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Bank Accounts

Now that you’re 18 and earning your own money, you will need an account for depositing funds, if you don’t already have one.

Woman at ATM

Federal and national agencies oversee banks and credit unions to protect your money and ensure proper business practices.

The Federal Deposit Insurance Corporation (FDIC) is a government organization that guarantees the safety of your money. Banking institutions that are insured by the FDIC will have stickers posted on the windows and inside the branch. If you’re unsure if your bank is insured, ask a branch manager. The National Credit Union Administration (NCUA) is a federal agency that regulates federal credit unions. Credit unions are financial institutions that are controlled by the account holders. Credit unions have a self-elected board of directors that sets interest rates and other bank regulations.

Banking Terms

Any time you put money into your account, it is called a deposit. You can deposit cash or checks. Depositing cash is always reflected immediately in your account. If you deposit a check, the amount may not post right away. Ask when you can expect the check to clear and the money to be available.
The balance is the amount of money you have in your account. This amount will change as you make deposits and withdrawals.
Any time you take money out of your account, it is called a withdrawal.
When you withdraw or spend more money than you have in your account, it is called an overdraft. There may be a fee associated with overdrafts to your account.

Benefits of Using a Bank

Safety and Record
Money in a bank is safe from theft, loss, or fire. Plus, having money in a bank means a bank is monitoring and keeping record of your finances. If you have a dispute over a payment or need to check your balance, a bank stores that information.
Banks make accessing and monitoring your money easy. With online banking, direct deposit, and automated teller machines (ATMs), you can access your accounts at any time and almost anywhere.
Other businesses offer check cashing services but will charge you a fee per use. A bank will not charge you for these services.
The FDIC insures your money to the maximum amount allowed by law, which currently is $250,000. Thus, the FDIC will return a customer’s money up to this amount in the event a bank closes and cannot return a customer’s money
Money kept in a savings account with a bank earns interest. Interest is essentially “free money” earned at a percentage.

Picking a Bank

Selecting the bank that best fits your needs can be tricky. Shop around to find a bank that makes you feel safe and in which your money will be protected. Record basic information on the bank as well as details on convenience, extra fees, and security. Choose an institution you think will best protect your money, is located where you feel safe, takes proper security measures, and doesn’t bombard you with hidden fees and high interest rates.

  • Bank week and weekend hours?
  • Nearby branch?
  • Multiple branches and ATMs
Extra Fees
  • ATM and debit card fees?
  • Checking and saving account fees?
  • Online or mobile banking fees?
  • Overdraft fees?
  • Surcharge1 fees?
  • FDIC/NCUA insured?
  • Cameras?
  • Security guard?
  • Outdoor lighting around ATMs?

Opening an Account

Understand your bank’s policies on checking accounts, overdraft programs, and savings accounts.

Checking Accounts
Ask the account manager if there are any fees for opening and maintaining a checking account. Note if there is a minimum opening or monthly balance. Some banks require you to always have a certain amount in your account and will charge extra or put holds on your account if the amount goes below the minimum.
Overdraft Programs
If your account balance falls below the required minimum, what is the fee? Does the bank offer low balance alerts? If you have multiple accounts, can they be linked to cover overdrafts? Is there a fee for that?
Savings Accounts
Just as with a regular checking account, you will need to know the minimum balance required to open a savings account and if there is an account minimum. Savings accounts are beneficial in that they offer you interest. Ask what the annual interest rate is. The higher the percentage, the more “free money” you will earn. Know how often the interest is compounded (see note below). Quarterly? Annually? The more often the interest is compounded, the more money you will earn.

Note: Compounding interest means adding the interest you have earned to your principal (beginning balance). For example, if you deposit $100 into your bank account with 20 percent interest, at the end of the year you will have $120 (100 × 0.2 = 20; 100 + 20 = 120). The next year, you will have $144 (120 × 0.2 = 24; 120 + 24 = 144). Thus, the more often your interest is compounded, the more money you will earn interest on. Banks may compound interest annually or quarterly.

1 Surcharge: Extra charge for using an ATM not owned and operated by your bank.

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