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Everything You Ever Wanted to Know about
Bank Accounts but Were Afraid to Ask

A bank account is a must for business owners who want to cash checks and keep their earnings in a safe place. Teens might find banks intimidating, but if you think a bank account is beyond your reach, think again!

Can Teens Open Accounts?

Each bank is different, but most financial institutions are beginning to realize that young people need their services too. Some are sponsoring Banks in School days and sending employees to schools to help students open accounts. There’s even one bank, Young Americans Bank in Denver, CO, whose clients can’t be over age 22. The best thing to do is call around and see what services your nearby banks can offer you.

What Kind of Account Should I Open?

There are two basic bank accounts: savings and checking. Financial institutions also offer other services that you may want to take advantage of, including Automated Teller Machine (ATM) cards, debit cards, and Certificates of Deposit(CDs).

Savings Account: The good news about savings accounts is that banks pay you interest — a percentage of the amount in the account — on your money. The bad news is that banks often limit how many withdrawals you can make from the account each month and take money away from you if you make more withdrawals than they allow.

Banks usually ask for a minimum deposit amount when opening a savings account, but deposits after that can be any amount.

Checking Account:

If you find that you’re being penalized because you’re making more savings account withdrawals than your bank permits, try a checking account. Checking accounts allow you to pay for things you want to buy without carrying a lot of cash around — all you have to do is write a check and the amount is taken from your account. If you don’t have enough money in the account to cover the check, it will “bounce” and you will be charged extra fees.

There are many kinds of checking accounts, some of which require that you keep a minimum amount in the account at all times. Do a little research to find out what kind of account is right for you. Banks usually require you to make a minimum deposit amount when opening a checking account and charge you a fee for printing checks and a monthly service charge.

ATM Cards: ATM cards allow you to withdraw money from your checking or savings account, or deposit funds into your account, without actually visiting the bank. Banks usually charge an annual fee for ATM cards, and also charge you if you use an ATM machine that isn’t theirs. Other downsides to ATM cards include:

• most banks have a maximum amount that you can take out each day;
• sometimes ATM machines can be out of order when you need cash; and,
• there’s a chance that your card could be stolen and used.

Debit Cards: They look like credit cards, they act like credit cards — so what’s the difference? The difference is that these Visas and MasterCards (depending on your bank) draw from funds in your checking account. Yes, that means you actually have to have money in your account or your debit card will be declined. Many stores give you the option of pressing “debit” or “credit” after you slide the card, and while it might be tempting to choose “debit” so that you can pay for your clothes and get some cash, you’ll be much better off choosing the “credit” option and not paying the surcharge banks normally impose on debit card transactions.

Just as for ATM cards, banks usually charge a monthly fee for a debit card, and there is always the possibility that your card could be stolen and used. If this happens, however, the same rules apply to a debit card as to a regular Visa or MasterCard — report the theft within 1-2 days and you’ll only be liable for a small fee instead of whatever the thief decides to spend. And while debit cards offer convenience, the trade-off is that it’s easy to forget to write down your purchases in your check register right away and really difficult to keep up with a bunch of receipts. If you don’t, though, you’ll soon be in the red.

Certificates of Deposit: CDs are like savings accounts with three exceptions: the minimum deposit to open an account is much higher than for a regular savings account; the amount of interest you earn is much higher; and you have to keep your money in the account for a certain period of time and aren’t allowed access to it during that time.

Choosing a Bank  It might be tempting to choose a bank that’s right around the corner, but, before you do, shop around and ask these questions: What is the minimum amount I need to open an account? What interest rate do you pay on savings accounts? How much are the service charges on checking accounts? Do you charge extra fees on commercial checking accounts? What do I need to bring with me to open an account (driver’s license, other identification, social security number, a parent)? Are you open after school hours and on the weekends? As you’re asking the questions, notice how the bank employees treat you. If they don’t take you seriously, you may want to take your business elsewhere.