When you begin to stay and earn a living in America, one of your main concerns would be how you would be dealing with your money. It is safe and convenient to have a bank account as it will help you to keep track of your transactions so that you will know where all your money is going and also protect you from theft of your hard earned money. There are many important things that you should keep in mind before opening a bank account.
The banking facility in America is highly regulated and secured. But there are some people and institutions who might take advantage of your innocence. There are many resources that will help you to make correct financial choices so that you can keep your money safe while living in America. Following is the list of resources related to banking:
Checking Accounts in USA
A transactional account allows secured and frequent access to funds. In America this type of account is called Checking Account. Mostly this type of account does not provide you interest and you can deposit or withdraw any sum of money how many ever times you want, subject to availability of funds. Most banks do not charge you any fee for opening the account, but if you do not have minimum balance in your account then your bank might charge you a maintenance fee which is usually $10 per month. So make sure you always have sufficient funds in your account if you want to save yourself from paying this maintenance fee unnecessarily. Other banks which do not have any minimum balance limit do not charge you any kind of maintenance fee. All you need to do is visit two or more banks and choose a bank which best satisfies all your needs.
Beware: If you are not careful then Overdraft fees will be charged if you spend more money than available in your account. Therefore check your transactions frequently and try not to get below zero.
Money Market Accounts in USA
Money Market Account requires a very high minimum balance to be present as it offers you a high rate of interests. This account invests the money in government and large corporate securities. The frequent withdrawals are not as easy as checking accounts. Usually the number of withdrawals is restricted to six or even less. Money market accounts will allows you to write up to three checks each month. This type of account is useful for those people who want to earn more interest or who want to keep their money as liquid.
Savings Accounts in USA
This account is helpful to store your saving for a long time. The number of withdrawals is restricted to few transactions per month and is not helpful for frequent use like checking account. The banking also pays you monthly interest for having certain amount of money in your account. The rate of interest is however less than rate offered by money market account and is usually between 0.5% and 2 %. You will not gain much from this type of account especially if you have kept your money for a long period. Some banks also allow you to link your checking and savings account to avoid paying an overdraft fee.
Money can be accessed through an ATM (Automatic Teller Machine) or by going to the bank in person. Most of the banks provide you ATM-come-debit card with the help of which you can check your balance, withdraw your money… Some banks also allow you check your balance, transfer money from one account to another online through internet banking.
Certificates of Deposit (CD) in USA
This type of account offers you a fixed rate of interest provided you deposit your money for a specific time period. The money can be drawn only after the period ends. You will be allowed to take your interest before the term ends but the bank will not allow you to take any part of the invested money.
If you withdraw your money before the term ends then you are subjected to a hefty penalty which can be more than the amount of interest earned resulting in some part of loss of your deposits.
Some banks will inform you that the term has ended and you collect your interest and your deposit. You can also renew the certificate of deposit or this will be done automatically by the bank.
An important term that you should be aware of is annual percentage yield (APY) which is the rate of return you earn accounting for compound interest. Addition of interest might vary depending on certain factors. This term is not the same as annual percentage rate (APR), which is the simple interest rate at the end of the year.
Quite often many people use CD Laddering strategy. Here a person divides his funds and invests them into different CDs. The term (or maturity) dates may vary among the CDs, say one is for a year, the second is for two years and the third is for three years. On expiring of the first one the depositor can add the funds into the three-year CD which has only two years remaining and therefore get a higher interest. This strategy gives you good liquidity with early-maturing funds instead of reinvesting.
Online checking account and online savings account operate the same as your account in your local bank. Using online banking your account can be managed and funded easily on the Internet. Usually the bank provides you with a username and password through which you can access your account online and perform any kind of transaction. Do find out if your bank provides Internet Banking facility and make maximum use of it.
The bank officials never ask you for your username or your password make sure you do not disclose any such confidential information to anyone or to any emails.