There are various types of bank accounts that you can open at a bank or credit union. You can either open a checking or a savings account. Bank accounts are essential when it comes to our everyday transaction activities. Millions of dollars pass through banks every day from different sources. But what is the difference between a checking and savings account? You will learn about the difference between the two bank accounts shortly.
Even though checking and savings accounts are the main types of bank accounts, there are other accounts with particular purposes. You can have a CD account that allows you to lock money for a certain period before withdrawing. Depending on your personal needs, you can also have a money market account or even Individual Retirement Accounts (IRA). Whichever the account, you can deposit and use money as per the terms and conditions.
You can open an account online or at a physical branch. Online account opening is becoming popular as many banks are embracing technology to make their services convenient and easy to access. Opening an account at a branch takes a lot of time as you have to queue, fill in some papers, and wait for verification. Online account opening can take a few minutes to open, and you can open one from anywhere so long as you have a secure internet connection.
What are savings and checking accounts?
Savings and checking accounts are the two main types of bank accounts that you can open in a bank. A checking account allows one to deposit money for day-to-day spending. You can access the funds online, at a physical branch, or an ATM using a debit card. Checking accounts come with debit cards, which are payment cards that allow you to pay for goods and services. A debit card also allows one to withdraw money at an ATM or over the counter. You can also send money with a checking account number instantly to account holders within your bank.
Savings accounts allow you to save money for future use. You can easily save funds for the project that you intend to carry out at a particular time. Since keeping money in your house is dangerous, you should keep money in a savings account to avoid the worst happening to your money. Savings accounts earn you interest with time.
What are the requirements to open a bank account?
It is essential to know the various things that you require to open an account. The federal government requires that everybody opening an account should present various documents, which include the following.
- Social Security Number (SSN)
- Identification document: can be your driver’s license, a passport, or a government id card.
- Phone number
- Email address
- Physical address
You should also be ready to present any other document that your bank or credit union requires.
How do you open a bank account?
As I mentioned earlier, you can either open an online account or one at a physical branch. To open an account, you have to study the available banks and see the one that pleases you. You should check on the various features that an account from a particular bank offers to know whether it fits your needs.
Again, you should decide whether you require a checking or a savings account. There are various free online checking accounts with no opening deposit to open with your phone or tablet. When opening your account online, you have to visit the concerned bank website to start your application. You can move to the account opening section and start your application.
You should also upload all the necessary documents that are necessary for your account to be verified. For your information, you have to upload your identification document and proof of your physical address. Banks can prove your phone number and email address when they send verification codes to your phone number and email address.
What are the factors to check when opening a bank account?
There are various factors that you should check when opening your account. There is no way you can wake up and start opening a bank account without checking how the account works. The following are the factors you should check to make sure that you get the best account.
i) Opening deposit
Some banks require you to deposit a particular amount in your account as soon as you open the account to be able to use it. You may not have money to deposit in a bank account during the account opening. In such a scenario, you should consider a bank with no opening deposit.
ii) Minimum balance
Some banks require you to maintain a particular minimum balance in your account. That means you should withdraw money to a particular amount. Such bank accounts can inconvenience you as you may need all the money in your account, but you will not access it.
iii) Monthly maintenance fees
There are bank accounts with high maintenance fees to make sure that they make as much money as possible from your deposit. Interestingly, some banks do not have monthly maintenance fees at all. If you get one, the better. However, do not be lured by zero maintenance fees as there may be other hidden costs that can drain you.
iv) Annual fees
Some banks charge annual fees on your account. Annual fees are usually large amounts of money as you can find yourself parting with $70, $80, or more, depending on your bank. If possible, avoid bank accounts with annual fees.
v) Transaction costs
There are various kinds of transaction costs that you may incur with your account. You can have ATM transaction costs, over-the-counter withdrawal costs, or even money transfer costs. The lower the transaction costs, the better. In most cases, it is free to withdraw money from checking accounts.
vi) Annual Percentage Yield (APY)
Once you open a savings account, there is the interest rate that you should earn per given time. APY is the interest rate that you can earn every year. The higher the rate, the higher you will earn. Some savings accounts also earn you interest when you maintain a particular amount of money in your account. Checking accounts have high-interest rates compared to savings accounts.
What Is the difference between a checking and savings account?
There are considerable differences between checking and savings accounts. They include the following.
- Checking accounts allow you to access your money 24/7, while savings accounts allow you to withdraw money during specific times. The checking accounts, also known as spending accounts, help you keep your money for your everyday expenditure. Savings accounts help you to keep your money for future use.
- Checking accounts come with debit cards to help you withdraw money from your checking account at ATMs. On the other hand, only a few savings accounts come with debit cards. You can easily get an online bank account with an instant debit card that you can use online for various kinds of transactions.
- The Checking accounts which allow you to save money have high APY, while APY for most savings accounts is usually minimal.
- Checking accounts do not have withdrawal limits, while savings accounts usually limit the amount of money you can withdraw in a given time.
Can I open a bank account if I am in the ChexSystem?
ChexSystem is a body that keeps records for bad account users to be referred by other banks when you request to open an account. You can enter the ChexSystem if you write many bouncing checks, close your account with a negative balance, or perform fraudulent transactions using your bank accounts.
You should not worry if you are in the ChexSystem since you can still get an account. Various banks can offer a checking account with no ChexSystems. Even though it is challenging to come across such banks, you can get one within your town to help you in your banking endeavors.
Does a second chance account come with a debit card?
If you get a second chance checking account, you may not get a debit card. Most second chance checking accounts do not offer debit cards whatsoever. For the few that offer you a debit card, they offer a lot of restrictions on how you can use the account. You may not get a chance to write checks as you could do with an ordinary checking account.
Most second chance checking accounts need you to make a particular deposit in your account. However, you can open a second chance checking with no opening deposit at some banking institutions and use the account to rectify your poor banking history.
For your information, second chance accounts help you to restore a good name with banking institutions. It may take several years for your details to be out of the ChexSystems, but you will be out to qualify for the ordinary accounts in the long run.
Bottom line
Checking and savings accounts are the main types of accounts you can open at a bank or credit union. A checking account allows you to keep the money for your everyday spending. You can access money in a checking account 24/7. A savings account allows one to keep money that they intend to spend in the future. Money in a spending account earns an interest rate.
