03 Banking and Payments

Choosing an account

A checking account is designed for frequent transactions, including receiving paychecks, making debit-card purchases, paying bills, and withdrawing cash. A savings account is generally used to set money aside and may earn interest. Some savings accounts limit certain withdrawals or transfers.

Banks and credit unions offer different account terms. Before opening an account, compare its agreement and fee disclosures.

Deposit protection

At an FDIC-insured bank, eligible checking and savings deposits are automatically insured up to $250,000 per depositor, per insured bank, per ownership category. This protection applies to deposits if the bank fails, not to investments such as stocks or mutual funds. Credit unions have a separate federal deposit-insurance system, so check whether the institution and account are covered.

Ways to make payments

Payment methods differ in how they access money, how quickly payments occur, and what risks or fees may apply.

• Cash is immediate and does not require an account, but it can be difficult to recover if lost or stolen.

• Checks instruct a bank to pay someone from your account. Record checks and monitor whether they clear.

• Debit cards draw money from a linked deposit account. A purchase can reduce the balance available for later payments.

• Credit cards let you borrow from the card issuer. They are not debit cards and may involve interest if you carry a balance.

• ACH transfers move money electronically between bank or credit-union accounts. Direct deposit and many recurring bill payments use ACH. Transfers may take time, can be returned if funds are insufficient, and may have limits or fees.

• Bank bill pay lets you ask your bank or credit union to send payments. With automatic debit, you authorize a company to withdraw payments from your account. Track the amount and date so enough money is available; otherwise, fees may apply.

• Payment apps can make person-to-person transfers convenient. Check the recipient carefully before sending money. Whether a balance left in an app has deposit-insurance protection may depend on the app’s arrangements and your enrollment.

Fees and account terms

Review an account’s fee schedule before signing up. Common charges include monthly maintenance fees, out-of-network ATM fees, overdraft or nonsufficient-funds (NSF) fees, wire-transfer fees, and fees for stop-payment requests or printed checks. A “free” account may still have fees, so check what the label does and does not include.

An overdraft happens when a transaction is paid despite insufficient funds, leaving the account below zero. An NSF fee may apply when a payment is rejected. For one-time debit-card and ATM transactions, a bank generally may not charge an overdraft fee unless you opted in to overdraft coverage; checks and recurring electronic payments can be treated differently. Ask which transactions are covered, what fees may apply, and how to decline or change overdraft coverage.

When comparing accounts, ask:

1. Is there a monthly fee, and how can it be avoided?

2. What balance or deposit is needed to open or maintain the account?

3. Which ATMs are free, and what do other ATMs cost?

4. What overdraft and returned-payment fees may apply?

5. Are there limits or fees for transfers, withdrawals, or account services?

Securing digital banking

Online and mobile banking can let you check balances, deposit checks, transfer money, pay bills, and receive alerts. Use the bank’s official app or type its known website address instead of following unexpected links in texts or emails.

Turn on multifactor authentication where available, use a unique password, and protect your phone with a screen lock. Never share a one-time verification code with someone who contacts you unexpectedly, even if they claim to be from your bank.

Use secure devices and networks for banking, sign out of shared devices, and keep your phone and banking app updated. Keep your contact information current so the bank can reach you about suspected fraud or account problems.

Monitoring and responding to problems

Review account activity and statements regularly. Set alerts for low balances, large transactions, and account changes if offered. Keep enough money available for scheduled payments, remembering that pending transactions may not yet appear in the balance you see.

Check the recipient’s name and payment details before sending a transfer; some person-to-person payments can be difficult to reverse. Do not give account passwords, PINs, or verification codes to callers or texters. If you are unsure whether a request is genuine, contact the bank using a number on your card or an official statement.

If you see a transaction you did not authorize or lose a debit card, contact the bank promptly using a trusted phone number or app and follow its instructions. Federal protections and reporting deadlines can depend on the type of transfer and when you report it, so act quickly and keep a record of your report. Save confirmation numbers, messages, and statements related to the report.

• deposit insurance