How Does A Bank Work?
Banks do not generally store all of the money you have saved in a vault in the back. For many reasons, this would be quite impractical. They do have a supply of money on hand to handle the flow of daily transactions. Your money you put in the bank for checking and savings are held safely through assets secured by the FDIC. You will have access to the money when you need it, but in this paperless transaction kind of world, most of the cash is never really seen.
All banks in the US are in different district areas and given a special number which helps track the location of that particular bank. If you were to look at the numbers on your checks, you may notice a series of two sets of numbers. One is a routing number which is the bank locator that tells the people where this money is supposed to be held when the check is cashed. The other set of numbers is your personal bank account number which tells the people at the bank which particular customer is making a withdrawal of their funds.
The banks employ many people to handle various levels of banking duties and must charge some kind of fee to keep the banks running. They must also deal with the issues of loss when checks are cashed against accounts that have no money. This is the reason banks tend to not favor customers who have very little funds in their accounts - because they do not create enough income to support the needs of the bank. Your money in the bank is invested by the banks which generate a source of income to keep the bank operating. For what cannot be made in investing income, fees have to be charged in order to make ends meet.
Why Would You Want To Open A Bank Account?
As we are no longer a strictly cash and carry society, banks serve as the go-between for many financial transactions and serves as the basis for proving your fiscal responsibility to those with whom you may have to do business with in your lifetime.
Without a bank account, either checking or savings, it will be very hard for you to get a loan for a mortgage, apply for a rental home, applying for business financing, or even getting a credit card. Sometimes employers will want to know you have an account with the bank before considering you for management. Along with most credit applications, they will ask you provide your banking details.
What Kind Of Bank Account Should You Open?
Almost everyone should have at least one checking and one savings account. You should use the checking account to handle your general living expenses such as paying bills, rent, or mortgage. Your savings account should serve as a method for you to save up for future big expenses such as if you need a down payment for a home, or to start a business, or to go on a vacation.
Banks have other plans you should consider such as CDs, IRAs, bonds, and other funds which give you a higher interest rate for keeping your money in the bank. You can use these vehicles for bigger investing needs such as planning for your retirement.
Not everyone should have a checking account. Should you? Are you generally a responsible person? If you are not or have a habit of not keeping track of money, you may want to steer clear of a checking account. The penalties in money and your reputation can be quite high if you make too many errors with this type of an account.
How To Open A Bank Account
You will need proof that you are who you say you are. Bring with you several forms of identification such as a driver's license or state ID. Also, bring in a bill that has your current address on it such as an electric or phone bill. It couldn't hurt if you had a third form of identification such as a birth certificate, voter's registration card, or even a work picture ID. It is very important to show you have a Social Security card.
Not all banks will require so much detail, but some may require all the above. It is best you have them handy in case you need them.
Shop around first before you open the account. Don't just settle for the first bank. They are a business enterprise and should respect you as a customer. Go into the banks you would consider and ask to speak with someone about opening an account, but do not be pressured to doing it the same day. If they seem less than enthusiastic about speaking with you before opening an account, they will probably not want to speak with you when you have a problem or question.
Use this first meeting to compare terms at each bank. Get a sheet that explains their fees and requirements. Ask about any interest you may get on your account. And if you can think of any questions that pertain to your personal banking needs, now would be the time to bring it up to the bank before you open the account.
Get the information from at least 3 competing banks and compare it to see which is the best deal for you. When you have decided on the bank, go in with your initial deposit and identification and any filled out paperwork to make the process speedy.
Banks prefer accounts with more than $500. Many banks will have higher fees for those with accounts under $100. Try to aim for the highest initial deposit as possible.
Once you are approved for an account, try not to fall below having the funds of your initial deposit in your account at all times.
How To Get A Bank Account When You Were Denied
A bank can be a very important tool in creating your financial destination. However, if you act irresponsibly with your account, it can back fire. Acts such as bouncing checks can create a mark on your record that will follow you for the next 4-6 years. If you have such activity on your banking account and should close your account with that bank, it will be next to impossible to open a new one should that bank use one of the verifications services such as ChexSystem.
If you find yourself in a position where you have abused your banking account in the past, there is a remedy available that will help you get a new account, but it will not work for all cases. Simply apply to any bank of your choice. If you are denied access to open an account, you will receive a letter about the reason why you were denied.
In that letter will be an address of any verification agency which provided details in making the decision. Write a certified letter to that agency to get a copy of the report - it will be free if you respond within 30 days of being denied.
