Online Banking Solutions
In general terms, banks work by taking the money that people deposit with them and using that amount as a base number for a formula to establish the amount of money they can create out of thin air, and then loaning that amount out to businesses or individuals and charging them interest on the loans. This is called fractional reserve banking. They pay you a much lower rate of interest for depositing (or, in effect, loaning) your money to them, and the difference between the amount they pay out in interest on deposits, and the amount they charge in interest on loans, is what the bank takes in as profit. Out of that profit comes all their various expenses, but when you consider that the total annual profit for American banks generally tops $160 billion, then you can see that banks make a LOT of money. Not all of the income they generate comes from interest, however. A great deal of it is made by charging you a fee for accessing your own money, and for charging administration fees for loans, term deposits, retirement accounts, lines of credit, and many other types of transactions. Banks are enmeshed in every aspect of our lives, from our basic everyday purchases, through our mortgages, loans, and credit cards, and on to our hopes for a comfortable retirement.
Choosing which bank to deal with can sometimes be a daunting task, unless you live in a small town with only one or two choices. Banks appear to offer a bewildering number of different types of accounts, different credit cards, different perks and different incentives. In reality, you will usually find that the only real differences are in the names and the hype. When you have chosen your preferred bank, then it is time to go in and open an account, right? Not necessarily. Many banks offer the option of signing up for an account online now. This option is usually reserved for those with good credit, though, and does not allow you to explain any small snags in your credit rating. Many people also feel that dealing with a machine is a much different proposition than dealing with a human being, so they may prefer the personal touch. Before you sign the papers, you should always make sure that you understand the rules relating to your account, the fees and costs associated with it, and the penalties for not staying within the rules. Whichever method you use to open the account, you must remember to keep your information for that account in a safe place, and never write your password or PIN down anywhere where it could be found by others. It is best to only have it in your head – that way it can never be stolen without your knowledge.
They type of account you should open depends very much on what you plan to do with that account. If you simply want somewhere to park your extra money so that you will have it for a rainy day, a basic savings account will probably do the job. In fact, some people open multiple savings accounts in order to save for different goals – one account for vacations, one for a down payment on a house, one for new furniture, and one for Christmas gifts, say. The possibilities are endless, but the accounts are all basically the same. Most savings accounts in North America right now pay you almost nothing in interest. It is common for them to offer 0.10 % in interest, so your savings will earn you very little money.
Checking accounts are the accounts that you would use for your everyday transactions. Today, even though they are called checking accounts, actually writing checks is becoming an obsolete practice. Debit cards are much quicker and easier to use, so checks are usually only used for transactions where a debit card cannot be used. Your checking account needs to fit your buying habits, so you need to think carefully about things like how often you use your debit card, how many times you would use an ATM in a month, and how many checks you might write. Then you need to compare the different checking accounts and choose the one that best suits your banking habits. Make sure you understand the fee structure, the costs for a bounced check or an NSF payment, and calculate how much that account will cost you every month. Those fees can add up, so make sure you know what you’re getting into.
Most bank accounts reward you greatly for having money. Strangely enough, banks tend to penalize you for not having any money, by charging you money. This does not help you have more money. The more money you have, the more perks you will get at the bank. Your savings will earn higher interest rates, your checking account will have fewer fees and lower charges, and the bank may offer you things like overdrafts and lines of credit. Do your research before accepting any of those things, though, because while they can be advantageous, they also have pitfalls.
At one time, there were few, if any, fees charged for normal transactions at most banks. That has changed drastically, and banks now charge a myriad of fees – some of them for such ridiculous reasons that you wonder how the law allows it. Almost every account you can possibly think of that any bank offers, comes with fees of some sort. Checking accounts have monthly fees, fees for using the ATM of a different bank, fees for using your debit card too many times, fees for using an overdraft if you have one (plus interest charged on the money you have used from your overdraft), fees for writing checks, and fees for too many withdrawals from a savings account. There are often exorbitant fees charged for writing a check when you don’t have sufficient funds in the bank to cover it, or when a pre-authorized debit is refused due to lack of funds. In the fine print of your contract you will most likely find the phrase “fees are subject to change without notice”, so it is important to keep track of your bank account so that you know what you are being charged every month.
The internet is a wonderful thing, but when it comes to keeping information secure, it could do better. Cybercrime has become so common and widespread that having your bank account compromised is nowhere near as unusual as it was before the advent of the internet. Before you get your bank account, it is a good idea to check out how that particular bank deals with cybercrime and its fallout. Find the part of your contract that details the rules regarding fraud or theft from your account, and make sure you understand what your rights are, and what your obligations are before you sign up for your account. Does the bank take responsibility if your account is hacked? What are you supposed to do if you notice money missing from your account? What happens if you cannot do that right away? Under what circumstances would you be held responsible for covering the costs of a theft from your account? Knowing all of these things can save you a lot of trouble later.
All the major banks now offer online banking, as well. This is a wonderful invention for those of us who remember the days when banks were open from 9:00 am to 3:00 pm Monday to Friday and it was impossible for a working person to go to the bank without taking time off work. Now you can bank at midnight in your pajamas if you choose, an innovation that would have raised eyebrows even twenty years ago. Now, online banking lets you pay bills, transfer funds between accounts, purchase checks, and generally manage your money without leaving home. It is a wonderful convenience for a great many people.
Years ago, you got your paper bank statement in the mail every month, with all of your cancelled checks included. Now, if you want a paper statement, you must pay a fee. Most people opt for an online statement, since you can see exactly what is happening with your money through online banking, and if you really need a printed statement you can print one off yourself. Whichever method you choose to receive your statement in, though, you should make sure you are aware of everything it says. Check each transaction and make sure it is yours, and report any that appear to be suspicious. Any errors or discrepancies should be reported to your bank immediately, since not doing so could be taken as proof that the transaction is acceptable to you. If you do get paper statements, keep them in a safe place, since your account number and banking information could be used by an unscrupulous individual to gain access to your account.
When dealing with banks, it is in your best interests to be knowledgeable about your accounts, and vigilant in keeping track of them.
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