. Typically there is a fee that the brokerage company charges you to buy stocks or mutual funds. However, you can’t use a regular checking account to buy Apple stock, so if you want to try your hand at investing in the market, you will need to open a brokerage account to do so.
Specialized Savings Accounts
Lastly, there are many different types of specialized savings accounts that you can open. For example, many smaller banks offer holiday savings accounts where you can save money all year for Christmas. You can also take your kids to open a bank account of their own as many banks offer certain accounts just for kids. Again, the availability of these types of specialized accounts will vary depending on where you live and which bank you use.
What Do You Need for Opening a Bank Account?
Once you’ve decided the type of bank account you want to open, you’ll need a few things to make it happen. You’ll likely need some identifying documents, like your driver’s license and your social security card. Also, provide a proof of your address.
You don’t have to have perfect credit, but it’s important that you don’t have a negative history with bank accounts. Much like a credit report, banks identify past customers who left with overdrawn bank accounts or didn’t pay their loans back on time. If you have a negative history with a bank, this information might be available for other banks to see. So, be sure to clear any adverse accounts with old banks before trying to open an account with a new one.
You’ll need an initial deposit so pay close attention to the minimum requirements.
The last thing you’ll need to open a bank account is your initial deposit. When it comes to your deposit, pay close attention to the requirements and fees. Some banks don’t charge any fees at all for checking and savings accounts. However, some might charge a fee if your balance drops below a certain amount. It’s important to know this ahead of time so you don’t get surprised with an unwanted fee simply because you only have a few hundred dollars in your account and not a few thousand.
Tips for a Good Banking Experience
Once you’ve decided on a bank, the type of account you want, and made your first deposit, there are a few things you can do to ensure a good banking experience overall.
First, go into the process very informed. Know all the features that come with your chosen bank account. For example, some accounts offer mobile check deposit while others don’t. Some refund ATM fees from out of network ATMs and some don’t. Some allow you to have access to your funds right away while some take a few days to clear a check that you deposit.
The more you know about how your bank operates, the less likely you’ll be surprised by a late fee or some other fee. So, do your research ahead of time to pick the best bank account for you. And, once you do, work hard to keep your account in good standing so you can form a long, prosperous relationship with your bank and watch your accounts grow over time.