Banking Information That Everyone Should Know
There are many misconceptions about banking and how the banks work to keep your money secure. Rumors and misinformation can result in people avoiding banks because they believe that they are not trustworthy or that their money will somehow be at risk if it is deposited with a banking institution. Learning the truth about banks and how the system works can go a long way towards easing any fears you may have about placing your money in a bank.
Bank Deposits Are Safe
A bank account is considered to be one of the safest places to store your money for a wide variety of reasons. Bank deposits are insured by the federal government, with some accounts insured for up to $250,000 per depositor. This means that if anything ever happens at the bank to cause it to fall into bankruptcy or shut its doors, the federal government will give you up to $250,000 of the balance of your account back.
Banks Pay Lower Rates
Banking institutions generally offer lower interest rates on interest bearing bank accounts than mutual fund companies or brokerage firms. Different banks may use different methods to calculate interest rates, but the reported “annual percentage yield” or APY is calculated the same way across all banking institutions. To compare the amount of interest that will be earned from various accounts, compare the APY of each account type with the others and see which ones will have the highest yields.
Fees Can Reduce Your Balance Significantly
There are a wide variety of fees and charges associated with bank accounts that can deplete the balance of the account quickly. Fees for using a competitor’s ATM can cost you between $3 and $5 per occurrence and having less than the minimum balance in your account can result in a monthly charge designed by the bank. Some banks also charge for having too many transactions within a specific time period, using a teller instead of the ATM, or transferring money between accounts. It is important to review the various fees associated with the account that you are interested in before signing up for the account to avoid unpleasant surprises in the future.
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