Bank Accounts 101 – All You Need to Know to Open a Bank Account

Bank Accounts 101

If you have never had to open a bank account before, it can be confusing and a little overwhelming. When opening a bank account, most people choose to have a checking account to make it possible for them to pay their bills. A savings account is another popular option because it provides a safe place to accumulate money for a later purchase. Investment accounts are yet another type of bank account that you may be interested in pursuing.

How to Open a Bank Account

When opening a bank account, it is helpful to research two or three local banks to find out the different terms that each has to offer. Some will request a minimum balance to open a bank account and others will not. One bank may stipulate that you must carry a certain balance each month, while the others have no such requirement. Try to get a basic idea of each bank’s requirements and fees for various services before choosing where to open a bank account.

Checking Accounts

A checking account is an account that is used for your bills and daily living expenses. In the past 15 years or so, debit cards have become commonplace to issue when a checking account is first opened. A debit card can be presented to merchants for purchases, and the money will be immediately withdrawn from your account. In this day and age, it is rare to find a retailer, restaurant or business owner who will accept a personal check, so the debit card is a must.

It is important to keep your checking account balanced to avoid spending more than you have. If this does happen, you will be charged an overdraft fee, and these can range from $25 to $40 per incident or more. If you have too many overdrafts with your checking account, it will be closed and your name will be placed in a national banking database for five years. This will make it impossible for you to get another checking account until your name has been cleared from the list.

Most banks offer online access, so it is simple to look at your checking account transactions daily and make sure that the account is always balanced. You may also have the option to pay your bills online and not write and mail checks for them.

Savings Accounts

A savings account is separate from your checking account, and ideally you let the money sit and accumulate interest until you need it for a large purchase. If your checking and savings account are at the same bank, you can easily transfer money between them.

When opening a bank account for savings purposes, ask how much interest the bank pays and how often they pay it. Interest is money that you earn for keeping your money at the bank and allowing the bank to use it for loans and other business purposes. For the average savings account, the interest paid is usually quite small, but the larger your balance, the more you will earn. In addition to knowing the interest rate, you should find out the minimum amount required to open a savings account and if there is a penalty for excessive withdrawals.

Investment Accounts

A common investment account with a bank is a Certificate of Deposit (CD). This is an account where you must commit to keeping the money in place for a specified number of months or years before you are allowed to withdraw it. A CD is a good investment because it pays higher interest and gears you toward long-term investing. Your bank may also have additional investment recommendations available.