It can be a bit overwhelming when you actually attempt to read the fine print about the terms and conditions of different banking institutions! It makes War and Peace look like a comic book. Yet, even as our world becomes more digital, banks still play a key role in your ability to manage your money. Keep them working for you, not vice versa!
Whether this is your first experience opening an account, you have moved, or you’re just not happy with your current bank, here’s the down-low on what you should know when scouting out the best "bank" for your money:
1. What Type of Account(s) Do I Need?
A typical young adult needs just two bank accounts: a checking account and a savings account. A checking account is a hub for paychecks entering via direct deposit and money going out for bills. The other part of the equation should be a savings account to help build an emergency fund for life’s unexpected expenses. You never know when you might be hit with an unexpected medical bill or car repair.
If you are married with children, your banking needs become more specialized. At the very least, most will want joint savings accounts for long-term goals, along with separate checking accounts for each spouse to keep peace in the house! You can get more specific later with CDs and other investment funds when your income grows.
Checking accounts allow you to write checks to access your funds. This type of account is handy if you pay bills by mail or in person. It’s typically less expensive than purchasing money orders and safer than carrying cash. Some banks yield interest on checking accounts, but at a lower rate than savings. Compare your bank’s checking account interest rate to an internet bank’s high-yield checking account, which can even be linked to your own bank’s checking account for a better return.
Savings accounts allow you to earn interest on the funds in your account, and opening one can be a good step toward building…although today’s current national average is only around 0.09%. Nonetheless, if you can get into the habit of not dipping into your savings account and paying your expenses only through your checking, the savings will still be there for a rainy day.
2. How do I qualify for free checking and avoid monthly service fees?
According to the American Bankers Association, 45% of Americans pay on average $10 a month for their checking accounts. Don’t be one of them! It is absolutely avoidable. Making a switch could save you $120 a year.
Many banks charge a monthly fee for basic savings and/or checking accounts. However, if you qualify for one of their exceptions you can get around this. Typically these include being a student, signing up for electronic statements, depositing a specific amount of money to open an account, or maintaining a minimum balance. If your savings account is tied to your checking account, it’s a pretty pain-free way to help you meet the minimum balance requirements for free checking.
Compare minimum deposit/balance requirements, and be sure that the sum is easy for you to maintain. You will still likely have to pay for overdrafts or bounced checks, but the number of transactions, deposits, withdrawals, or money transfers should be included as no-fee. Request a list of any fees and be sure they are excluded before signing on the dotted line.
Credit unions offer no-fee accounts to their members, and online stand-alone institutions offer no-fee accounts with competitive interest as well. Consider an online option like Ally, or a nearby credit union if you prefer a bank with physical branches.
3. Which ATMs can I use without an extra charge?
Most banks allow you access to their own ATMs free, but your bank’s locations may not always be the most convenient way to get cash. Using an out-of-network ATM could cost you fees from your bank as well as from the ATM owner and/or network.
Some banks belong to networks that allow you to access all ATMs within the network for free. Internet-only banks often grant you access to any ATM and reimburse any fees.
Check if your ATM card will also carry the MasterCard or Visa logo, which means they can be used to make purchases virtually anywhere those credit cards are accepted. You should also learn whether you will pay a transaction fee if you use your debit card to get cash back from a merchant.
4. Is there a charge to pay bills online?
Your account may be called a checking account, but with online bill-pay services, you may never actually write a paper check. Many banks offer this service free, but others attach fees. That said, most banks do charge fees for online payments if you want expedited processing, so allow enough time between paychecks and due dates to avoid those costs.
5. Can I make mobile deposits for free, and how long does it take for funds to become available?
Your bank likely has a mobile app that lets you deposit checks from your phone. Most offer this service for free, but others may charge for the convenience. Still, others offer mobile deposits for free but put a hold on the money for several days, then offer you access to a given deposit faster for a fee. You will need to inquire how long the hold is before your money is available to you.
6. How can I get help if something goes wrong?
Your bank may have nearby branches that you can walk into for help, but if you have an internet-only bank or use a bank from out of town, you'll have to rely on phone, email, or web chat to resolve any problems that may arise.
When you start making money hand over fist, you have specialized life events you are planning for, or are in crisis management, you can diversify into a more complex banking portfolio. In the meantime, these basics do fine for quite some time.