For most consumers, banking is second nature. Checking accounts, savings accounts, and other products and services through banks and credit unions are used every day. However, if you are new to banking, it can be a confusing and intimidating topic. Teenagers, those who are new to the U.S., or even unbanked Americans who are part of underserved communities may not know the basics of banking. We’ll explain everything you need to know about why it’s important to have a bank account, how to open one, and how to choose between a bank vs. a credit union.
Basics of Banking
Why do you need a bank account?
When it comes to the basics of banking, the logical first question is “Why is it important to have a bank account anyway?” Having a bank account allows you to safely store your money. It’s much safer than hiding it in your house somewhere, like under your mattress! Even if your bank gets robbed, banks are insured, so your money is fully protected.
How do you open a bank account?
Opening a checking account with a bank or credit union is usually quite simple. With more and more people using online banks, you might not even have to leave your home to open your account! Whether you open the account online or in person, it’s important to have the following information on hand:
- Social Security Number
- Government-issued ID
- Physical/mailing address
- Initial deposit
If you’re opening your account online, you may have to print, sign, and mail some documents to your bank. You will probably not be able to use your account until they receive the documents. Once your account becomes active, you should receive your debit card in the mail. The bank will give you instructions on how to activate it and set your pin number.
How do you choose between a bank and a credit union?
When it comes to the basics of banking, we would be amiss to leave out credit unions! What’s the difference between the two? Credit unions are nonprofit institutions owned by their members. They typically offer lower rates on loans and lower fees than banks. The downside is that credit unions are limited in the financial products and services they offer. They also don’t have as many branches or ATMs, and they may be behind in the world of mobile and online banking. Banks, on the other hand, are for-profit companies. Large national banks having branches and ATMs in nearly every city, so it’s easier to access your money, especially if you move to a new state or travel frequently. Banks also tend to offer more products – different types of loans, accounts, etc.
While the fees may be higher than a credit union, if you’re looking for a specific product or service, it’s more likely that a bank will offer it than a credit union. If you just want to open a basic checking or savings account with low fees, a credit union might be the better option. Do your research ahead of time on the banks and credit unions in your area to see what would be the best option for you.
To learn more about our educational resources, or to schedule a financial literacy workshop in your community, call 800-769-3571.