You probably have a checking account and maybe a savings account, but chances are you don’t give much thought to the impact banking has on your finances. Being knowledgeable about how banks work can save you money. You might be surprised just how much your banking arrangements and habits are costing you.
Choosing a bank can have a bigger impact on your finances than you might realize. Important factors to consider include convenience, free ATM access, online banking platform, and fees (which can add up quickly and drain your account). Many banks charge monthly fees unless you maintain a minimum balance or use direct deposit for paychecks. They may also charge your account if you use a live teller (instead of an app or ATM) or a “foreign” (meaning not in their network) bank’s ATM. Virtually all financial institutions charge for bouncing checks (that you write or deposit), stopping payment on a check, and overdrawing your account.
Think about your banking habits and what you want your bank to do for you. Identify the services that are most important to you, compare fees for those services between several different banks, and then choose the bank that fits your needs for the best price. If you use an ATM to withdraw cash from your account on a weekly basis, for example, you wouldn’t want to choose a bank that doesn’t have ATMs near your home or workplace or one that charges a hefty fee for ATM transactions. You may decide to use a traditional brick-and-mortar bank in your neighborhood or a strictly online bank.
Another big choice is deciding between a credit union and a traditional bank. Banks are owned by investors; credit unions are owned and controlled by customers, who are members. Credit unions are nonprofit organizations and return surplus earnings to members in the form of lower interest rates on loans, increasing interest rates on deposits, or offering free or low-cost services. While banks, especially large national banks, may prioritize profits and shareholders, credit unions prioritize their member-customers.
Both banks and credit unions offer accounts that are insured and fully backed by the US government. This ensures that your accounts will be protected for up to $250,000 in each participating financial institution. Banks are backed by the Federal Deposit Insurance Corporation (FDIC); credit unions are covered by the National Credit Union Administration (NCUA).
Joint accounts (accounts with two owners) have $500,000 of protection ($250,000 for each owner) and are treated as separate from any accounts held by each individual owner in his or her own name. That means you would be insured for up to $250,000 in accounts in just your name, as well as half of a $500,000 joint account. Retirement accounts such as IRAs are also treated separately for purposes of the $250,000 FDIC protection. For example, a married couple could have the following accounts FDIC-protected at the same bank:
That would protect a total of $1,500,000 in one financial institution!
Make Sure Your Bank Is Insured
How do you make sure a bank or credit union is government-insured? The vast majority are, but some are not, so it pays to check. Go to the FDIC website at www.fdic.gov, click on “BankFind” and enter the bank name and state or its URL. For credit unions, visit www.ncua.gov or www.mycreditunion.gov.
Online banking allows you to manage your money via the Internet—when and where you want. You can view all your banking transactions, move money, view and print your canceled checks, and pay bills online. You can also set up notifications for when checks clear or your balance goes under a predetermined minimum. Many online-only savings accounts offer higher interest rates than traditional banks.
The main benefit of online banking is convenience. You can access your accounts and complete transactions from anywhere at any time. You can automate transactions to beef up your savings or make sure bills get paid on time every month.
Mobile banking apps add even more convenience than online banking. With these apps, which are offered by many banks and credit unions, you can manage your money from your smartphone, no matter where you are.
These apps allow you to deposit checks remotely, so you don’t need to go to the bank or ATM. You can do virtually any banking function using your mobile banking app, including:
The only thing these apps can’t do? Give you cash. However, they can direct you to the nearest ATM or brick-and-mortar bank so you can get the cash you need quickly.
In addition, payment apps like PayPal, Zelle, and Venmo let you quickly and easily transfer money to other people. You can use these apps for everything from secure online shopping to splitting a dinner check when you’re out with friends to sending and receiving money immediately. You can link these apps to bank accounts and credit card accounts, then pay whichever way works better for you at the time.