So, now you’re making money and you need a safe place to put it.
First things first. You need a bank account.
Sounds simple enough. But it can be easier said than done.
We break down the difference between checking and savings accounts, so you can pick the right one for you!
What is a checking account?
The most common type of bank account is often referred to as a checking account, or sometimes a transactional account. Checking accounts allow for easy access to your funds to withdraw cash or pay bills.
Did you know?
Technically, it is only called a checking account when a customer is able to write checks issued by their bank. However, as checks become less common, many people still call their basic bank account their checking account, even if they only use their debit card to make purchases.
Checking account features
Most banks provide the following standard checking account features:
- Debit card for purchases and ATM withdrawals
- Set of personal checks
- Ability to receive direct deposits
Depending on the bank, you may also be provided with incentives such as gift cards to sign up for an account or refer family and friends.
Customers do not generally receive interest on the money in their account.
There are often several fees associated with checking accounts. These include minimum balance fees, overdraft fees, and monthly maintenance fees.
A checking account is the best type of account to manage your everyday financial needs. You can set up direct deposit to get your paycheck deposited directly in your account or automatic bill pay to have money withdrawn every month to cover bills such as rent or electric.
You can also use the debit card that comes with your account to make everyday purchases and withdraw cash from ATMs.
What is a savings account?
While a checking account is good for everyday use, a savings account is better for holding money aside for the future. Therefore, most people have a savings account in conjunction with their checking account, rather than just having a savings account alone.
Because there is a legal limit to the number of withdrawals a customer can make per month from a savings account, customers do not receive a debit card to make withdrawals or pay bills with their savings.
Savings account features
So, why sign up for a savings account? Easy! They come with features specifically geared towards saving money.
Savings accounts earn interest on the funds you add, for example. That means you actually earn money just for letting a bank hold your savings. The average interest rate is between 0.06% and 1.5%, with online-only banks traditionally offering higher rates than traditional banks.
Generally, there are also lower fees associated with savings accounts, especially if you already have a checking account with the same bank.
You may still be required to maintain a minimum balance to avoid paying any fees.
And, since you can only make a limited number of withdrawals, you are less tempted to take out the money you are meant to be saving.
What do I need to start a bank account?
Once you decide which account you need, consider the different types of banks you can use.
Luckily, almost every bank offers a basic package that includes both a checking and a savings account. So, that should not complicate matters.
Then, all that’s left to do is go to a bank near you or go online to sign up for an account.
Either way, you will likely need documentation to prove your identity. Documentation includes a government-issued ID, such as a passport or driver’s license, and proof of address, like a utility bill with your name and address on it.
Keep in mind that some banks require a minimum deposit to open an account. You can use either cash or a check from another bank account to deposit the money into your new account.
Check with the bank first to see what documents they require to start an account and how much money you will need to make the initial deposit.
That’s it! Once you have a checking or savings account (or both!), you’re on your way to financial equality and independence.
It can be especially difficult in a new country to get started, but with a bank account you can start making purchases, receiving paychecks, and saving money.
To make things a whole lot easier, check out our MAJORITY membership if you’re looking for a way to put money in an account without paying all those pesky fees.
The MAJORITY Membership has your wallet’s best interest in mind.