Whether you’ve saved $50 or $500, opening your first bank account is not only a step into your longer financial life, but something that everyone should do. Don’t let it scare you, it’s an easy and important decision to make, which will help make your financial goals all easier. There are many benefits to opening your first bank account, from being able to track and save your money in a secure place to paying your bills online, paying without cash or withdrawing from an ATM, and creating long-term savings.
Here’s an overview of how to open your first bank account and tips on choosing the best option for you!
Checking vs. Savings Account
There are two key accounts that are part of your first bank account. A checking account is a bank account that allows you easy access for day-to-day cash deposits and withdrawals. A checking account is a secure source for receiving and storing money that you need on a quick basis. A checking account is most often associated with bill pays, ATM withdraws, direct deposits, and just overall convenience.
A savings account is a bank account that has specific requirements such as a limited number of withdrawals, no checking or debit card linking, limited transfers, and cannot be overdrawn. A savings account is most often associated with building an emergency fund or saving for a short-term goal. One important thing you’ll want to understand is if the interest rate on your savings account is reasonable. According to the FDIC, the national average interest rate on savings accounts currently stands at 0.06% APY. This applies to both average and large deposits.
Choosing the Right Bank
When opening your first bank account, consider your options and potential costs. There are many banks to choose from, including large national banks to local banks, online banks, and tech alternatives. You’ll want to pay attention to how much the fees vary between them all. A few pros and cons can be found in each choice so you’ll want to research what works best for your financial situation and goals.
- Large, multinational banks: Traditional, large banks have more options and convenience with locations worldwide, but typically have a wide range of fees and lower interest rates.
- Local banks: community banks are essential to various areas. Since these types of banks are more tight-knit, they are more flexible with loan requirements than big banks.
- Credit unions: These financial institutions are cooperatively owned by members and democratically run by members who vote on things like interest rates. Since they are non-profit, account members usually get better rates on both loans and savings interest.
- Online only banks: online banks tend to have more favorable rates than big banks and can pass higher savings to customers.
Facts to Consider When Selecting A Bank
- Fees: This is a major consideration in selecting the right bank for you. Since fees often depend on your banking habits, you’ll want to pay attention to what spending and withdrawal habits you typically have. Some monthly account fees that may be triggered by low balances include ATM use fees, late payment fees for loans, bounced checks, and overdraft protection fees.
- Interest Rates: Another important factor to consider is how much interest you can earn on deposits, or will be charged on loans. Aim for high-interest accounts so you can generate income through your savings account.
- Balance Requirements: Some banks have minimum balance requirements that can trigger fees that include an average monthly balance, minimum balance, and minimum amount in savings that you’ll want to make sure you fit so that you don’t get charged with these fees.
- Types of accounts offered: Checking and savings accounts are the main two accounts you’ll want to know the details off, but if you’re looking for reward checking accounts, there are banks with those as an additional option.
- Types of financial products available: While it may not be your main priority now, you’ll definitely want to consider which loan and asset growth products you might want down the road such as a car loan, home loan, individual retirement agreements, credit card loans, etc.
Once you decide which bank you would like to open an account at, you can either do so in person at the bank or go apply online on their website. The great part is that you are not tied to one bank for the rest of your financial life. As your financial needs and goals change, you can always open another bank account at the bank that fits your needs. Also, congrats on opening your first bank account!