Bank accounts allow you to save your money in a safe place and are usually free to open and use, but most have fees and some pay interest on the balance and unlike the cash you keep in your wallet, money held in bank accounts is secure.
Your bank may try to convince you that you will save money by doing all your banking with them – don’t fall for it.
All bank products have the potential to screw you of your hard earned money : Out-of-network ATM charges (financial institution and third-party machine operator fee), maintenance fees, overdraft fees and many more.
Banking Fees are completely avoidable, but you need to know what to do in order to not get hit.
Purpose of bank is to manage your money and handle expenses in a convenient manner.
Types of Basic Bank Accounts
- Savings Accounts
- Checking Accounts
- Money Market Accounts
- Certificate of deposit, or CD
Consumers Can Avoid or minimize bank fees by shopping around and by using newer ways of banking.
There are a lot of minor variations on the general type of bank accounts
Local Credit unions offers a much better deal than banks.
Types of savings accounts
Most Savings accounts are interest bearing bank accounts that allow you to withdraw money at any time, but you are limited to certain number of transfers out of the account per month.
Here is a rundown of several types of savings accounts:
- Savings deposit accounts
- Jumbo savings accounts
- High interest savings accounts
- Rewards savings accounts
- Joint savings accounts
- Student savings accounts
Money market accounts are similar and are governed by the same restriction on transfers.
Jumbo Accounts generally refers to large deposits of $100,000 or more. Banks sometimes pay a higher interest rate on such large deposits for jumbo savings accounts.
Joint Savings Account
These are savings account held by two or more parties. Joint accounts multiply the FDIC insurance limit applicable to the account (normally $250,000) by the number of owners of the account.
Types Checking Accounts
Dividend/Interest Checking Accounts
Its called demand deposit accounts in some places. In Europe its called debit accounts or current accounts, or personal accounts.
Here is a rundown of several types of checking accounts:
- free checking accounts
- basic checking accounts
- business checking accounts
- interest checking accounts
- joint checking accounts
- reward checking accounts
- student checking accounts
- senior checking accounts
- lifeline checking accounts
- express checking accounts
- money market checking accounts
Some banks conduct operations entirely online and don’t have any physical locations, so they pass their low overhead savings to customers in the form of a free checking account!
A business checking account can help keep your personal and business finances separate and help you keep accurate records that you’ll need for filing your business taxes.
Most banks charge a monthly fee for business checking accounts. However, there are some options for free business checking provided you meet opening deposit and/or daily average balance requirements.
An interest bearing checking account allows you to earn interest on the money held in your checking account. customers need to meet requirements to qualify for these account types, such as an average daily balance requirement, a direct deposit requirement or a debit card usage requirement.
What is Bank Insurance ?? FDIC Insured
Bank insurance is a guarantee by the Federal Deposit Insurance Corporation (FDIC) of deposits in a bank. Since the FDIC was established in 1933, no depositor has lost a penny of FDIC-insured funds.
Anything over $250,000 are not covered by FDIC, if accounts are with the same bank, under the same name.
Bank insurance helps protect customers, who deposit their savings in banks, against commercial bank insolvency. Each depositor is insured to at least $250,000 per bank.
If your insured bank fails, FDIC insurance will cover your deposit accounts, dollar for dollar up to the insurance limit, including principal and any accrued interest through the date of the insured bank’s closing.
What is not Covered by FDIC ?
FDIC insurance does not cover other financial products and services that banks may offer, such as stocks, bonds, mutual funds, life insurance policies, annuities or securities.
What FDIC Bank Insurance Coverage Includes
Negotiable Order of Withdrawal (NOW) accounts
Money market deposit accounts (MMDAs)
Time deposits such as certificates of deposit (CD’s)
Cashier’s checks, money orders and other official items issued by a bank
What FDIC Bank Insurance Coverage Does Not Include:
Life insurance policies
Safe deposit boxes or their contents
U.S. Treasury bills, bonds or notes
What happens when a FDIC insured bank fails?
Though unlikely, bank failures do occur and the FDIC responds in two capacities. First, as the insurer of the bank’s deposits, the FDIC pays insurance to depositors up to the insurance limit. Historically, the FDIC pays insurance within a few days after a bank closing, usually the next business day, by either (1) providing each depositor with a new account at another insured bank in an amount equal to the insured balance of their account at the failed bank, or (2) by issuing a check to each depositor for the insured balance of their account at the failed bank.
Some deposits that exceed $250,000 and are linked to trust documents or deposits established by a third party broker may have a short wait so that their accounts can be reviewed to determine the amount of deposit insurance coverage available to them. The amount of time involved depends on how long it takes for the depositor to provide supplemental information to the FDIC so that we can complete the insurance determination.
Second, as the receiver of the failed bank, the FDIC assumes the task of selling/collecting the assets of the failed bank and settling its debts, including claims for deposits in excess of the insured limit. If a depositor has uninsured funds they receive the insured portion of their funds quickly, as described above. They may also, however, recover some portion of their uninsured funds (their remaining claim on the failed bank) from the proceeds from the sale of failed bank assets. It can take several years to sell off the assets of a failed bank. As assets are sold, however, depositors who had uninsured funds usually receive periodic payments (on a pro-rata “cents on the dollar” basis) on their remaining claim.
Where to find the best savings accounts ??
Free personal savings accounts from banks and credit unions help customers keep more of their own money in their pockets. The best ones don’t charge monthly fees and even offer other free services or pay interest. All those unnecessary bank fees, can easily suck up your savings if you’re not careful.
What are the Best Free Checking Accounts ??
It’s becoming increasingly difficult to find truly free checking accounts. At many retail banks, you’re now required to pay a monthly maintenance fee for the privilege of keeping your checking account open.
Fortunately, it’s still possible to find free checking accounts. You just have to know where to look!
Ally Bank, Member FDIC, As an Ally Bank customer, your Ally Bank deposits are insured by the FDIC up to $250,000 per depositor, for each account ownership category.
Are banks the only institutions offering savings account ??
Credit unions operate much the same as banks, although they typically offer fewer financial services. Credit union accounts are federally insured through the National Credit Union Share Insurance Fund (NCUSIF), the credit union equivalent of the FDIC.
One of the simplest alternatives to depositing money in a traditional savings account is to obtain a money market account instead. Money market accounts are insured by the Federal Deposit Insurance Corporation (FDIC) just like regular savings or checking accounts.
Banks Vs Credit Unions
Credit unions offers higher interest rates on deposits and lower rates on loans compared to for profit banks.
Banks by default are for-profit enterprises, while credit unions are non-profits. Credit unions in principle exist to serve a local community of people tied by a “bond of association,” which may be based on location, employer, faith, membership in another organization, or other factors.
To serve its community, a credit union provides financial products on the best favorable terms to the stakeholders. credit unions offer small dividends, and discounted loan rates and other benefits to a large group of members.
Stop Getting Gouged : Extra Banking Fees You Can Avoid
If there’s one thing for profit banks love, it’s charging you extra and hoping you won’t notice. Greed is the greatest motivator.
In a free market, banks profit by satisfying their customers, investing wisely, and making prudent loans. Regulations, policies, and political rhetoric can change those incentives.
Top Banks in America
- Bank of America.
- Wells Fargo.
- Citi Bank.
- US Bancorp/U.S. Bank.
- Bank of New York Mellon.
- State Street.
- Capital One.
- TD Bank.