Setting up bank accounts is something that everyone has to do, but many people don’t consider their options and what their bank can offer them. Between all the accounts and benefits, there’s a lot to take in. Finance Guru has created a guide that goes into everything you need to know about banking for you to make an educated decision on what you need from your bank.
Types of Accounts
There are several different types of bank accounts that service completely unique purposes. When signing up with a bank, you want to make sure you’re signing up for the right type of account. We have a description of the three different accounts you can sign up for below.
Many people use their checking account to make purchases. A checking account is a banking account that has checks paired with them. You can also make unlimited transfers in and out of the account.
Not only are their checks associated with your checking account, but you can also get a debit card. A debit card is a card that you use to make purchases and the money is taken out of the account immediately. If you don’t have enough money in the checking account when you use a debit card, you’ll be declined or overdraw and must pay a penalty.
The purpose of a savings account is pretty obvious: to save money. Many savings accounts include interest that helps build your investment over time. Not only that, but banks prefer you keep money in the account and limit how many transfers you have in and out of it. If you go beyond the transfer limit, the account can be changed into a checking account.
A credit card account is much different than the previous two accounts we mentioned above. Credit cards are more like a loan account. They allow you to make purchase by borrowing money from the bank. At the end of the money, you need to pay back the money for your purchases. If you can’t pay it all at once, you can make payments overtime with interest accruing over time.
Debit vs Credit Cards
Debit and credit cards may look the same, but they differ greatly in what they offer. As you already know, debit cards draw money from your account at the point of purchase. Meanwhile, when you use a credit card, the bank pays for the purchase and you owe them the money at the end of a billing cycle.
Both cards have their benefits and should be used in certain situations. Debit cards pay for the purchase immediately, so you never have to worry about accruing debt or interest. It also means you won’t have to carry cash because the card works the same at a point-of-purchase. However, you won’t be improving your credit score when using your debit card. Plus, you’ll need to have the money to make the purchase in your account at that moment.
Credit cards, on the other hand, help build your credit score when used properly. There are also many unique awards that you can only get when you use a credit card. However, if you don’t pay your credit card debt entirely at the end of the billing cycle, it accrues interest. You’ll end up paying more for your purchase than it’s worth.
Investment Bank Accounts
A savings account isn’t enough to have your money collect interest. There are investment accounts that’ll help your money build equity. We’ll go into greater detail on each account below.
Certificates of deposit, also known as CDs, are one of the safest investments you can make. They can be purchased at banks and typically have a high interest rate – higher than savings accounts and money market accounts.
However, there’s one drawback to CDs: it’s very difficult to take your money out of the account - your money Is locked into the CD. While you are accruing a lot of interest, if you need the money, you won’t be able to take your money out of the account easily.
IRA stands for individual retirement account and is a retirement account that you can start with the bank. There are two different types of IRAs you can open: traditional and roth IRA. Contributions to a traditional IRA aren’t taxed but when you withdraw the money, you’re taxed.
A roth IRA is the exact opposite: your contributions are taxed when you put it into the account but you’re not taxed when you withdraw your money. Both types of IRA continue to grow because your money earns interest. This is a great way to build a retirement account on your own (if your company doesn’t offer a 401k or you want a second retirement account).
Money Market Accounts
Money market accounts are like a super savings account. They tend to have highewr interest rates than a typical savings account, so your account will grow over time. However, to open and maintain a money market account, there’s a minimum deposited and balance requirement. Ask your bank what their requirements are.
Benefits of Online Banking
One of the biggest benefits offered at most banks is online banking. This allows you to access your bank account at any point via your computer or smart phone. This allows you to constantly be in control of your money. You can (and should) check your bank account every day and make sure that there are no fishy charges on your account.
Another benefit that you get from online banking is the ability to transfer money to other accounts. If you have multiple accounts, you can transfer money from one account to another. You can also send friends and family who use the same bank as you. This is great if you owe them money or are splitting a check. Not only banks have this feature but some, such as Chase, offer this to their clients.
Security of Banking Online
Many people worry about the security of online banking; they believe that it’s easy to preform identity theft. However, all banks take proper to ensure safety while accessing your accounts online. For instance, the account locks you out after a couple minutes of inactivity. There’s also no visible account numbers that people can see if they’re looking over your shoulder.
The best thing you can do is avoid accessing your bank account using public Wi-Fi. It’s not difficult for people to hack into public Wi-Fi and get your banking information. However, if you stay on LTE, you’ll be safe from any sort of small level data breach.
Direct Deposit with Your Bank Account
Another great thing you can do with banking accounts is have your pay checks deposited into your checking or savings account. This means you don’t have to take a paper check into a bank and deposit. All you need to do is provide your account information to your employer and they can deposited into your bank account immediately on pay day.
Another thing you can do is have your bills withdrawn from your account when they’re due. Like direct deposit, your utilities can take the money form your account with only your account information. You can rest easily knowing it’s impossible for you to miss a payment on any of your utility bills
Can You Overdraw an Acconut?
Something you want to avoid with your checking account is overdrawing it. When you overdraw an account, that means spending more money than you have. When this happens, your bank will charge you fees for every day your account is overdrawn.
Thankfully, many banks have safety precautions to avoid this situation form ever happening. In the past, if you tried to use your debit card on something that would overdraw your account, the transaction would still go through. Now, you can set it where your card is declined if you don’t have enough money in the account to make a purchase.
ATMs and Potential Fees
Sometimes, you can use your debit card for a purchase - you’re going to have to use cash. That means you must take a trip to the ATM. The best thing you can do is go to a cash station from your own bank. If you go to a universal ATM, you’ll be charged a fee which can be anywhere from $2-$8. Save your money and go to cash station within your own bank.
Do Different Banks Offer Different Perks?
What most people don’t know is that many banks offer different perks. What are these perks that a bank could offer you? Here are some examples:
Better interest rates on your savings accounts
Low minimum deposits on money market accounts
Specialized checks and debit cards for your checking accounts
Low interest rates on your credit cards
Unique types of credit card accounts
Before selecting a bank to open accounts with, make sure you do the proper research and find one that offers exactly what you’re looking for. While it may seem like a very easy selection, there are many things you need to keep in mind, especially if you plan on opening more than one type of account.
Finding the Right Bank Using Finance Guru
Finance Guru wants to make it easy to find the right bank for you. Whether you need a checking, savings, credit card or investing account, one of our comparison tools will help you find what you’re looking for. This tool will compare the top banks in your area and help you decide what’s right for you.
It’s important to note that the best bank for your checking account might not be the same one as your savings account. While we think you should find the best offer, we recommend keeping all your accounts at one bank. It allows you to transfer money easily and check all your accounts with one online login.