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Basic Banking Guide


Written by Lauren Perez | Updated on 2/21/2019

Here at DepositAccounts, we understand that becoming proficient in money management doesn’t always come easily. If you already have a savings account, you may not realize that there are other savings options out there like money market accounts or CDs. You can also find new and better ways to save even more money, like opening an interest-earning checking account which can easily add to your monthly savings. Everyone — including our own experts! — has to start somewhere when learning a new skill, and learning how to maximize your savings is no small feat.

That’s why we’ve created our Basic Banking series. It’s designed to help those who are new to banking get their bearings. We’ll cover a variety of topics each week like how to write a check and where you can send money online. Each article will have a “Banking 101” tag added to the beginning of each title so that you can easily identify which articles belong to this series. We want to offer the starting knowledge that can help new savers save smarter, with the eventual goal of becoming like our regular readers who know the ins and outs of banking like the backs of their hands.

For those well-versed readers, this series offers you a chance to tell us about other elements you think might be crucial to banking successfully. Leave us a note in the comments and let us know what type of basic banking topics we should include in this series - we’d like to hear from you!

Articles in our Basic Banking series currently includes:

Banking 101: Second Chance Banking - Savings and Checking Accounts That Won't Turn You Down

When you apply for a new savings or checking account, it’s common for the financial institution to check your history with a consumer reporting agency, such as ChexSystems. If the bank finds any negative reports, such as accounts that were closed due to unpaid balances or fees, or accounts with fraudulent activity, they may deny your application. Read more


Banking 101: How to Cash a Check Without Going to the Bank

With digital banking and peer-to-peer payment services on the rise, it can come as a surprise that people still pay each other using paper checks. For many, receiving a check may be an unusual experience, leading to the inevitable question: What to do with the thing? Read more


Banking 101: How to Find Your Check Routing Number

A routing number is a nine-digit number that is used as identification for banks and credit unions in the U.S. This digital address allows money to be processed and transferred from bank to bank. It also denotes the location where an account was opened. This number is also proof that the bank or credit union has an account with the Federal Reserve. Read more


Banking 101: What is the difference between APR and APY?

APR and APY can be confusing financial concepts, but knowing the difference between the two ways to calculate annual interest can help you make more informed decisions when saving and investing. Both APR and APY affect how much you earn or owe when applied to account balances. Read more


Banking 101: What is Regulation D and How Does It Affect Me?

If you’ve ever parked your money in a savings account, you may have learned the hard way that you can’t just withdraw money any time you want. Financial institutions, such as banks and credit unions, generally limit the number of times per month that you can easily pull money from your account. If you exceed your monthly withdrawal limit, your bank might charge you a fee — or it could even deny your transaction altogether. Read more


Banking 101: Is Mobile Banking Safe? Should You Avoid it?

As more and more banks enhance their mobile applications and customers increasingly bank online, there is growing scrutiny on the safety of these transactions. Many of us are asking the following questions: Is mobile banking safe? Is it better to stick to teller windows, paper checks and ATMs? Can we confidently use the digital resources that are making money management easier than ever? Read more


Banking 101: Everything You Need to Know About Money Orders

Money orders are like prepaid checks. You provide the funds upfront and fill out an order that, like a personal check, is endorsed to a specific recipient. Say you need to pay your utility bill, but the company doesn’t accept personal checks — and sending an envelope full of cash isn’t a safe option. Money orders are an alternative and secure form of payment to consider. Read more


Banking 101: Pay Off Debt or Save - How to Make the Right Choice

When you carry a substantial amount of debt but also need to grow your savings, it can be tough to figure out whether you should pay off debt or save money. Should you focus on shrinking your debt so that you pay as little interest as possible? Or, should you fund your savings so that you have enough liquid cash to deal with sudden expenses? Read more


Banking 101: Checking vs. Savings Account

Everyone needs a safe place to store their money, but deciding which type of bank account to open can be confusing. Should you open a checking account with a debit card that you can use for everyday purchases? Or is it better to consider a savings account, where you can build a rainy day fund? Read more


Banking 101: Where Can You Send Money Online?

Every once in a while, you need to send money online to someone — perhaps to your daughter for her broken-down car or to your friend who loaned you money for concert merchandise. There are many options available, and each one comes with its own format and fee schedule. Read more

Comments
kcfield
kcfield   |     |   Comment #1
One "essential" is finding a primary checking account (at a highly rated bank or credit union) that has no minimum balances or fees. In some instances, the financial institution may require direct deposit of one's paycheck for fees and minimum balances to be waived. In other instances, direct deposit is not a requirement for totally free checking. Another essential is finding a solid primary savings account, where one can establish their emergency savings (experts recommend three to six months of expenses as a minimum) and their general savings. Some of the factors to look at in establishing a primary savings account are: 1) top tier of interest rates; 2) An institution whose interest rates are stable rather than wildly fluctuating (sometimes the very top rates are "teaser" and do not remain there long); 3) a bank or credit union that is top rated--both in terms of financial stability and customer ratings (Some top interest rate banks and credit union have poor customer ratings). When choosing an institution for a CD investment--these same principles are applicable (stable and high interest rate, highly rated institution--with early withdrawal penalties being an additional factor to consider, as Ken T. often and wisely states.
deplorable 1
deplorable 1   |     |   Comment #5
Yep the first step when starting out is to find a good FREE checking account with a $0 minimum balance requirement so you don't incur any fees for going under a balance. Then the second step is to find the highest yielding savings account you can find and link it to your checking. Then put any extra money above bills into the savings account rather than in the 0% checking. Then you can start hunting for some CDs that beat your savings rate. I did this when I was a kid but sadly there are still many adults who have not managed to get even this far. Hopefully there are some younger readers learning on here.
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NYCDoug
NYCDoug   |     |   Comment #6
To build upon on kcfield's solid foundation: establishing these "primary" checking & savings accounts as "hub" accounts -- not only with low/no fees and required minimum balances, but multiple ACH connections (ideally unlimited) and rapid transfers (ideally overnight). This positions you to have easy access to your money as well to be able to take advantage of the many higher interest rate (promotional) offers found at this site.

