Sometimes looking into opening an account or accounts in banks can be confusing. There are so many types of banks and bank accounts in the USA! Which banks are right for you to open an account in? Which types of accounts should you open? Below are some simple explanations of several types of banks and the accounts you can open.
There are many types of Banks in the USA:
1. Savings Banks – these banks can also be called “Thrifts”, and are businesses that are for-profit. Savings Banks take deposits of money, invest that money, and pay the depositor interest out of the money made from those investments. Some Savings Banks give credit to depositors.
2. Credit Unions – these banks are non-profit financial institutions. A Credit Union is owned and controlled by those doing business there. Membership is needed to get into a Credit Union, normally determined by where the person works, their location, or possibly where the go to church.
3. Commercial Banks – these banks used to only deal with businesses, but have extended their services to individuals. Commercial banks offer individuals most of the same services as other types of banks.
4. Community Banks – these banks usually provide savings accounts. Money deposited into these banks is then loaned out to local residents in the community, normally for home loans because they are the safest loans and the home provides very good quality collateral.
5. Investment Banks – these banks do just what the name says…they invest. Investment Banks buy and sell stocks and bonds and give investment advice to its clients. These banks do not accept deposits, make loans, and are not insured by the FDIC (Federal Deposit Insurance Company).
There are many types of Bank Accounts in the USA.
1. Savings Account – this type of account is probably the most basic account offered by banks. You deposit money into a savings account and earn interest on that deposit based on the APR, or Annual Percentage Rate.
2. Checking Account – this type of account allows for depositing, withdrawal, and the writing of ‘checks’ to pay bills and for purchases. Many banks now offer ATM or debit cards along with the standard checkbook when you open a checking account.
3. Certificate of Deposit (CD) – this type of account, also known as a CD, is for deposit only. You don’t touch the money deposited in a CD for an agreed upon amount of time, ranging from 6 months to several years, and you will earn a guaranteed amount of interest. If you do withdraw the money before the agreed upon date, many banks will charge you a fee.
4. Money Market Account – this type of account is similar to a savings account. The interest rate of a money market account is higher than the traditional savings account, but the minimum balance maybe $5000 or more. Please ask your specific bank about details of their offering.
Important Note: Always ask for details on the various costs/charges associated with each type of bank account. Some banks will have hidden charges, and you surely want to avoid those banks. Ideally, you want the bank to give you a print out or letter stating the various costs/charges associated with the type of account you want. The vast majority of Bank Account managers are honest and sincere, but there are a few who will create problems for their customers by inadequate disclosure of interest rates and account charges.
Next Step: There are multiple options available in each city and state. Please take the time to look around, do a proper survey, and then decide a bank that is right for you. Do not finalize any option before you speak with at least 5 different banks.