Tips & Advice
What documents are necessary when opening a bank account?
Generally, when opening a standard domestic bank account you will need two forms of government issued identification, like a social security card and a driver’s license (or legally issued ID), or a passport. Some accounts may require an Individual Taxpayer Identification Number (ITIN) or a proof of address, meaning you need to bring in something like a utility bill with your name and address on it. More complicated accounts can have different requirements. If you are not a U.S. citizen, you might be able to open an account with a state-issued identification from your country of citizenship.
The best way to pick a bank is to identify exactly what your financial needs are and find a bank, or banks, that provide those services. If you need basic checking and/or savings accounts, nearly any local bank can set you up. Some banks can cover the entire spectrum of needs, while some are more specialized toward businesses, international account holders, or high-end clients. If you are in a specific industry that has a corresponding credit union, those can be a great place to go. Do some research or get referrals or recommendations.
Online banking allows you can access your bank accounts on your computer (or smartphone) and pay your bills, write online checks, deposit checks (via the bank’s app) transfer money, check on account balances from the comfort of your home. Online banking is the new normal and is a convenient tool to manage your finances without ever having to step foot in a bank.
What is an overdraft fee?
An overdraft fee is when a checking or savings account is overdrawn. If you don’t have electronic notification set up when you balance gets below a certain amount, you might find out when a check bounces.Usually your bank will cover the difference and charge you a fee. These fees vary depending on the amount of the overdraft, how long you’ve been with the bank, how much money you keep there, etc. These fees can sometimes be waived if the overdraft is minor and/or if you are a valued customer in good standing with the bank.
Credit unions are non-profit banking institutions that are set up to serve their members. Credit unions provide many of the same services other banks provide, such as checking and savings accounts, loans and investment opportunities. The big difference between credit unions and banks is credit unions are also member owned -- the depositors are the owners and it works as a cooperative institution -- which provides a lower-interest loans and services.
What does FDIC Insured mean?
The Federal Deposit Insurance Corporation (FDIC) is a federal agency that protects and insures customer deposits in banks and credit unions. If a bank is robbed or goes bankrupt the FDIC protection means you will not lose (all of) your money, but you’ll probably still need a new bank. Most banks are FDIC insured and will have a notice on display (usually a sticker on the entrance) alerting you it is a FDIC insured institution. This provides protection of up to $250,000 per depositor, per branch, per account. Not every cent is guaranteed.
What services do banks provide?
Banks provide a variety of services. First, they offer a place to keep your money and financial assets and you can make dividends from interest. They can set you up with a credit card for spending or to just establish credit in order to make larger purchases. They provide loans for cars, homes, businesses, or just about any reason (as long as you can pay it back!) -- as well as provide financial services, such as investing guidance and opportunities. Most banks have safe deposit boxes where you can store things like jewelry, gold, or important documents. Banks are in the business of making money, so understand you will be paying for most services.
- While there are a variety of bank account types, there are five primary types: Savings, basic checking, interest-bearing checking, money markets, and CDs
- Savings accounts are where you put your money for that rainy day. They usually have interest rates higher than a checking account.
- Basic checking accounts provide a minimum of services, usually they are a very low or no-interest account used to write checks, or for setting up automatic payment schedules for bills where payments are made electronically.
- Interest-bearing checking accounts pay you an interest rate, in addition to doing everything that a standard checking account does. .
- Money market deposit accounts (MMDAs) invest your account balance into short-term debt opportunities, treasury bills, or CDs (certificates of deposit). MMDA rates are higher than checking accounts, but require a higher minimum balance.
- CDs are time-based deposits in which you agree to keep the entire sum in the bank for a period of time (six months, 12 months, 24 months) and the longer the time, the higher the yield or return for you (because the bank gets to use your money longer, too).
There are four primary types of banks: Commercial, consumer, private, and investment:
- Commercial banks are where most people have their checking and/or savings accounts. Their primary business is taking assets and deposits, lending it to other customers, and making money off of the loan’s interest rates. They also charge fees on checking and/or savings accounts.
- Consumer banks, such as a credit union, generally focus on the personal needs of a specific group or industry, like an auto workers credit union. They offer the same services as commercial banks, but the idea behind credit unions is to support and cater to a specific group of customers.
- Private banks primarily deal with high net worth individuals, and/or those with sizeable assets, and help them with investments, banking and other services.
- Investment banks deal primarily with businesses to sell bonds, acting as a conduit between the investors (those folks putting up the money) and the business (those folks borrowing the money).