I have found it useful to have two hub accounts. One "on the ground" [so-called "brick & mortar"] -- a checking account at a physical branch where cash withdrawals and cash/check deposits can be made any time, day or night, via ubiquitous ATMs. The other "in the air" [online] -- a savings account with a high interest rate, used to pivot funds into and out of even higher interest rate CDs as they arise, and subsequently mature.

The game in finding these accounts is that they are moving targets; interest rates fluctuate. And there are always trade-offs (for example, a high rate, with rapid transfers, but limited ACH connections, or a required minimum balance to avoid fees). So, in addition to all the listings that Deposit Accounts provides, perhaps a matrix summarizing the account attributes of, say, the top five viable hub accounts would prove indispensable for newbies, as well as for us veterans.

To start, attributes for hub account comparison tables [one checking, one savings] could include
- Bank Name
- Online / Branch
- Interest Rate
- Minimum Balance to avoid fees
- Number of ACH Connections Allowed
- Speed of ACH transfers
- Comments / Other [website, customer service . . . ]
kcfield
kcfield   |     |   Comment #11
NYC: Excellent points, especially with respect to establishing more than one hub accounts and ensuring excellent ACH connections. It is helpful if at least one of these hubs has high daily ACH limits if one transfers significant funds regularly. For example, AMEX savings has no daily ACH limits.
NYCDoug
NYCDoug   |     |   Comment #13
I forgot about the daily/monthly transfer limits, KC -- Yes, a must-include!

This can be a deal breaker, though less likely so for those just getting started -- with less capital to burn or churn than we . . .

But please do add it to our growing "cafeteria of criteria" matrix wishlist, Lauren!

It takes a village ;-)
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HighYield
HighYield   |     |   Comment #10
Nice article by Ms Perez.

Basic banking comment? I respectfully suggest that most people make it way too complicated.
For young people just starting out, my parents gave me one very simple bit of advice: When you get your paycheck, immediately put 10% of it into a savings account. And don't touch it! That advice has served me well my entire working life. And even in retirement.

Now days, there are many good online banks, with no fees. It couldn't get any simpler.
HighYield
HighYield   |     |   Comment #14
I should add, if you're talking your average young person, it seems like so many younger people are struggling, financially. And understandably so. It may be difficult to even get them interested in banking/saving. They may have very little to put away, so I just suggest they keep it as simple as possible.

They don't need to be overwhelmed by all the bank technical details. Just a basic online savings acct, and maybe get a CD when they can afford one. At least that's a start.
deplorable 1
deplorable 1   |     |   Comment #18
This is the very reason these basics need to be taught in school from a early age. We have a entire generation of kids who all have smartphones yet don't even have a basic savings account. They have no clue that one of the best financial tools available is right in their pocket. Look at this recent government shut down for a good example. You have adults that have no savings and can't even go a week without a paycheck before they are lining up at food pantries. We can teach advanced math in high school but somehow basic banking and financial literacy are completely neglected.
Mobile Banking
Mobile Banking   |     |   Comment #19
Regarding Smartphones:
Maybe some people are unaware, but a phone is the most unsecure internet connection available. It is not advised to use a phone for any banking, yet banks push users to install their application and use it. It is sold as convenient, but that convenience is not worth the risk. The problem is that Wi-fi connections are not secure.
deplorable 1
deplorable 1   |     |   Comment #23
I agree and I personally do all of my banking on a windows based machine on a hard line. Many will argue that with encryption this precaution is unnecessary and that may be true to some extent but certainly not with public wifi.
senior
senior   |     |   Comment #27
Excellent comments deplorable 1. When I was in high school back in the 70s, (46 yrs ago!) there was an elective class called "You and Your Money." A great class that taught all the basics about banking & saving & check writing. I really enjoyed it. I don't believe any high schools offer a class like that anymore.
LaurenPerez
LaurenPerez   |     |   Comment #12
Thank you all for your quick responses! We appreciate your continued contributions, and we will work on incorporating your ideas in future articles as we build this series.
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Chex Sys
Chex Sys   |     |   Comment #20
There is a lot of information available about credit scores and how they effect the consumer. I have not seen too much written about Chex System. It would be interesting to know more about how that works. For example, how many new accounts can someone open before they are red flagged at Chex System?
???
???   |     |   Comment #21
https://www.depositaccounts.com/blog/chexsystems.html
Chex Sys
Chex Sys   |     |   Comment #22
Yes, thank you, I am aware of that article and have read it. It was very thorough, however the question I had was not addressed in that article.
klink
klink   |     |   Comment #28
Read the latest, I would think that another couple covering Establish Budget and Emergency Fund would fit right in this series. Alas, not sure it goes with the "Banking" 101 moniker but it could be tied in somehow.

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