What do an estimated 70 million Americans have in common?
They don’t have a bank account.
The reasons are varied. Sometimes it’s due to bad credit, or lack of access to a bank branch. Older people still have the memory of watching their parents’ money evaporate during the Depression’s ‘bank holidays.’
Often, though, it’s due to inertia. “Why should I go to the trouble of a bank account?” Would-Be Depositor asks. “What’s in it for me?”
*Well, for starters, it’s a lot safer than our ancestors’ accounts. Part of that is thanks to the FDIC, or Federal Deposit Insurance Corporation. This government agency stands behind the institutions it insures up to $250,000 per depositor. That’s a lot of cash. (Check for bank ratings, insured banks and other updates on their website.)
*Automatic check deposits. Many companies prefer using automatic deposit, rather than issuing paper checks. Not only that, it’s safer. Case in point: After working all winter at a local ski resort, our oldest daughter endorsed and mailed it to her bank. It never got there, thanks to a light-fingered thief helping himself out of Daughter’s mailbox. Money: gone.
Your checking account also gives you the freedom to hook up to a 401(k) or other investment account. Now you can not only write checks when needed, but transfer money to other accounts. An automatic draw lets you save more easily for retirement, and helps build up an emergency fund.
*Bill Pay arrangements. Save on postage, late fees and general hassle with an automatic bill-paying plan. Many institutions now offer this as part of their benefits, and it’s easy to set up. It also can be arranged around the times income flows into your account.
*Make it easier to budget. Consider opening one main account, then a few others. That way, you can automatically transfer funds to save for emergencies, pay your mortgage or auto loan, or plan for an upcoming trip. Once your main account is in place, it’s easy to open and transfer funds when you’re paid. The old adage is true: once the money is ‘gone,’ it really is “out of sight, out of mind.”
*Minimize your fees. No extra fees for cashing checks, like a check cashing store…it’s free! Your local bank can also accept coins (and no percentage off the top), provide a notary public (ours charges a reasonable $5 for services), and often gives you price breaks or waives fees for loans, CDs and other extras. Many banks also offer free checking. (Check for minimum deposits needed and other requirements before you open the account.)
*Need money? You don’t have to wait. Keeping an online account, like Paypal, means cooling your heels 3-4 business days before the funds are available — or longer. A bank account, on the other hand, gives you access to that money now, especially if you use ATMS. Many institutions not only let you withdraw money whenever you need it, day or night, but have agreements with other banks. That means you won’t necessarily have to cough up ATM fees, even if you’re using a bank across town – or in or out of the country, including Mexico and Canada. (Ask beforehand about access and fees.)
*Debit cards are great! Have you had trouble with credit cards before? A debit card lets you make purchases wherever credit cards are used — and for no extra fee. It also keeps you from using money you don’t have. Debit cards reduce the need to carry extra cash around, yet protect the funds you have by being easy to cancel or put on temporary hold.
*Protect yourself from overdrafts. Ouch – a check bounced. Many banks let you sign up for an automatic overdraft program — you’ll have to pay the overdraft fee, but you won’t have to deal with repeated check submissions, and the resulting penalties. (These can really add up, too.)
*Connect everything electronically. You don’t need an online account, when you can automatically see your account information via the Internet. Many banks also let you monitor any other financial accounts, like money markets, CDs and loans. Why is this important? For one thing, it lets you easily make payments and transfer funds. For another, it gives you instant access to any movements (i.e., transactions) in your money, legal or not. And…
Being able to see everything gives you a proactive jump if something’s wrong. A would-be thief attempted to siphon off funds from our savings account. (Apparently he’d gotten access via stolen credit card information.) Thankfully, we caught Mr. Sneaky early on, thanks to 24-hr access, and shut him down before the money even left our account. Whew.
*Finally, bank accounts open the door to other services. Need a home improvement or auto loan? You’ll find it easier at a bank who already knows you’re honest and pay your bills. Other investment vehicles are also available, including CDs and money markets. Your personal bank can often offer price breaks, discounts or a better interest rate. They can also help you rebuild shaky credit with secured loans and credit cards; many issue their own credit cards, with bonus offers and cashback discounts.
When opening an account, or changing banks, take some time to read everything, including the fine print. Check upfront what fees they charge, if minimums are required, and what interest rates are offered.
Banking not only helps you use and grow your money more wisely — it gives you peace of mind.
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