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Your money doesn't belong under your mattress, no matter how much or how little you have. Putting your money in a bank account keeps it safe. Most banks are insured by the FDIC (Federal Deposit Insurance Corporation), so if anything happens to the bank, or if the bank loses your money, you will get it all back.
Aside from safety, banks offer you and your money several advantages. In a savings account, your money will accrue interest - and even though you may not make a fortune from it, it's better than nothing at all. Most banks will provide you with a debit card so you don't have to carry too much cash with you, and some offer credit cards that you may be approved for as a customer of the bank. Finally, with online access to your account, you won't even have to leave your home to manage your money.
How Do You Choose a Bank?
Great, you want to open an account - or maybe you're not sure if your current account is in the best hands. What should you look for in a bank?
When comparing banks, make sure to review all of the details of the accounts they offer, and ask questions if necessary. You can also look into credit unions, which are like community banks that are owned by their members. Some have better interest rates and lower fees but may offer fewer services or rewards programs.
Here are some things to consider when opening an account:
- Fees. Look for an account that does not have a monthly fee. If it does, ideally it will be waived if you make any kind of deposit each month. Also ask about overdraft fees and charges for out-of-network ATMs.
- Access. How convenient will it be for you to use the bank? Think of this in terms of the locations of the bank's branches as well as their online and mobile account services.
- Interest. Although the interest rates for savings accounts may seem low, a better rate can really add up over time.
- ATMs. Most banks charge fees when you use a different bank's ATM. Try to get a sense of how many ATMs the bank has and where they are located.
Quick Guide to Banking Terms
Annual Percentage Yield: The rate at which your money accrues interest over the course of a year.
Bank Statement: A document that shows your account balance and recent transactions, usually over the course of the past month. Most banks offer the option to receive a digital statement.
Certificate of Deposit (CD): A type of account that usually has a fixed interest rate and is opened for a specific length of time. In exchange for accruing more interest, you agree not to withdraw funds during the life of the account.
Checking Account: A type of account that usually offers unlimited deposits and easy withdrawals via checks, ATMs, and debit cards. In exchange for this easy access to your money, you accrue very little interest, if any.
Debit Card: A payment card that draws money directly from your bank account with each purchase. Debit cards offer convenience but do not help you build credit.
Direct Deposit: A deposit into your account that occurs electronically, as opposed to using a check. This is a common alternative to receiving paper paychecks.
Overdraft: Spending more money than you have in your account. Essentially, the bank loans you the money until you deposit more, and you will incur a large fee.
Savings Account: A type of account where your money accrues more interest than a checking account. In exchange, you may have a limit on monthly transactions and may not be able to write checks or withdraw funds with a debit card. If the account has a monthly service charge, then you likely will not want to have the account.