So you’ve got that first paycheck. Many jobs now prefer, or even require, you to have direct deposit for your paycheck. You’ll need to open a bank account to deposit your paycheck. But even if your job doesn’t require it, you still might want one. Here’s a couple of reason’s why real quick.
- Going to a check cashing store will cost you – 3-5% of your check will go right to them. Money that should go in your pocket.
- A bank account is a good place to put money “out of sight” so you’re not tempted to spend it, and thus have it if a need arises.
- Getting access means having access to ATMs and Tellers, so you can get cash in case some place doesn’t take credit cards, or their credit machine is down. (Went into one place, and a person had knocked over a telephone pole – no credit card processing for two days for them until it was fixed. Cash let me buy things right then.)
- Most banks will perform notary services for free for their customers.
Not all banks or bank accounts are equal. There are several things you need to consider when opening a bank account, and the first is actually the bank itself.
First you need to consider the location of the bank branches. How many do they have? Are they near places you go? What are their hours?
Most things can be done on-line, and that’s great, but having a bank where you can simply walk in is a huge deal. When we moved, we initially weren’t going to change banks because our old bank didn’t have any offices in our state. But boy did we change our tune fast when we needed to talk to someone.
Once you’ve ruled out the banks that don’t work for you, there should still be several left to choose from. Now you’ll want to decide what kind of account do you want. Do you want just a checking account or do you want a savings account as well?
All banks will have both types of accounts, but there are several things that will be different at each bank. Generally speaking, a checking account won’t give you any interest on your money – however, savings accounts don’t hardly any more either.
I usually recommend going with a checking account because of a couple of simple reasons. First, some places require a check, at least initially to set up accounts such as utilities, first month rent, etc (unless you want to pay an additional fee for using a credit card – no thank you), thus it’s nice to have a checking account. Also, you will probably need a canceled check to set up direct deposit at your work.
The next thing to consider is if there is a minimum balance. If the bank requires a minimum balance, if the amount of money in your account dips below this amount you will get charged a fee. Make sure you pick an account that you know you can keep the minimum balance or that doesn’t have a minimum balance. Most banks have a “no-frills” account which only requires $100 to $500 – also check to see if the minimum amount is a daily minimum balance, or and average. The daily balance means if on any one day you drop below the amount you will be charged a fee. The average means you can go below for a few days with out penalty, but you overall want to stay above.
Some bank accounts require an initial deposit, a certain amount of money be placed into the account to open it. Usually this is around $100, but could be more. Fancier accounts with additional features may require more. The most I’ve personally seen at a standard retail bank is $10,000 – but that is rare.
Do you want a debit card or ATM card? Not all accounts include a debit card (checking) or ATM (savings) or may charge a fee to have one or a fee if you use your debit card more than a designated amount of times.
Do you want access to an ATM? Some accounts charge a fee for this convenience or a fee if you use the ATM machines more than a designated time each month. Some banks only have ATM machines available at their bank, while others have ATM machines at their banks and also in other locations. Knowing which is which is important, as you will probably not be charged for using the ATM that belongs to your bank, but if you use one from a 3rd party service, you may be charged a fee by them and/or your bank.
Some accounts have a service charge every month. Many times there is a way to waive this service charge by doing something – keeping a certain amount of money in the account, have multiple accounts at the same bank, having direct deposit, etc. Find out if there is a way you can waive it that works for you. Not every checking account at every bank has a service charge, so look into that too.
Note: Direct deposit is usually the easiest way to avoid a service charge – so if your work offers it, make sure you set it up.
There may also be a limit to the number of deposits or withdrawals per month. If you may need to do either of these, be sure to check and make sure there is no limit before incurring fees.
Most checking accounts will not give you interest and if they do, they usually have many requirements that you must maintain. So if you want an account that will give you interest, you may want to consider opening a savings account or, more likely, a money-market account. Ask your bank about them. In the “old days” savings accounts would give you 3-5% interest on the money in the account, you’d literally earn money on your existing money. Today, a good account will give you 0.1% – which is only slightly better than nothing.
Once again, make sure you check about service charges, minimum balances and fees. Interest rates will vary based upon what bank and what type of savings account you choose. Be sure to look at interest rates and how often do you get paid the interest (monthly or quarterly).
Many people select a bank account based upon recommendations, or the one that is closest to their house/work or simply chose the one that their parents go to without looking at the account details. What works for one person may not be the best account for you. So go to several banks, ask questions about their accounts, get information to take home with you about the accounts and pick the best account for you.
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