Banks offer consumer and business customers a variety of different account types that meet both short-term and long-term needs. Checking accounts are transactional accounts, designed for day-to-day needs. Savings account enable people to earn interest while keeping funds liquid. Certificates of deposit accounts are longer term instruments that are illiquid and offer higher returns than savings accounts.
Identification
The 2001 Patriot Act requires account owners to provide the bank with a government issued form of identification at the time of account opening. The ID must include an ID number, the person's name, date of birth and physical address.
Signers on business accounts must provide the same information as people opening personal accounts but also the relevant documents that prove the business is established in the state where they intend to bank. Documents vary by state and entity type but include articles of incorporation and business licences.
Time Frame
When bank accounts are opened they are regarded as "new" for 30 days. The Expedited Funds Availability Act allows banks to hold all checks deposited into new accounts, except for checks both drawn from and deposited into the same bank. Banks make $100 of a check available for use the day after the deposit, remaining balances of up to $4,900 are held for two business days, and amounts in excess of that are held for seven business days.
Features
Most checking accounts come with checks and free automated teller machine (ATM) debit cards. The cards enable account holders to access funds at ATMs and make purchases at point of sale (POS) machines. Other standard features include Internet banking, which enables business and personal account owners to view account activity online, and billpay which account holders use to pay one-off or recurring bills.
Savings accounts withdrawals are made at the bank but savings money market accounts allow account holders to write up to six checks per month.
Considerations
Many banks offer perks such as free checks and free safe deposit boxes but require personal or business account holders to maintain minimum balances. If balances fall below specified minimums, banks assess penalty fees. Some banks offer free accounts without minimums or perks. For many people the basic accounts are sufficient and they prefer to pay for checks rather than run the risk of incurring monthly maintenance fees.
Most banks restrict savings withdrawals to between one and six a month and excessive withdrawals cause penalty fees.
Benefits
All bank deposit accounts are covered by the Federal Deposit Insurance Corporation. The FDIC ensures accounts up to $250,000 per account owner or entity. Individuals can increase coverage by adding account owners and beneficiaries as each additional person receives $250,000 of coverage.
Bank accounts enable individuals and business owners to manage their money effectively. Monthly statements provide paper trails that help with audits and taxes. Debit cards and checks provide convenience for people not wishing to always carry cash.
