May Newsletter Topic - "Bank Accounts"

01.  Types of Bank Accounts
02.  Opening Accounts
03.  Banking features to compare & tips for saving
04.  Question and Answers

There are many reasons to have a bank account. First and most important is that your money is safer in an insured bank or credit union than under your mattress. Most banks and credit unions are insured so that if something were to happen to your money while in the possession of the institution you will receive it back. Did you know you can actually save money by having your money in a bank account?

When you have to pay bills you can write a check which will not cost you any money if you have an account. However, if you do not have a checking account you must purchase a certified check or money order. In addition to safety and saving you money, having a bank account will actually make you money. Bank accounts offer interest to you. Basically the bank or credit union will pay you a percentage just for keeping your money in their institution. Interest varies from different banks and credit unions. There are a lot of other perks to having a bank account, for instance direct deposit and automatic bill pay.

Bank fees have begun to spiral out of control over the past few years. It is very important to have a bank account, however it is also imperative to make sure you are not paying any fees. People who mismanage their accounts typically get charged. For example, if you write a check for $50 and you only have $30 in your account you will obviously be charged a fee.

On the other hand though if you are being responsible with your account you should not be getting hit with fees. Lately, ATM surcharges have gotten really high. Bankrate stated that banks now charge an average of 25% more to use another banks ATM than they did 6 years ago. On top of that cash advances, balance transfers and other fees have suddenly risen over the past couple of years. Within this newsletter we will discuss different options available to you.

1. Types of Bank Accounts

Checking Accounts

Checking accounts give you the opportunity to write checks or use an ATM. It is free access to your money and you make unlimited deposits. Some checking accounts offer interest whereas others do not. Find out all the fees and bank charges.

Money Market Accounts

A money market account is an interest bearing account. You still have the option of writing checks and withdrawing money. However, it is not as convenient as a checking account because you are limited to how many times you can withdraw money without penalties. Usually though there is a required balance in order to receive the interest. Some banks charge a fee for opening a money market.

Savings Account

Savings accounts are usually used to save money for a period of time therefore do not come with a checkbook or ATM card. The number of times you can withdraw money is limited. There may be fees or a minimum balance requirement on these accounts.

Certificate of Deposits

This saving option offers a guaranteed amount of return on your money. The way it works is you put a certain amount of money into this account for a specified amount of time. In turn you are given interest on your money. The terms vary from different institutions. Some offer terms of months while others require a minimum of a year or even more. Generally, the longer the term you agree to the higher the interest. If you withdraw the money earlier than the term permits, you will be charged a penalty. The thing to remember about CDs is that when your term is over you must notify your institution because most of the time it will renew automatically.

2.How to open a bank account

Step 1: Choose an institution.
The first step is to decide where you would like to bank .You can bank at a bank or a credit union. Once you decide what kind of account you want to open you can look at what each bank offers.

Step 2: Go to the bank's website or branch.
The benefit to opening an account online is that you can open it anytime. If you want to open it in person find out the branch hours and go to that location.

Step 3: Pick the account and services you want.
If you decide to open an account online, make sure you have done your research on what type(s) of account will work best for your specific needs. Keep in mind that you will not have the benefit of speaking directly with a bank associate.

Step 4: Providing Information.
The bank requires some information about you in order for them to open the account. It is usually required that you show two forms of ID, disclose your social security number and date of birth. This information is required to ensure that you are really who you say you are and also as protection for the bank.

Step 5: Understanding and agreeing to all terms.
In order to open the account it is required that you agree to all terms of the account. In other words if you have monthly charges that you must pay or a minimum balance that must be kept in the account you must agree to these terms.

Step 6: Finalize your information.
This is the part where you review all information and sign any applicable pages or documents. If you are online you will have to print, sign and return the papers.

Information that a bank must disclose to you


• APR (Annual Percentage Rate)
• Fees or charges that will be applied
• Minimum balance requirements

3. Banking features to compare & tips for saving

Features to compare when shopping around for
a bank or credit union:

• Interest Rate: Compare the interest rates that each bank offers. Find out if the rate will change after you open the account or depending on how much money you have in the account.
• Interest Compounding: This is when you earn interest on the interest that you earned.
• Fees: Find out if there is a monthly fee or a fee that is charged if your balance goes below a certain dollar amount.
• Limits: Find out what the bank requirements are for monthly withdrawals..
• Interest: If the account is closed before the interest is paid will the interest be credited to you.
• Time Limit: How long does it take for funds to be available once deposited.

Tips for saving money on your checking account
and ATM Fees

• Look for a bank with no fee checking accounts
• Buy your checks through a discount check dealer. Often times you can save a lot of money through these dealers instead of buying them directly through your bank.
• Be sure to know what is in your account at all times so that you do not bounce any checks. Fees for NSF checks range from $15 to $40.
• Choose a bank that offers an account with no minimum balance. If the account does require a minimum balance be sure that you are able to maintain that balance. Some banks charge fees if you drop below that balance.
• Choose a bank that has a large network and many ATMs.
• Use ATMs that do not charge fees. Find out if any grocery stores or local ATMs are affiliated with your bank and will not charge you a fee for using that machine.
• Plan ahead as to how much cash you will need and use your bank's ATM only.
• Use the cash back feature with your debit card instead of an ATM that is going to charge you a fee.
• If you plan on taking a trip be sure to get traveler's checks.
• If possible avoid ATM machines at casinos, big attractions (Disney World) and similar locations since they tend to charge higher fees.

4. Question and Answers

1. If I close my bank account will it hurt my credit score?
As long as you do not have a negative balance when you close your bank account it will have no effect on your credit score.

2. What do I need to open a bank account?
Each bank's requirements are a little different. Generally speaking though two forms of ID and a good rating with other banks is usually required.

3. How many bank accounts should I have?
You should only have two: one savings account and one checking account.

4. Can I open an account if I owe money to another bank?
It is very difficult to open an account when you owe money to another bank. Try to go for the smaller banks since they are more flexible with rules. Be sure to talk to the manager and be upfront about any previous problems.

5. Is my money safe?
As long as you deposit your money into a bank that is federally insured. Most banks and credit unions in the U.S are federally insured. You want to look for the FDIC logo. You can also call to find out at 800-934-3342.

6. What is the difference between a bank and a credit union?
A bank is a for profit organization. Banks make loans, hold deposits and provide other services for the public. They collect funds from demand, savings, and time deposits. A credit union is a not for profit organization. They offer services to their members or affiliations that share a common bond. Generally companies or employers are linked to credit unions. Credit unions are exempt from federal and local taxes.

7. What is the FDIC?
FDIC stands for the Federal Deposit Insurance Corporation. It is an agency that has been around since 1933. This agency insures the deposits of banks up to $100,000 per account. Most U.S banks are members of the FDIC.

8. What is overdraft protection?
It is a line of credit that is provided by your banking institution. It is simply a safety net for your finances. It protects you from bouncing a check or ATM charge. If you do not have the money in your account for a charge that was made the overdraft protection will kick in and pay the bill. You will then be charged that amount plus whatever fees or interest you have agreed to in advance. The benefit to having overdraft protection is that you will not be charged fees for insufficient funds from your bank or the other party who is cashing the check.

Got a question? Then contact our Education Team on 561-883-2398 Ex.310 United conducts regular seminars on financial education, including "How to Budget", come along and join us. To reserve your seat contact our Education Team on 561-883-2398 Ex.310

Newsletter 05
Rev.1
May, 2006