Looking into what bank accounts are and why you might want one.
read moreAll of the below are examples of a "deposit account". Checking Account: an account that you can easily get money in and out of, considered "cash" really, since you can take it out at any time. May charge maintenance or transaction fees. Features include: • "ATM Card" (often in the same card as a debit card), allowing you to withdraw cash from ATM. • Debit Card, allowing you to pay directly from your bank account. • Checks, allowing you to pay via paper for items. • Electronic transfers • etc. Technically, you can go into negative balance (called over drafting), which essentially means that the bank is providing credit. Some will charge fees for this and interest. We shouldn't ever be concerned about this though. "Stop payments" which come at a cost, allow you to ask your bank not to honor a check you wrote. You can also use ATMs out of the bank's network, which might come at a fee (couple dollars). Savings Account: it's an account that you can't get money out as easily, but gives you a higher return since they're investing the money. Apparently there's even a limit based on US regulation on how frequently you can withdraw money from the account (otherwise you will have to pay $10 or even risk the account getting downgraded to a checking account). Money Market Account: another account that pays even higher interest than savings. Some banks require higher minimum balances in order to avoid monthly fees. Again, there are limitations according to US law on how frequently you can withdraw from these accounts. Bank account Basics: • Routing number: ABA routing transit numbers are used in the US. They identify the financial institution of the check/whatever it's attached to. ⁃ Routing numbers previously were used to handle where the check should be shipped in order to withdraw from the person's account (probably since their account was in a specific bank). So the routing number identifies the bank as well as the state of the specific account. That's how the guy was able to get away with checks not bouncing for two weeks, because he'd change the routing number for a check he wrote in NY to be a CA routing number, making it take 2 weeks (in the mail system) for the check to bounce. ⁃ It is in the bottom left of the check, and is 9 digits. It seems to identify not only the state, but also (in the old days) the specific branch to go to. • Account number: identifies your specific account at that bank. This is important, as it could be used to withdraw money from your account. It's listed on every check, right next to the routing number. • "N.A." is like "Inc." but identifies a bank. Stands for National association. • Paying through direct direct deposit or paying bills electronically otherwise usually means going through the ACH (Automated Clearing House) network. ⁃ ACH fundamentally is electronic transfers from one bank account to another. ⁃ http://engineering.gusto.com/how-ach-works-a-developer-perspective-part-1/ ⁃ It seems like banks are the only ones who are allowed to operate on the ACH network, so if you are a person who wants to initiate an ACH transfer, you have to have a business account with a bank and then they'll do the transfer for you. ⁃ The way it works is crazy, you upload a text file for each transaction you want to do indicating the amount, and bank account numbers and routing numbers and upload it to an FTP server, then the bank will forward it in the evening to the federal reserve. ⁃ The federal reserve seems to facilitate all of these communications between the banks. ⁃ If there's an issue with the credit/debit into the account, the receiving bank uploads to the federal reserve a file indicating "not sufficient funds" or "invalid account number". Essentially they have 24 hours to upload these files regarding the rejection. ⁃ Basically, this whole system works by batching the requests, so there are certain times of day when things get processed (it's not a real-time system), which is why these transfers can take some time. Considerations for checking: • You care about minimum balances. • You care about the online banking experience (e.g. mobile app, bill pay, etc). • You care about monthly fees if you don't meet some criteria. • You care a LITTLE about access to the bank and how widespread it is (e.g to get cash). • You DO NOT care at all about interest, because even the best checking accounts are only going to offer 0.03% interest (which is $9 on 30k). Various options for bank account: • Bank of America Core Checking ⁃ $1500 minimum DAILY balance OR qualifying direct deposit of $250 (seems like salary counts) or more OR pay $12/month. ⁃ Has good mobile app ⁃ ATMs everywhere place. ⁃ Two month grace period on fees for when first setting up. • USBank Checking (both packages): ⁃ $1500 minimum balance OR $1000 direct deposit OR pay $6.95/month. ⁃ Mobile app available, not sure how good. ⁃ Way way way fewer branches. ⁃ Another package has higher fee but waived if you have credit card. • Wells Fargo ⁃ $1500 minimum daily balance OR direct deposits of $500 or more OR 10 debit card purchases/payments OR pay $10/month ($5 discount if under 25 years old). ⁃ Free debit card replacement ⁃ Mobile app available, not sure how good. ⁃ Got a lot of flak for employees opening extra accounts for customers (illegally). ⁃ Just as many ATMs as Bank of America in SF, half as many as Bank of America in NY. • Citibank ⁃ $1500 minimum balance OR $10/month. ⁃ Mobile app, not sure how good. ⁃ Not as many ATMs in SF or NY (closer) as BofA. • Chase ⁃ $1500 minimum daily balance OR $500 direct deposit OR pay $12 fee. ⁃ $200 bonus when you open a checking account and setup a direct deposit. ⁃ Issue is: ⁃ They pretty much have 0 ATMs in Boston (BofA has more) ⁃ They have 0 ATMs in North Carolina (BofA has more) ⁃ The do have plenty in NYC and SF. ⁃ Decided it's not worth the $200 for the cost of switching banks later/having to deal with any inconvenience. $200 now isn't worth as much as convenience. Friends: Li uses Chase and recommends chase. Depends on where you live. Tara recommends BofA. Seems like the best