A simple, secure way to store your money while still having access to it is by opening up a bank account. There are different account options to suit your needs, and they are outlined below.
Keep in mind that most established banks in the United States are members of the FDIC (Federal Deposit Insurance Corporation), a government-backed agency that insures any money you have in your accounts. As of the time of this posting, each person who has deposited money in a bank was insured up to $250,000 per bank he/she had deposited in, provided that bank was a member of the FDIC. This protects you in case the bank your money is in goes under.
A checking account, as its name implies, is an account you can withdraw money from using checks. While many people still use checks, checking accounts are now more often accessed with debit cards. There is no limit to the number of deposits or withdrawals made on a checking account.
Money deposited into a checking account can be withdrawn using an ATM or debit card, or by writing a check. Many debit cards now have the Visa or MasterCard symbol on the front, meaning those cards can be used anywhere Visa or MasterCard is accepted. Keep in mind, though, that unlike a credit card, you have to have the money in your account to use the card as a Visa or MasterCard. When you use that card, it is still deducting the purchase from your checking account.
Many banks offer free basic checking accounts for those who carry a small balance or utilize direct deposit (see below for more information on direct deposit). Some banks will offer free checks, a free ATM or debit card, or other perks for having an account. Look online at different banks' websites or go into your local branches to get more information about what each bank offers.
Even with free accounts, however, there may be fees involved. While there isn't a fee for having the account (as long as you meet the conditions required by that bank), there will be other fees associated with certain activities.
If you're using an ATM or debit card at a different bank than where your account is, there may be fees involved to withdraw money. Some banks or retailers may also impose fees if your card is used as a debit card, or as a credit card. Most banks will also charge fees if you withdraw more than you have in your account, whether through your debit card or by writing a check. You may also encounter fees for receiving paper statements each month or not meeting account requirements. See your bank for specific information on fees or account conditions.
Some banks also have daily maximums involved in the ATM or debit card, meaning the account holder can only withdraw or spend a specified amount of money per day. To have this maximum lifted or changed, contact your bank.
Whether it's to save for a specific goal or to just have money set aside for emergencies, having a savings account can be useful, as well. A savings account is simply a bank account from which you can deposit and withdraw money as you need to. The money is not quite as accessible as with a checking account, but many banks will offer ATM cards linked to a savings account, or you can go into a branch and withdraw money that way. Keep in mind that savings accounts only allow a specific number of withdrawals each month, usually six, before fees are imposed.
The purpose of a savings account is to have a place where money can accumulate safely and securely. To encourage you to keep more money in the account, some banks will offer interest you can earn on the balance. While this may not be a large amount (maybe .25%), it is essentially "free" money, and it can add up over time.
As with checking accounts, there may be fees for certain activities. However, many banks will offer a free savings account if you maintain a specified balance in the account or set up an automatic transfer to the savings account from a checking account.
CDs (Certificates of Deposit)
CDs are kind of like savings accounts, but you are required to keep the money you deposit in the account for a specific length of time. You choose the length of time when you open the CD. Once the length of time has passed, you can either withdraw the money or renew the CD for the same length of time, or for a different length of time.
Having money in a CD encourages you not to withdraw funds from your savings, as doing so would involve large fees. The most popular reason for CDs, however, is that they will offer interest you can earn on the balance, usually at a higher rate than savings accounts. Different banks will offer different interest rates, and the length of time involved will affect the rate as well. Rates will change over time, going up and down as the economy fluctuates. Sometimes banks will run special offers on certain lengths of time, offering a higher interest rate on that CD for a limited time.
If you are thinking about putting your money in a CD, shop around for the best rates. Doing so can make a considerable difference in how much you earn. Keep in mind that CDs often have a minimum required deposit to open them. The minimums will vary depending on the bank and the length of time.
Money Market Accounts
Money market accounts are kind of a combination savings and checking account. They offer interest like a savings account, but you can often write checks to withdraw money, like a checking account.
With money markets, the interest rates are often higher than savings accounts, and possibly CDs as well. However the minimum balance required is usually much higher. The interest rates are determined by activity in the money market – a network of financial institutions and dealers who trade short-term financial assets. As with CDs, these rates may fluctuate with the economy.
As with savings accounts, the number of withdrawals you make on the account, whether by check or otherwise, is limited. Going over this number will result in fees. Banks may impose other fees as well. For more information, contact your bank.
The popularity of the internet has made banking online fast, easy and convenient. Many brick-and-mortar banks now offer an extension of their banks online, with some banks being available solely online (and possibly offering higher interest rates on savings accounts and CDs).
The simplest reason to visit a bank's website is to get information. You can learn about the different services that bank offers, current interest rates and more. Many banks allow you to open accounts online, or you can get answers from a banking representative.
By setting up an online profile, you can also access your account information. This allows you to get up-to-the-minute balances, transfer money, keep track of deposits and withdrawals, and more. If you would like, you can still receive paper statements each month, or you can opt for paperless banking, with which your statements are only available online.
Another popular feature of online banking is online bill pay. While many companies allow you to pay your bill online through their personal websites, many banks now offer a feature that enables you to pay your bills through your bank. Money is withdrawn from your bank account, and your bank pays your bill. You can have the payment made once, or set up an automatic payment each month. Rather than having to visit each company's website individually, you can have everything in one location.
One of the most popular reasons for opening a bank account is to use direct deposit. With direct deposit, your paychecks are automatically deposited into your bank account. This means you don't have to get your check from your employer, then go to the bank and deposit it or cash it. With some banks, depositing a paper check may also mean a hold is put on the check, so you can't access that money right away. By having the check automatically deposited from your employer, the money is available immediately.
Some employers will also allow you to deposit your check into several different accounts. You can have money automatically deposited into a savings account, a checking account, etc. This makes saving easy.
With some banks, having direct deposit will also enable you to avoid fees on your account, keeping more money in your pocket. Ask your employer or your bank for more information on how to set up direct deposit.