Did you know that not all bank accounts are created equal? Some have benefits that can help you save money and others can rack up numerous fees.
Here are some things to consider when opening a checking or savings account:
The FDIC is an independent agency created by the government to insure the money that you keep in a bank account. The FDIC will make sure you do not lose the money that is in your account even if the bank burns down. It protects up to $250,000 in an insured account, so if your account is below this, you can feel confident that it is safe.
Not all bank accounts are FDIC insured.1 Find this out before you open any account.
Are there any monthly fees for your bank account? What is the overdraft fee? How much does it cost to use the ATM? Small fees add up each month and can result in a large yearly fee. Some bank accounts charge you if your balance falls below a certain amount. Others charge if you do not make at least one deposit per month. Make sure you read the fine print before you decide on a bank.
Is there a bank near your home or job? If not, you may have to pay ATM fees or spend time and gas money getting to your bank.
Be sure to have a savings account set up. Also, get in the habit of taking out a certain amount from every paycheck to put into your savings. This will help you prepare for large purchases in the future, like a car or house. It will also give you a safety net to use in a costly emergency. For example, you'll be prepared for:
Investing sounds like something far-off, but you can start doing so as soon as you have a bank account. A simple way to start is by putting your money into an account with interest. Interest is money that the bank pays you when you keep money in an account.
If possible, choose a bank that has high interest rates. Look for high interest rates (1-4%) on checking, savings, or other accounts. You'd be surprised how much interest can add up over time! However, note that if you make a good amount of interest, you'll have to report it on your taxes.
Usually savings and checking accounts do not tend to have high interest rates. If you're really looking for a good investment, it helps to look at other, less common types of accounts. Here are a few examples:
Though they work similarly, there's an important difference between credit unions and banks. Unlike banks, credit unions do not make a profit and all members are shareholders of the institution. In other words, they're member-owned and will be working for you rather than for a few select shareholders. Credit unions are typically smaller and don't have the universality of banks, but there's several benefits of choosing one.
For instance, credit unions usually offer higher interest rates on savings accounts, lower fees, and more lenient terms and conditions than banks. Also, many of them offer the same services as banks but for less. For example, they offer checking and savings accounts, mortgages, business accounts and more. Not only that, most credit unions let you use many different ATMs at no cost!3
When choosing which type to use, ask yourself what your needs are. Find out whether a bank or credit union would be better for you.
Once you have opened your bank account, make sure to use it! Avoid check cashing services, payday loan stores, and pawn shops. These services charge you high interest rates.
Check your balance 2-3 times per week to avoid fees for overdrafts and returned checks.