Open A Banking Account With One Of These Top Options

You may want or need to open a new bank account for any number of reasons. For example, recent events relating to the COVID-19 outbreak have caused certain banks to change their policies. You may want an account at a bank that offers the business hours and support you need. Even when COVID-19 is not a factor, a new bank account has many uses. You can take advantage of perks offered for opening the account, such as monetary bonuses. Your new account may also help you keep your funds organized, allowing you to have different accounts for specific purposes, such as a regular spending account versus an emergency fund.

Deciding to open a new bank account is one thing. Choosing the type of bank account that is most useful to you is another. There are several banking options from which you can pick. To make up your mind, you must understand each option involves unique features, as well as certain downsides. Here is a brief overview of the top bank account options available.

Savings Accounts

You can think of a savings account as similar to a storage unit you use to store items for a later date. The savings account differs only because it is a means of storing money, rather than possessions. You can use a savings account for several long-term purposes. Common options include saving funds for:

• Purchasing a Home
• Purchasing a Large Item (Car, Boat Etc.)
• Keeping an Emergency Fund
• Saving Funds for Your Child for College
• Saving for a Vacation

A savings account has certain benefits. For example, it typically has a high interest accumulation rate compared to other types of bank accounts. That means you can accrue significant additional funds by maintaining it for a long period. However, the interest rate on a savings account does not typically remain the same for the entire period the account is open. It changes based on market conditions. You can also opt to have a portion of your pay check automatically placed into your savings account each pay period.

One of the biggest limitations of a savings account is federal regulations and individual bank regulations limit how many times you can withdraw from it per month. That means you cannot always access your funds when you want them. It also means your savings account is not useful for day-to-day activities like making utility payments. If you want to open a savings account, be aware some banks charge fees for savings account setup or maintenance. Others offer free savings accounts.

Checking Accounts

In contrast to a savings account, a checking account is designed for frequent use. You can even set up your utility payments to automatically withdraw from your checking account. A checking account typically comes with paper checks and a debit card. Thus, you can withdraw money from it easily whenever you want.

Like savings accounts, some checking accounts are free. Others have recurring fees. When fees do exist, you can often avoid the need to pay them by meeting rules provided by your bank. For example, you may have to do one or more of the following:

• Maintain a Minimum Balance
• Perform a Minimum Amount of Monthly Transactions
• Use the Account to Receive Direct Deposits from Your Employer

Money Market Accounts

Money market accounts are similar to savings accounts in terms of their often high interest rates and transaction limitations. However, you can write checks from a money market account. You also receive a debit card connected to your money market account when you create it. Typically, you can only use your money market account up to six times each month. However, withdrawing funds from an ATM is not counted as one of those transactions.

Certificate of Deposit (CD) Accounts

A CD account is a specific type of savings account. When you open a CD you make a deposit one time. That money stays in the account for a preset period of time, such as five years. During that time, it accumulates a high amount of interest. You can choose to open a variable interest rate CD or a fixed interest rate CD.

No Deposit and Bad Credit Bank Account Options

If you want to open a bank account without a minimum balance required, a checking account is the best option. There are many brick-and-mortar banks that offer no deposit or low deposit options for opening one. Multiple online-only banks also allow you to open a checking account without an initial deposit. Some of them include:

• Chime
• Acorns
• Lending Club
• Capitol One 360

It is also important to know a bad credit history does not preclude you from opening a checking account. Banks do not usually check your credit score unless you are applying for a loan. However, the bank you choose is likely to check your banking history by investigating your ChexSystems score. ChexSystems tracks activity like bad checks in your banking history.

If you do have a poor ChexSystems history, all is not lost. You can apply for a second chance checking account. However, a second chance account typically has many restrictions and fees. After a year or two, a second chance checking account is usually converted to a regular checking account with reduced restrictions and fees. In the meantime, you may not typically use a debit card with your second chance account. The bank may also require you to keep a certain minimum amount in your checking account at all times.

Other Considerations When Opening a Bank Account

If you have trouble deciding what type of bank account to open, you can talk to a representative at the bank you intend to use. He or she can advise you and inform you of the perks of opening certain accounts. Make sure you also discuss all fees associated with each account type. You may also benefit from opening multiple accounts at once or opening an account at a bank where you already have a positive history. For example, you can easily transfer funds from a checking to a savings account when both are at the same institution. Use those and similar factors to make your final decision.