how to choose a bank account

How to choose the best bank account?

If you are opening your first checking account or relocated to a new area and need to find a new bank, you are probably curious about how to find a bank that meets your needs. You will also need to decide what type of bank account to open.

Many people opt to keep their cash in multiple banks. Some do this to separate their personal and business finances. Some people choose to open all of their accounts through the same bank, usually for convenience. Looking into a bank thoroughly before opening an account will allow you to make a decision that is beneficial to your lifestyle.

Deciding Which Bank to Choose

Before making a commitment to any bank, make the following considerations.

Explore Different Bank Types

If you need a bank that offers traditional banking services, you may want to look into retail banks. If you need a physical location to do your banking, try to find a bank with brick and mortar locations. If you are tech-savvy, an online bank may be right for you. Remember that if you choose an online bank, you won’t have access to a physical bank. It may be possible for you to join a credit union. Credit unions are non-profit organizations that cater to the needs of people with a common employer, professional interest, or labor union.

Settle On the Right Size

Large banks are often well-known and have many physical branches. If you travel frequently, this could be a huge plus. You will be able to access your money anywhere and in many cases, you will be able to skate around foreign bank ATM fees. People who are less inclined to travel may be more interested in customer service and products available at a smaller institution. For example, local banks take deposits and lend cash locally. If you decide to go with something smaller, you will likely have a more personal relationship with the bank.

Narrow Your Location

When you make the decision to open an account with a brick and mortar bank, you will want to know where the closest physical location is as well as the closest ATM. You will also want to find other branches nearby. Emergencies happen, you do not want to be far from your bank when they do. You don’t want to have to drive a long distance to rectify an issue.

Look for Appropriate Products and Services

Along with a basic bank account, retail banks also give you the ability to open checking and savings accounts. credit cards, loans, and even safe deposit boxes. Many banks go above and beyond and offer important, modern features like smartphone apps. This can be a great way to check your balance on the go. This can be an important feature if you travel often. The benefits available at your chosen bank should cater to your needs.

Understand the Costs

Banks charge interest on loans, but not all interest rates are created equally. Banks also charge maintenance fees, wire transfer fees for account usage, and overdraft fees. These are only a few of the charges that could be applied to your account. Banks of all sizes (and credit unions) charge these fees. However, additional costs like this are usually lower at online banks and credit unions, also there are many possibilities to waive the fees, we will talk about it in our next article. Shop around and compare costs before making any important financial decisions.

Figure the Interest

Generally, the higher your account balance, the more money your accounts will garner in interest. Online banks and credit unions usually offer better interest rates.

Determining Which Bank Account to Open

Once you are ready to commit to a bank, you have to select an appropriate bank account type.

Set a Goal

Your personal needs should dictate what kind of account you decide to open. You may be opening an account to write checks for bills or groceries, You may be saving money to cover any unexpected expenses. You might be looking to save for a big-ticket purchase, like a home or a car. Decide what function your account needs to serve.

Open the Right Type of Bank Account

Choose an account that fits your goal. You may want a checking or savings account for everyday banking and transactions. A money market account (MMA) would be a good choice if you are putting money in an emergency fund and a certificate of deposit for long-term savings. Many people sign up for a savings account when they open a checking account. When you set up these two types of accounts at the same bank, you can easily transfer money between the two. Sometimes, you can set up automatic transfers between these accounts.

Watch Out for Transaction Limits

The money market and savings accounts generally allow you to make only 6 withdrawals or transfers per month. Checking accounts allow you to withdrawal money virtually anytime, but you may only be allowed to remove a certain dollar amount daily. If you regularly make high-dollar purchases, make sure you find a bank that offers a high daily spending limit.

Take Stock of the Fees

Fees differ greatly depending on which type of account you choose. Do your research on any bank you are considering to learn about monthly maintenance fees, early withdrawal punishments for Certificate of Deposit. There can also be other fees depending on which account you choose. Determine if you can afford the fees that come with your new bank account. Some banks offer free checking accounts. Look for a free account if you want to minimize monthly expenses. 

Assess the Minimum Balance Requirements

The minimum balance requirement for a bank account differs. It is the minimum amount of money you need to keep in your account. Having a balance above the minimum balance requirement lets you avoid maintenance fees. Be sure to choose an account that has a minimum balance requirement that is financially appropriate for you. Some banks also waive your monthly fees if you use direct deposit, use other products from the bank, or are a senior citizen.

Read the Fine Print

You should always carefully read any information your bank provides you. Make sure you completely understand the terms and conditions of your new bank account.

Banks oftentimes limit how much you can withdraw from your checking account daily and some accounts limit how many free checks you can write per statement period. However, your bank may have unique regulations regarding when funds will become available for usage or stopping payments on a check.

Your bank may offer various online banking products to manage your bank account. If this is the case, the terms and conditions matter even more due to the amount of convenience options available online. There may be additional charges with doing your banking online or bill payment. Before you open any bank account, inquire about these policies.

What To Do If the Bank Denies Your Application

Banks go to great lengths to ensure they do not lose money. After all, banks are businesses. If you have a questionable financial history, a bank may not accept your application. Most banks use ChexSystems auditing to look at a potential client’s bank account and closure activity.

If you are historically notorious for overdrafts or if another bank closed your account because you wrote fraudulent checks, you may have trouble finding a bank to accept your business. You could qualify for a “second chance” account that doesn’t require a financial background check. You will pay fees that are higher than average, but with time and effort, you can “graduate” from these programs and have normal rates again.

If you are denied, the federal government requires that the bank gives you an adverse action notice that supplies the name of the company that gave the information. Be sure to obtain and read this notice, and then find your ChexSystems within 60 days of your rejection. This will help you understand why the bank rejected you so you can rectify these issues before applying for another account.

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