If you are opening your first checking account or have recently moved to a new area and need a new bank, you may be wondering where you should open your bank account and which bank account you should open to meet your personal needs.
Choosing the Right Bank
When selecting the bank you want to deal with, you should consider the following points:
Explore different types of banks: Commercial banks provide basic banking services to consumers and are the most suitable for everyday banking. You can choose traditional banks that offer a physical presence if you prefer an institution that has a physical location, or online banks if you have technological skills and do not need to visit a bank branch. You may also qualify to join a credit union, which is a non-profit organization serving the banking needs of people who have a common employer, union membership, or professional interest.
Determine the right size: Large commercial banks are often well-known names in the banking industry and have branches across the United States, which is an advantage if you travel a lot for work or leisure. You will be able to access your money easily when you are away and may be able to avoid foreign ATM fees. Otherwise, you may find that the products and customer service at a smaller bank suit you better. For example, community banks accept deposits and lend locally, leading to a more personal relationship with the bank.
Narrow down your location: If you choose a bank with branches, you should identify the nearest branch and ATM, as well as the broader service area. If a financial emergency occurs, you won’t want to drive a long distance to get cash.
Look for the right products and services: In addition to basic banking accounts, most commercial banks allow you to open checking accounts, savings accounts, credit cards, loans, and safe deposit boxes. Some banks go beyond the basics and offer innovative features such as mobile apps, which can be a great option if you are always on the go. The offerings that the bank provides should align with your current and anticipated needs.
Understand the costs: Banks charge interest on loans and impose monthly maintenance fees, overdraft fees, and transfer fees for using the account, just to name a few examples. Both large and small banks, as well as credit unions, impose these fees, although they tend to be lower at online banks and credit unions. Before you decide where to open your bank account, compare costs at different banks to minimize fees.
Interest calculation: Some accounts, such as savings accounts, accumulate interest. Online banks and credit unions tend to pay more interest on your balances.
Determining the Right Bank Account to Open
Once you decide where to open your bank account, follow these tips to choose the account:
Define your goal: The reason for opening your account will dictate the type of bank account you should open. For example, you may want to write checks to pay bills or create an emergency fund to be covered in case of job loss or unexpected medical expenses. You may want to save for a long-term achievement like a down payment on a house. Clearly determine why you want to save.
Open the right type of account: Choose a bank account that fits your goal. For example, you may choose a checking account or a savings account for everyday banking, or a money market account for your emergency fund, or a certificate of deposit for your long-term needs. You may also want to set up a savings account at the same time you create a checking account. This will allow you to link the accounts and move money manually between accounts or set up automatic transfers to make saving money regularly easier.
Be cautious
Caution on Transaction Limits: Savings accounts and money market accounts set limits on the number of withdrawals or transfers per month. Checking accounts are not as restricted, but they may allow you to make debit card purchases and ATM withdrawals up to a certain limit per day. If you typically make purchases that exceed this limit, you should open a bank account that allows you to make daily purchases with a higher limit.
Review Fees: Fee schedules vary by account type. Check the website of the bank account you’re considering to learn more about monthly maintenance fees, early withdrawal penalties from certificates, and other fees to determine if you can afford them. There are still free accounts – those that do not charge monthly maintenance fees – and it’s worth finding one if your goal is to minimize banking expenses.
Assess Minimum Balance Requirements: This is usually the minimum amount you need to keep in a fee-based bank account or in total deposits at the bank to avoid paying monthly maintenance fees. It can range from $25 to $10,000, so if you want to avoid maintenance fees, choose an account with a balance requirement that does not exceed your financial capabilities. It may be better to open a free bank account if your average balance is low or below average.
Note: Many banks also waive monthly fees if you receive a certain amount of direct deposits into your account during the statement period, or if you have other accounts open with the bank, or if you are a senior.
Read the Terms and Conditions Carefully
Carefully read the promotional materials you receive from the bank as well as the bank account agreement to ensure you understand the terms and conditions for your new bank and bank account.
In addition to daily limits on debit card purchases, some accounts may place unique limits on the number of free checks you can write during the statement period. Similarly, the bank may have unique policies regarding when funds become available for withdrawal or how to stop payment on a check.
If your bank offers online options for managing your account, the precise terms and conditions are even more important since many convenience options relate to services available online. There may be fees associated with online banking or bill pay, for example. Before opening a bank account, ask questions if you are unsure about the meaning of a policy or how it will affect you.
What to Do If the Bank Denies Your Application
Banks do not want to lose money any more than any other business, so they may deny your business if they consider you a high-risk customer due to your poor banking history. Most banks check your banking activity and account closure history with ChexSystems, an agency that provides reports on consumer banking activity.
If you have a history of overdrafts or, worse, if you closed another bank account due to writing bad checks, you may have difficulty opening a new account. You may only qualify for a “second chance” account that does not require a ChexSystems report review. You may have to pay higher fees than usual for these accounts, but typically you can “graduate” to a traditional bank account after some time if you do not make further mistakes.
If your application to open a bank account is denied, federal law requires the bank to issue you a notice of adverse action that names the company that provided the negative information leading to your denial. It’s important to review this notice and obtain a free copy of your ChexSystems report within 60 days of receiving the notice to understand the factors that impacted the bank’s decision. This way, you can take steps to correct questionable banking behaviors and ensure approval for your next bank account application.
Source:
https://www.thebalancemoney.com/before-you-open-a-bank-account-2385850
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