In my previous post we looked over some of the most basic concepts of banking. Now it is time to take our knowledge a bit deeper. I’m confident that my last post on the basics of banking has not only convinced you that banks are a safe place to store your money, but they also help you to do more with your money, and help you work towards achieving your financial goals. Today we will look at the specifics of how to choose an account based on the purpose for which you are opening the account.
Banks offer several different types of both checking and savings accounts. Some of the accounts pay interest, some do not. Some are geared toward students, while others are geared towards seniors. So the purpose behind the account you are looking at is one of the main factors when considering what account type you open. Here are some tips to help you in your search.
How much money do you plan to deposit at the bank?
The amount of money that you are looking to park at the bank really dictates the type of account that you are looking at. Minimum balance requirements vary from bank to bank. In 2009 a survey from bankrate.com found the average balance required for a no fee, interest bearing account was more than $3300. However, if you settle for a non-interest bearing account the average balance is just a little under $185 to avoid monthly fees. Check out the specific requirement of your bank. It’s also noteworthy that if you belong to a credit union they often have interest bearing accounts that require no minimums. These accounts will often charge a flat fee, however this fee is usually minimal. As an example, I have an account with NC State Employees Credit Union and the monthly fee is $1. These fees typically can be donated to a foundation for most credit unions.
How many checks will you write in a month?
Many of these no-fee accounts limit the number of checks you may write in a month, and the bank will often charge fees if you exceed that limit. On the other hand most consumers will not reach the number of checks written for this to be an issue. Also keep in mind, if you only write a few checks a month, and you are most likely not going to meet the minimum balance required to avoid fees, then you are probably best suited to a no-frills, flat fee checking account.
How many related banking services would you like?
The other services that banks offer are almost as important as the account type you are looking to open. For example, if you use ATMs frequently you want to make sure that there are plenty of ATMs conveniently located near you. If you use another bank’s ATM you may end up paying a $3.00 or more fee to your bank, not to mention the surcharge the other bank will probably charge. Also, does the bank offer other services in house that you might need? Insurance services, lending, money market accounts, investment services. These are all important things to consider when choosing a bank.
How many different types of accounts are you going to want to set up at the bank?
The more accounts that you have with your bank, the better your chances at getting a price break, and more perks on the bank’s other services and products. As an example, if you have a checking and a savings account, and you are looking at a mortgage or signing up for the bank’s credit card be sure to see if you are entitled to any additional discounts. Also if you are interested in savings plans or investment accounts, you would want to make sure that the institution offers these services.
As always using the Internet is probably one of the easiest ways to compare fees, yields and minimum deposit requirements nationwide. Comparison shopping is very important to make sure that you are getting the most from your bank, and the biggest bang for your buck.
Check out our next Banking Basics 101 post on Interest.
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