Some items to consider before you choose to open an account with a certain bank:
Choose a bank that has plenty of branches and ATMs around town. This varies from region to region. On the West Coast Wells Fargo is a dominant player, while Chase or CitiBank are big on the East Coast. A few other banks are Bank of America, MBNA, Fleet, and Washington Mutual. Choosing a bank with plenty of branches can also save you money (see ATM Services below).
If you belong to a big-name bank, there is little to absolutely no chance of it folding and leaving you in a bind to find a new bank. So if you’re one of those people who don’t like change, stick to a bank with a secured place in the banking world.
- Minimum Balances
Certain types of accounts require you to maintain a minimum balance – that means that you must have at least a certain amount of money in the bank at all times. If your account ever dips below that minimum balance, then you’ll get charged a fine.
- Service Charges
Some accounts charge you a monthly fee for the privilege of using their services; however, that the service fees at most banks are usually fairly low. Ask about special rates for students.
- ATM Services
Unlike Israel, banks will most likely charge you a fee for using automated teller machines (ATMs) that don’t belong to them, and some will limit you to a certain number of ATM transactions per month on your bank’s ATMs (if you exceed that number, you’ll have to pay an additional fee at some banks).
Type Of Accounts
So now that you’ve picked out a bank, you need to decide what type of account you’re going to open. Essentially, there are four types of accounts:
A savings account is all about – surprise! – saving your money in an account. However, the main purpose of having this type of account is not only to store your money safely away, but also to gain interest. There are several types of savings accounts, and the details and names of each type vary from bank to bank. Below is a general description of the different types of Savings Accounts:
- Passbook Savings
This is the simplest type of savings account. You go into the bank, deposit or withdraw your money, and the teller makes a notation on your passbook (which records all the activity that goes on with your account). A passbook savings account is perfect if you’re a haphazard saver who randomly makes deposits and/or withdrawals.
- Regular Savings
This account can be linked to a checking account (more about Checking and Linking later), and the bank will send you a statement in the mail to let you know what’s going on every month. You’ll get an ATM card with this account which will permit you to withdraw cash at all of the bank’s ATM machines and at other universal ATM machines. A regular savings account is ideal for people who make a steady – but limited – income.
- High-Interest Savings
This account comes with all the benefits of a regular account, but has a higher minimum balance (that is, you have to always have a lot of cash sitting in the account). On the up side, it gives back a relatively higher interest return (compared to a passbook or regular savings account). So you store more, but you also get more back. If you’ve got a couple of thousand dollars for your bar mitzvah that you want to put away, this is the account for you.
- Certificates of Deposit (CDs in English of PAKAM in Hebrew)
The above three accounts are all “liquid” accounts, meaning that you can deposit money into and take money out of your account at any time (while taking care to honor your minimum balance requirements). When you put your money in a CD, you agree to put it away for a certain number of months. That means ABSOLUTELY NO TOUCHING. There’s no adding money to the CD, and there’s definitely no removing money from it either. Because you’re giving your money to the bank for three or more months at a time, the bank will pay you a (relatively) higher interest than they’ll pay you for keeping money in any of the other savings accounts.
All banks offer checking accounts, but some offer checking accounts that also work as savings accounts. Details as follows:
- Regular Checking
At most banks, you’ll pay a low monthly fee for check-writing services. This means that you’ll be set up with a checkbook immediately after opening the account, and have the option of writing checks that draw money out of this account. With regular checking, you’ll also get the money storage and ATM services.
- Interest Checking
This account features everything that a regular checking account has, but it includes an interest rate, so it acts like a regular savings account. Sounds too good to be true? It might be, depending on how much the monthly charge for maintaining such an account is at your bank – it’s usually a good deal higher than the monthly fee for a regular checking account. So you have to make sure that you always have enough cash in your account so that the interest outweighs the monthly charge.
Anytime you write a bogus check your bank will fine you an amount that will undoubtedly make you wince. So don’t write checks without making sure that you can honor them first. You can’t be overdrawn like back home.
Some banks offer a service called “overdraft protection,” which basically means that if the check bounces, the bank will spot you the amount of money for which you’ve written a check. (You’ll still be fined, though.)
If what you really need is a checking account, but what you want is to earn interest without paying the high fees for interest checking, you have the option of linking a savings account to your regular checking account.
The line between linked accounts is usually pretty distinct – you can’t have $1000 sitting in your savings account, earning interest, and expect to pay your checks through that same account. You must first transfer some of that money into your interest-less checking account first.
When making deposits, you’ll have the option of putting the money into one of your accounts. (You can shift the dough between accounts once it’s in.) I recommend that you don’t try to be slick by keeping all your money in your savings account until you have to pay for a check (and then transferring the exact amount you wrote the check out for into checking). Unless you live next door to, on top of, or inside the bank, and have easy access to it at all times, it’s quite possible that your fantastic scheme will end up costing you.
Opening an Account
Ways to open an account
Before you sprint down to the bank of your choice, we’d like to inform you that you might not even need to step out of your house to open your account. Thanks to technology, there are several ways to open an account now:
- Over the phone
According to the bigger chain banks, people are increasingly picking up the phone to open a bank account. You might want to consider looking up the number to your bank and giving them a call instead of making the trip. The process will take longer because you’ll have to mail in your signature, but it is a fairly simple way to go.
- On the Internet
Many banks – especially the online banks – offer applications over the Internet. Simply call the bank to ask for their website, or look it up. When you open an account online, you don’t have to deal with a pesky teller trying to talk you into opening a certain type of account. You can also leisurely browse through all your options and take your time in deciding what you really want. There’s no pressure, and you can always call the bank if you discover that you need some assistance.
- In person
If the above two options reek of detachment to you, you can always head down to the bank and get some of that human contact you crave so badly. Another advantage of opening a bank account in person is that you can ask the teller all of your questions and get immediate answers (as opposed to waiting two business days to get an e-mail response). Because you can sign all the papers on the spot, the process of opening an account is also faster in person.
Qualification and identification
Before picking up the phone, switching over to your bank’s website, or physically heading over to your bank, make sure you qualify for a bank account by preparing some ID first.
- Proof of age
You’ve got to be at least 18 years of age to open a bank account.
- Proof of address
A phone bill, driver’s license, or any other official document with your name and address will do.
- Proof that you are who you say you are
The bank will ask for your social security number, employer identification number, or VISA number to ensure that you exist, so have those digits handy.
In addition to these requirements, get out an ID with your picture, an ID with your signature, and anything else you’ve got that tells the bank you’re legit (a passport is always nice).
Questions to ask
The following questions MUST be answered before you give your money away. What if you forget to ask about time deadlines, and suddenly realize that you can’t touch your money for three years? So always get the answers to the following:
- Is there a monthly fee for maintaining this account? If so, what is it?
- Is there a minimum balance that I must keep within this account? If so, what is it? And what sorts of fees apply if I go under that limit?
- What is the interest rate of my savings account?
- Is the account for which I’m applying FDIC insured? (You definitely want your account to be insured by the Federal Deposit Insurance Corporation. If your bank ever goes bankrupt and loses all your money, the FDIC’s will pay you back down to the very last cent.)
- Is there a limit to the amount of transactions (deposits/withdrawals, check writing, ATM uses) I have per month? If so, how many do I get of each? What sorts of fees apply if I go over my limit?
- Where can I withdraw cash without paying any fees? What is the fee for using an ATM machine that doesn’t belong to this bank?
In addition to these questions, don’t be shy when it comes to asking for a clarification on anything that confuses you.