When you receive that report, go over all the details. With all letters of communications to collection agencies, send them certified mail WITH return signature receipt so you will have a record mailed back to you with their signature as proof they did receive it. If there are any marks on there that are untrue, write a dispute letter like this one:
Your Name
Your Address
Your City, State Zip Code
Date
Agency Name
Agency Address
Agency City, State Zip Code
To Whom It May Concern:
Attached is a copy of the report you have sent me when I was denied an account at BANK NAME HERE. I have circled the entries that concern me.
There are some items which I respectfully request you investigate because these allegations are false.
I know as a consumer, I have a right to be heard in this matter. If you cannot prove these allegations are true within 30 days, I demand you remove them from my record.
Sincerely,
YOUR NAME HERE
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In 30 days the reporting agency will send a letter to the ones who made the allegations on your report. They have 5 days to respond to the letter and give the reporting agency proof. If they fail to respond to the request and 30 days have passed, the agency is required to drop the negative entry on your report.
After 30 days, if you have not received a reply from the agency, send this letter by certified mail:
Your Name
Your Address
Your City, State Zip Code
Date
Agency Name
Agency Address
Agency City, State Zip Code
To Whom It May Concern:
30 days ago, I have requested you investigate the allegations I believe were false on your report. I have enclosed a copy of the report you sent me with the items in question in this letter to refresh your memory.
As it has been over 30 days and you have sent no proof that these allegations are true, I demand these allegations be removed from my report.
Please send me an updated copy of my report with the negative items removed.
Sincerely,
YOUR NAME HERE
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If you want to check out if there are any marks on your record before you apply to a bank, contact these companies:
- CheckRite -- (800) 766-2748
- ChexSystems -- (800) 428-9623 (closed checking accounts)
- CrossCheck -- (800) 552-1900
- Equifax -- (800) 437-5120
- National Processing Co. (NPC) -- (800) 526-5380
- SCAN -- (800) 262-7771
- TeleCheck -- (800) 710-9898
Complaints About Banks
If you have a complaint about a bank in connection with any of the Federal credit laws--or if you think any part of your business with a bank has been handled in an unfair or deceptive way--you may get advice and help from the Federal Reserve. The practice you complain about does not have to be covered by Federal law. Furthermore, you don't have to be a customer of the bank to file a complaint.
You should submit your complaint--in writing whenever possible--to the Division of Consumer and Community Affairs, Board of Governors of the Federal Reserve System, Washington, D.C. 20551, or to the Reserve Bank nearest you, as listed on page 43 of this handbook. Be sure to describe the bank practice you are complaining about and give the name and address of the bank involved.
The Federal Reserve will write back within 15 days. Sometimes they will have an answer, sometimes they will tell you that more time is needed to handle your complaint.
The additional time is required when complex issues are involved or when the complaint will be investigated by a Federal Reserve Bank. When this is the case, the Federal Reserve will try to keep you informed about the progress being made.
The Board supervises only state chartered banks that are members of the Federal Reserve System. It will refer complaints about other institutions to the appropriate Federal regulatory agency and let you know where your complaint has been referred.
Your Credit Billing and Electronic Fund Transfer Statements
It is important to check credit billing and electronic fund transfer account statements regularly because these documents may contain mistakes that could damage your credit status or reflect improper charges or transfers. If you find an error or discrepancy, notify the company and dispute the error immediately. The Fair Credit Billing Act (FCBA) and Electronic Fund Transfer Act (EFTA) establish procedures for resolving mistakes on credit billing and electronic fund transfer account statements, including:
charges or electronic fund transfers that you or anyone you have authorized to use your accounthave not made;
charges or electronic fund transfers that are incorrectly identified or show the wrong date or amount;
math errors;
failure to post payments, credits, or electronic fund transfers properly;
failure to send bills to your current address provided the creditor receives your change of address, in writing, at least 20 days before the billing period ends;
charges or electronic fund transfers for which you ask for an explanation or written proof of purchase along with a claimed error or request for clarification. The FCBA generally applies only to "open end" credit accounts, credit cards and revolving charge accounts, like department store accounts. It does not apply to loans or credit sales that are paid according to a fixed schedule until the entire amount is paid back, like an automobile loan. The EFTA applies to electronic fund transfers, like those involving automatic teller machines (ATMs), point-of-sale debit transactions, and other electronic banking transactions.
For details, see Fair Credit Billing and A Consumer's Guide to E-Payments.
