Banks and financial institutions are a part of our daily lives. Almost everyone has a checking account (if you don’t, please schedule a free consultation with us), a savings account and some form of plastic (debit and credit cards). The longer you bank with a specific institution, the more history they have about you. This makes it easier to obtain other products from your bank. The CGS Team is breaking down some of the basic products and services offered by most financial institutions. If you need any of these products, start at your local banking center!
Checking accounts are the main products offered by banks. In fact, checking accounts are what keep most institutions in business! A checking account is a deposit account that allows the owner to do withdrawals and deposits. Checking accounts are very liquid and the funds in them can be accessed through checks, ATMs, ACHs and debit card purchases. Since we all have bills, we should all have checking accounts.
Depending on where you bank, some checking accounts come with perks. If you have a certain balance amount, or you have consistent deposits set up, you could be offered interest on the funds in the account. You could also have the account fees waived. If you don’t have much money or don’t have the option of direct deposit, consider a checking account at a credit union. They are notorious for charging no fees and having minimal balance requirements.
A savings account differs from a checking account in that it’s not meant for transactional purposes. The money you put into a savings account is not to be touched consistently. In fact, there are federal regulations regarding how many transfers from your savings can be done within a month’s time. As of now, the limit is 6 transfers per month. If you reach or surpass 6 transfers from your savings account, your bank can assess a fee or change your account to a checking.
Another difference is that savings accounts come with higher interest rates than checking accounts. Since your money is not supposed to be touched, banks give interest as an incentive for not touching those funds. If you want to earn the most interest for your savings, consider an online savings account. The interest rates are 10 times higher than those offered at standard banks.
If you don’t have good credit or any credit history at all, seeking credit from your current bank may be your best bet. As we mentioned earlier, your bank has an idea of how you spend your money. If you’ve avoided overdrafts and have something in your savings, they may not care as much about your credit history as another company would.
Most banks offer credit cards for their customers or even customers who have accounts at other banks. The great thing about having a credit card from your local bank is that everything is linked together. You can easily pay your credit card by transferring money from your checking account. You don’t have to set up ACH payments that link to a different lender, although that’s not too big of a deal.
Loans and Lines of Credit
If you don’t know what a loan or line of credit is, check out the article Finance 101: Loans and Lines of Credit. Whether it’s an auto loan, home loan, or personal loan, your bank offers it! Similar to credit cards, if you have poor credit history, getting a loan from your bank may be easier than financing somewhere else.
When applying for a personal loan or credit line, you have a wider range of funds that you may be approved for. Most banks offer loans starting at $1,000 through $100,000. Since banking institutions have the capacity to offer more, you may be approved for more than you need. As long as you only take what you need, this can work in your favor – leaving you with more available credit had you been approved for less.
Certificate of Deposits (CDs)
CDs are a form of long-term savings. Most CDs require you keep your funds in there for at least 1 year. Taking your funds out early can result in major fees. The benefit of CDs is that you know exactly what interest you will be earning, and it’s usually higher than what a standard savings account offers.
If you don’t want to invest just yet, and you have a couple thousand dollars that you don’t need within the next year or two, a CD could be a great way to earn some extra interest. Most banks offer CDs and give special rates based on your account balance with the bank.
There are plenty of perks to sticking with your normal bank when seeking financial products. Now you have a good overview of what most banks offer! Do you bank with multiple institutions? Do you get perks or special rates from your bank? Post a reply comment below to share!