SOYOUWANNA OPEN A BANK ACCOUNT?

3. PICK A TYPE OF ACCOUNT

So now that you've assessed your financial status and picked out a bank, you need to decide what type of account you're gonna open. We'll sort out all the different types, and we'll try not to use confusing terms like "overdraft protection" (without translating them, at least).

Savings accounts
Checking accounts
Linking accounts
Joint accounts

Savings accounts

A savings account is all about - surprise! - saving your money in an account. However, the main purpose of having this type of account is not only to store your money safely away, but also to gain interest. "Interest" means that the bank will pay you for letting them hold your money, and how much interest you get depends on the amount of money you have in your savings account. Bottom line: the more money you save, the more you'll gain.

There are several types of savings accounts, and the details and names of each type vary from bank to bank. We can't guarantee that all banks will have each of the following kinds of accounts, but they are covered broadly enough so that you have at least a general idea of what to ask for when you step into the bank:

• Passbook Savings: This is the simplest type of savings account. You go into the bank, deposit or withdraw your money, and the teller makes a notation on your passbook (which records all the activity that goes on with your account). A passbook savings account is perfect if you're a haphazard saver who randomly makes deposits and/or withdrawals.
  
  
• Regular Savings: This account can be linked to a checking account (more about checking and linking later), and the bank will send you a statement in the mail to let you know what's going on every month. You'll get an ATM card with this account which will permit you to withdraw cash at all of the bank's ATM machines and at other universal ATM machines. A regular savings account is ideal for people who make a steady - but limited - income.
  
  
• High-Interest Savings: This account comes with all the benefits of a regular account, but has a higher minimum balance (that is, you have to always have a lot of cash sitting in the account). On the up side, it gives back a relatively higher interest return (compared to a passbook or regular savings account). So you store more, but you also get more back. If you've got a couple of thousand dollars for your bar mitzvah that you want to put away, this is the account for you.
  
  
• Certificates of Deposit (CDs): The above three accounts are all "liquid" accounts, meaning that you can deposit money into and take money out of your account at any time (while taking care to honor your minimum balance requirements). When you put your money in a CD, you agree to put it away for a certain number of months. That means ABSOLUTELY NO TOUCHING. There's no adding money to the CD, and there's definitely no removing money from it either. Because you're giving your money to the bank for three or more months at a time, the bank will pay you a (relatively) higher interest than they'll pay you for keeping money in any of the other savings accounts.

Checking accounts

The neatest thing about having a checking account is the fact that you get your very own checkbook, with you name on it and everything! (It will not, however, be so neat when you're writing out checks for huge bill payments.) All banks offer checking accounts, but some offer checking accounts that also work as savings accounts. We'll go over both types in detail.

• Regular Checking: At most banks, you'll pay a low monthly fee for check-writing services. This means that you'll be set up with a checkbook immediately after opening the account, and have the option of writing checks that draw money out of this account. With regular checking, you'll also get the money storage and ATM services. Whenever you need to randomly take money out to buy groceries, clothes, or a feral midget, it should be from your checking account.
  
  
• Interest Checking: This account features everything that a regular checking account has, but it includes an interest rate, so it acts like a regular savings account. Sounds too good to be true? It might be, depending on how much the monthly charge for maintaining such an account is at your bank - it's usually a good deal higher than the monthly fee for a regular checking account. So you have to make sure that you always have enough cash in your account so that the interest outweighs the monthly charge.

Anytime you write a bogus check (like scribbling down $50,000 to buy that pony you've always wanted, when you actually have closer to $5 in your account), the check will "bounce." This is just a cute way of saying that the payment won't go through and you'll be held responsible for messing up - your bank will fine you an amount that will undoubtedly make you wince. So don't write checks without making sure that you can honor them first.

Some banks offer a service called "overdraft protection," which basically means that if the check bounces, the bank will spot you the amount of money for which you've written a check. (You'll still be fined, though.)

Linking Accounts

If what you really need is a checking account, but what you want is to earn interest without paying the high fees for interest checking, you have the option of linking a savings account to your regular checking account.

The line between linked accounts is usually pretty distinct - you can't have $1000 sitting in your savings account, earning interest, and expect to pay your checks through that same account. You must first transfer some of that money into your interest-less checking account first.

When making deposits, you'll have the option of putting the money into one of your accounts. (You can shift the dough between accounts once it's in.) We recommend that you don't try to be slick by keeping all your money in your savings account until you have to pay for a check (and then transferring the exact amount you wrote the check out for into checking). Unless you live next door to, on top of, or inside the bank, and have easy access to it at all times, it's quite possible that your fantastic scheme will end up costing you.

Joint accounts

Joint accounts have nothing to do with marijuana. Sorry 'bout that. When you open any account with another person, it is called a joint account - married couples usually open one of these accounts, but unmarried couples and total strangers can do it as well. You and the co-account opener have equal ownership to all the money in the account, and can take advantage of all the services that come with the account. Either of you can deposit or withdraw as much of the money as you like without having to answer to the other holder. So it's actually not a good idea to open a joint account with a total stranger… unless the total stranger is a great deal richer than you are, in which case a joint account would be very ideal.

We should add that if one of the joint account owners dies, the surviving owner gets all the money in the account. So if your plan in life is to marry a rich old geezer and wait until he/she keels over so that you can collect all of his/her money, make sure that you've signed up for a joint account before your spouse croaks. You sicko.