A bank account allows you to make day-to-day transactions, earn interest, and lay the foundation for efficient financial management. Knowing the different types of bank accounts, bank cards, and additional fees and terminologies can help simplify the process.
Here are four things you should know before opening a bank account:
1.Difference Between Checking and Savings Accounts
Let’s start with the most obvious one: What’s the difference between a checking and savings account? Here’s how they differ:
Checking Account: The purpose of a checking account is to manage day-to-day finances, such as paying bills or buying groceries. You can access your funds through debit cards, checks, and ATM withdrawals.
You can also link your account to money transfer apps for a contactless banking experience. Checking Accounts offer direct and easy access to your funds and are excellent for record keeping.
Savings Account: As the name indicates, a savings account is used to save money for short and long-term goals, such as building an emergency fund or saving for college. It allows you to earn interest on deposits and grow your money. Most savings accounts have limited withdrawals or transfers to make money less accessible to you.
Knowing the purpose, features, and benefits of the two most common types of bank accounts can save you money and hassle in the long run.
2. Types of Bank Cards
Next, learn the features of different bank cards. This will help you choose which card is appropriate for your needs when you’re opening a bank account. Common types include:
Debit Cards: They allow you to access funds from your checking account directly. You can also withdraw money from an ATM or a cash register. Debit cards can also be used for online payments.
Prepaid Cards: These cards must be loaded with money before making payments. In comparison to debit cards, a prepaid card doesn’t have to be linked to a bank account.
Credit Cards: They allow you to borrow money to make a purchase. At the end of the month, your bank will send a detailed credit card statement stating your required payment. A credit card has a limit, which is the maximum amount you can borrow or spend.
3. Associated Fees
Every bank imposes certain fees to cover operating costs and to make a profit. Common fees include:
- Monthly maintenance and operational fee.
- Overdraft fee.
- ATM fee for using an ATM outside your bank’s network.
- Lost card fee.
- Excess transaction fee.
- Foreign transactions fee.
- Inactivity fee.
Bank fees can vary depending on your account type. Make sure you compare the features of savings and checking accounts to make an informed decision.
4. Filling Out a Check
Despite the popularity of online transactions, checks remain a secure and traceable way to send large sums of money. They can be easily tracked and verified, ensuring peace of mind. Read SoFi’s guide on how to fill out a check before opening a bank account, which can save you unnecessary delays.
First, put today’s date in the upper-right-hand corner of the check. Write the recipient’s name and double-check the spelling. Next, write the payment amount in numbers and words. Sign your name on the designated signature line on the bottom right corner.
You can also take additional steps to make the transaction secure. This includes monitoring your account balance after sending the check and taking a picture of your check as proof.
