Before You Open a Bank Account
You may be considering opening a new bank account for many reasons. This may be your first checking account or you may be moving to a new area and so you need to find a new bank. In addition to traditional banks, you may want to consider switching to an online only bank. When looking for a bank, it is important to consider everything you need. Many people forget that they are customers of the bank and can change accounts if things do not work for you.
Here are five things you should consider before you choosing a banking account.
Choose the Right Bank
You should look at several options before you determine which bank is the right one for you. If you travel a lot with your job, or just for fun, you may be better off going with a bigger bank that is located all over the United States. This can save you money in ATM fees. If you do not plan on traveling much you may find the products and customer service at a smaller bank a better fit. If you qualify for a credit union, you should take advantage of it. Credit unions offer higher interest rates on savings accounts and lower interest rates on loans. Generally, the fees are much lower at credit unions as well. Finding the right bank for your situation is just as important as finding a good account.
- Think about locations
- Consider services being offered
- Look at the fees
Choose the Right Account
You can look online at the minimum balance requirements and fee schedules for the different accounts offered at several banks.
You need to determine if you can afford a minimum balance requirement and decide how much that is. There are several advantages of being able to maintain a higher minimum balance, you may be able to avoid monthly banking fees, earn higher interest rates and avoid fees for money orders and travelers’ checks.
However, if you choose an amount that is too high, you will be charged fees for being under the limit and quickly lose any of the advantages offered by the account. Many banks will waive monthly fees if you have an automatic deposit or meet a minimum number of transactions each month. It is possible to find free checking and it is worth finding a bank and account that will give it to you.
- Consider the monthly service fees
- Look at minimum balance requirements
- Check out transaction limits
Read the Fine Print
Additionally, you need to read the fine print of any conditions and terms that go with your account. Many accounts will limit the number of debit card transactions or the number of checks you write. There may be charges associated with online banking or bill pay. They may have policies regarding when your funds will become available or how to put a stop payment on a check. You need to understand all of the charges and limits before you set up the account. Some people choose to have accounts at multiple banks to keep their business and personal expenses separate or so they can qualify for a loan at a different bank. If you do this you will need to be careful not to overdraw an account.
With online options to manage your account, paying attention to fine print may matter more since a lot of convenience options are addressed with the services available online.
- Compare the fine print on different accounts at the same bank
- Reading the brochures and disclosures before opening the account can save you time
- Ask questions if you are not sure what a policy means or how it will affect you
Find Out What Happens if You Make a Mistake
Consider your overdraft options. You should keep a running total of your checking account so that you never overdraw, but mistakes do happen. You need to understand what happens if you do overdraw. Many banks allow you to set up an automatic transfer from a savings account to your checking account when you overdraw. Others offer an overdraft line of credit with a transfer fee.
Then you pay interest on the amount you transferred. Other banks allow you to go into the negative but charge you a fee for each item they pay while you are overdrawn. You should avoid this type of protection since it is quite expensive.
- Some banks may waive the fee the first time you overdraw each year
- Find the best strategy to deal with possible mistakes
- Balance your account each month to help avoid issues in the future
Open a Savings Account
You may want to set up a savings account at the same time. This will make it easier for you to save money on a regular basis. You can also set up an automatic transfer once a month. If you do it on payday, you will never even miss the money that you transfer over. You will be surprised at how quickly this money will start to add up. A savings account at your bank may be a good replacement for a cash reserve account. You may also want to consider an online savings account since it offers higher interest rates. You can still set up automatic transfers with this option.
- Look for the right savings option for your needs
- Consider a money market account for an emergency fund
- Look at minimum balance requirements and be sure you can meet them to avoid monthly fees and other issues.