Banking

A bank account can keep your money accessible and some offer tools and interest.

Bank Account Basics

There are two main types of bank accounts: checking and savings. Checking accounts allow you to easily access your money. Savings accounts allow you to store money and typically earn more in interest.

Helpful Terms

Automated Teller Machine (ATM): A computerized machine that allows you to perform basic account transactions like checking your balance, withdrawing cash, or depositing cash or checks.

Balance: The amount of funds in your account.

Bank: Business that offers accounts for you to keep your money. These businesses also typically offer loans and credit cards. Banks can also be called financial institutions.

Credit Union: Nonprofit financial institution that requires a membership. Each credit union determines its membership requirements. Memberships are often based on belonging to the same employer, church, school, or community organization.

Deposit: The money to be added to your account.

Direct Deposit: An electronic transfer of funds into your account. Typically your employer will offer to direct deposit your paycheck on each payday.

Fees: Charges for account services.

Minimum Balance: The lowest amount required to open account, earn interest, or avoid fees.

Overdraft: A negative balance caused by withdrawing more money than the account has.

Withdrawal: The money to be taken out of your account

Checking Accounts

A checking account can help you manage your everyday finances. Be sure to look at the terms of any checking account you are considering. Some charge a monthly fee for having an account unless you maintain a minimum balance or deposit a minimum amount of funds each month. Some earn interest but may have a higher minimum balance to do so. Many financial institutions offer student checking accounts that have lower minimum balances or fees. 

Checking accounts typically come with a debit card and checks. Both allow you to use the funds in your account to make purchases. It is important to make sure you have enough funds to pay for any purchases you make using your debit card or checks. Debit cards typically remove the funds from your account within a few business days. When you write a check, the money will not be removed until the check is cashed which can take days, weeks, or even months. You are responsible for keeping track of what you have spent using your debit card and checks to ensure you do not spend more than you have. Debit cards can also be used at ATMs to withdrawal cash. Checks can be written to provide cash as well.

You can also use your checking account for automatic bill payments. Many companies offer automatic bill payment through your account. If you choose to do this, the company will automatically withdraw the amount owed each month. For instance, if you have a car loan through your bank, you could set up an automatic bill payment to have your car loan payment automatically taken from your checking account on the due date. Automatic bill payment ensures that your payments are made on time. Remember to make sure your account has enough funds to cover all your payments.

Savings Accounts

Savings accounts can help you store money for future expenses. These accounts typically earn more interest and have limits to how many times you can withdraw money each month. Like checking accounts, you should look at the terms of the account. Savings accounts may charge a monthly fee to keep the account or require you to maintain a minimum balance or deposit a minimum amount each month to avoid the fee. Many financial institutions offer a student savings account that have lower minimum balances or fees.

Savings accounts are a good place to keep funds for emergency expenses like a suddenly lost textbook or broken laptop.