Having a bank account is one of the most important aspects of financial responsibility. A bank account is essential in order to get a credit card, apply for a loan, get direct deposit paychecks, and to buy a house or car. The most common accounts are a checking and savings account.
A checking account allows you to keep your money in one central location, make purchases using a debit card, or get cash out at the ATM. Checking accounts protect your money from getting lost, stolen, or destroyed, and are federally insured to replace your money should anything happen to the bank. Banks usually offer free services to members with checking accounts, including free check cashing.
In addition to having a checking account, a savings account is beneficial because it is a specific account to save money and to access in case of emergencies. The regulations for savings account differ with each bank or credit union. Certain banks limit the number of withdrawals you can make from a savings account each month. You usually cannot have a bank card linked to a savings account. Most savings accounts will accrue interest, and so by having this account you can actually make money. The interest rates will vary between banks and from year to year.
It is important to first find the right bank or credit union. Starting an account at a local bank as opposed to a large national chain could be beneficial because it usually charges lower fees to open an account. However, it is more difficult to access your money when traveling because a branch will not be in the area.
A credit union is similar to a bank but is a not-for-profit organization. It returns profits to its members in the form of dividends. Credit unions typically have lower fees, but higher interest rates. In order to become a member and have an account at a credit union, you need to be a part of a specific organization, trade/career, or community. There are local credit unions that work within specific communities to benefit its members.