Banks and credit unions are financial institutions that offer financial services to allow you to safely store money. Knowing the basics of banking and how to choose the right financial institution will help you achieve your financial goals.
Benefits of a Bank Account
If you do not currently have a bank account but have been thinking about opening one, here are some of the benefits you should consider:
- Your money is safe
Keeping cash in your home puts you at risk of theft, fire, flood, loss, or damage. Opening an account at an FDIC-insured bank or NCUA-insured credit union ensures that your money is protected in the event of a disaster up to $250,000. In addition, you are covered in the unlikely event of a bank or credit union failure. - No check cashing fees
Most bank or credit union accounts have no check cashing fees. This can save you money when depositing a check. - Online bill pay and account access
Most bank accounts offer online bill pay and online account access where you can review how much money you have and what charges have been made to your account. - You can transfer money to family and friends with ease
Person-to-person payments and mobile app payments are offered by most banks and credit unions.
Types of Bank Accounts
The main types of bank accounts offered by banks or credit unions are:
- Checking Accounts
Checking accounts are the most basic form of a bank account, designed for everyday transactions. They typically come with a debit card and checkbook, allowing you to pay bills, make purchases, withdraw cash, and transfer money. - Savings Accounts
Savings accounts are designed to help you save money and earn interest on your deposits. They are ideal for setting aside funds for emergencies, future purchases, or short-term goals. - Certificates of Deposit (CDs)
Certificates of Deposit (CDs) are time deposits where you commit to keeping your money in the account for a fixed term, ranging from a few months to several years. In return, you earn a higher interest rate compared to regular savings accounts. - Online Only Accounts
Online bank accounts are a type of bank account that operate primarily over the internet, eliminating the need for physical branches. They are a convenient option for individuals who prefer managing their finances from the comfort of their home or on the go. However, they may lack in-person customer service and immediate cash deposit options.
Choosing the Right Financial Institution
When selecting a bank or credit union, consider the following factors to ensure it meets your needs:
- Reputation: Research customer reviews and ratings for the institution.
- Convenience: Look for nearby branches and ATMs, and check the availability of online banking services.
- Fees and Charges: Compare fees for account maintenance, overdrafts, and other services.
- Interest Rates: Check interest rates for savings accounts, checking accounts, and CDs.
Opening a Bank Account
To open a bank account, you will typically need:
- Identification: Government-issued ID, such as a driver's license or passport.
- Proof of Address: Some proof of address
- Social Security Number: For identification and tax purposes.
- Initial Deposit: Some accounts require a minimum deposit to open.
Visit the bank or credit union in person or apply online, following their application process. Be prepared to provide personal information and documents as requested.
Deposit Account Coverage
Both the FDIC (for banks) and the NCUA (for credit unions) provide depositors with up to $250,000 in coverage per individual, per institution. This insurance protects your money in the event of a bank or credit union failure.
Understanding Bank Fees
Financial institutions often charge fees for various services. Being aware of these fees can help you avoid unnecessary charges:
- Account Maintenance Fees: Monthly fees for maintaining the account
- Withdrawal and Transfer Fees: Charges for excessive withdrawals or transfers
- ATM Fees: Fees for using out-of-network ATMs
- Overdraft Fees: Charges for spending more than your account balance
Additional Resources
Bank on Washington
Helping individuals get set up with bank accounts.
Federal Deposit Insurance Corporation
About FDIC insurance.
National Credit Union Administration
About NCUA insurance for credit unions.
HelpWithMyBank.Gov
Answers to frequently asked questions about banks.