- A bank is a financial institution that accepts deposits, securely holds funds, and makes loans.
What is a Bank?
Banks are financial institutions that provide a number of services to their customers. The two most common types of accounts that banks offer are checking and savings accounts, which allow customers to deposit and withdraw funds that the bank keeps secure.
With checking accounts, customers are provided a checkbook or check card which can be used to make payments or withdraw money without penalty. Savings accounts typically do not come with checks and limit a customer’s access to funds. While savings accounts allow withdrawals, they usually limit them and charge fees if those restrictions are broken.
Though checking accounts offer more versatility, savings accounts pay interest on a customer’s money in the account. Essentially, they are intended for funds that a customer plans to let sit and accumulate interest, while checking accounts are intended for funds that a customer plans to access frequently. Basically, checking accounts are for everyday spending, while savings accounts are for long-term savings.
In addition to checking and savings accounts, banks also offer a variety of loans. One kind of loan that customers frequently seek from banks is a home mortgage. Some other services that banks provide are wealth management and currency exchange.
Which Bank has the best checking and savings accounts?
Finding the “best” checking and savings account largely depends on what you’re looking for. Some people might be more interested in avoiding ATM fees while others might need a bank that doesn’t require a minimum balance. There is no overall best bank—it depends on each person’s individual needs.
Comparing interest rates for savings accounts is a good place to start (you’ll typically want a low interest rate for loans, but a high interest rate on accounts that earn you interest). When selecting the best checking or savings account for you, make sure to watch for fees and factor them into your decision.
Banks charge a variety of fees for checking and savings accounts: monthly maintenance fees, ATM fees, minimum balance fees, overdraft fees, bounced check fees, foreign transaction fees, and withdrawal fees. But they are not always automatically assessed, and a customer might be able to avoid them by meeting certain requirements. Also, particular types of customers—such as students—may qualify for exemption from certain fees.
Banks list fees on their websites and provide fee information when customers open accounts, but there’s a lot to watch out for. Be sure to read the fine print and comparison shop to ensure you get an account that’s right for you.
Are checking and savings accounts free at Banks?
Many banks offer “free” checking and savings accounts. However, they are sometimes only truly free if a customer meets certain requirements. For instance, a monthly maintenance fee may be assessed if a customer does not maintain a minimum balance. To ensure that your “free” account is actually free, look for one that doesn’t come with penalties, or check the account’s list of fees and meet the requirements that allow you to avoid them.
What is the difference between a Bank and a credit union?
Banks and credit unions are similar. They both accept deposits, make loans, and offer financial services. However, credit unions are not-for-profit organizations that are owned by their members. Unlike at banks, a customer must apply to be part of a credit union.
Typically, credit unions pay higher rates for savings accounts and charge lower interest rates on loans than commercial banks—both good things.2 But the requirements for membership at a credit union can be high (though some cater specifically to low-income members) and often an applicant must demonstrate good financial health to be accepted.
Credit unions are located throughout the country and can be found on www.MyCreditUnion.gov. A list of credit unions geared toward low-income members can be acquired by writing the Office of Consumer Financial Protection and Access.
- “10 Smart Ways to Avoid Checking Account Fees for Good.” The Huffington Post. November 25, 2014. Accessed on November 10, 2016 at http://www.huffingtonpost.com/mybanktracker/10-smart-ways-to-avoid-ch_b_6219730.html.
- “What is a Credit Union?” MyCreditUnion.gov. Accessed on November 10, 2016, at http://www.mycreditunion.gov/Pages/whats-a-credit-union.aspx.