Banking Basics

  1. Money in the bank is safe. If you bank at a bank that is FDIC-insured, you are insured by the federal government against loss of up to $100,000 per depositer.

  2. Sometimes you pay for the convenience of a bank account. If you know your money needs and habits, you will be able to pick the accounts that fit you best. Banks offer various checking and saving accounts and each has their own perks, fees, etc. Make sure you ask questions about these different perks and fees so you understand the account you choose.

  3. Don’t expect your bank account to act as an investment. Keep in mind that inflation, even at a low rate, usually is higher than the amount of interest that most banks offer. This means that inflation can and will eat away what you earn from a bank.

  4. Interest rates aren’t always what they seem. Different banks use different methods to calculate interest. When comparing different accounts from various banks, make sure to ask for each account’s “annual percentage yield”. Only the APY is calculated the same way everywhere.

  5. If it is interest you want, better rates are out there. Options like certificates of deposit (CDs) may be a great tool for guaranteed interest. CDs are insured up to $100,000 and can lock in stated interest rates anywhere from three months to five years. However, as much of a benefit it is to be able to lock in an interest rate, here also lies the risk. If interest rates drop, the bank is still obligated to pay you the interest rate that you locked it in for. However, if interest rates go up, you are stuck with the lower interest rate. Another option is a money market account. These accounts pay more than typical bank accounts but don’t require you to lock up your money for a specific amount of time.

  6. ATM fees can hit you hard. If you are a person who uses an ATM often, this may be an area you look at a little more closely. Many banks have fees for using ATMs, but there are some banks out there that will offer no fees or reimburse your account for the fee if you bring in the receipt. Whatever you find, here again, choose the one that best fits your requirements.

  7. The option of online banking can make paying your bills easier. This is a perk that many banks offer. The option to pay your bills can save you time and money. However, make sure the vendor will accept payment this way without charging you fees. Also, online banking can sometimes be paired with other financial programs such as Quicken or Microsoft Money and can assist you in terms of financial planning and budgeting.

  8. Getting the best deal takes some work. As you have seen throughout this list, comparing different accounts is as important as comparing different banks. Don’t be afraid to ask for price breaks and don’t expect to get the best deal if you only go to one bank. Shop around. You can even use the internet to shop for bank services nationwide or search locations near you.

  9. When all is said and done, banks aren’t the only places that offer banking services. Places like credit unions, some mutual fund companies, and a few others can offer accounts that resemble bank services. Keep these places also in mind when you are looking to open an account.

Overall, do your homework. Look into different banks and the various options they offer for their accounts and choose the one that will work best for you without costing you a lot of money in the end.

By Lisa Pribula
FLCS Certified Credit Counselor

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