What you'll find here

From savings accounts, to checking accounts, and everything beyond. Here, we cover the ins and outs of the system to help you make the most informed personal banking decisions.

Banking 101

Before you open an account, make sure you have a good understanding of the ground-level details:

How many bank accounts should I have?

Typically, the average person has two active bank accounts – one for checking and one for savings. Your checking account is where most of your living transactions take place: direct deposits and withdrawls. The savings account is normally for building a pool of currency over time for a specific purpose, or in case of emergencies. You can open any additional accounts if you choose to, but depending on your situation, you might need the approval of your bank. Some require a certain amount of money to be deposited before making the account active.

Can I have open accounts at two separate banks?

There's nothing keeping you from opening accounts at different banks. Some people might want to keep business funds separate from personal funds, and alternating between banks helps them to better organize. Others may want to open a joint account with a spouse or partner, and doing so at a different bank keeps them from having to change a system they're already comfortable with. Whatever your reasoning, be sure to adhere to bank policies and do your best to avoid overdraft penalties.

What is overdraft?

Overdraft occurs when you don't have sufficient funds (NSF) in a particular checking account to cover a transaction, resulting in your balance ending up in the negative. For example, if there is $100 in your checking account and you make purchases totaling $110, your available balance would read -$10.00 until more funds can be deposited. And if you were to deposit another $90 into the account, your available balance would read $80. The $10 difference is due to the overdraft. Some banks charge an additional overdraft penalty fee if you don't bring your account balance back to $0 or higher within a number of days. There are two alternatives to overdraft. One is when your attempted transaction is denied when you run out of money (check bounces, debit card rejected). The other is getting overdraft protection, which opens any secondary accounts to be accessed for reserve funds if needed. Typically, your savings account can be tied to your checking account for overdraft protection.

Can my bank close my account without notice?

A bank will not normally close an account until it has provided you with at least 14 days notice. If there is an issue with your account, you will most likely be made aware of it well ahead of time. In which case, the bank will allow you to fix the problem or close the account yourself. Even if there is a rare case in which your bank does happen to close your account without your notice, it would be due to a court order.

Latest Banking Articles

Personal Finance 101: What Does FDIC Insurance Really Mean?

Understanding FDIC Insurance and What It Means In the Case of Bank Failure One of the biggest things I encourage…

Trent Hamm
Trent Hamm
Sep 4, 2014
Checking Accounts and Bernie Madoff

Ronnie writes in: I’m curious what your thoughts are on fractional reserve banking. It seems to me that this method…

Trent Hamm
Trent Hamm
Sep 17, 2014
The Backup Checking Account

Not too long ago, my wife and I combined our checking and savings accounts, mostly in an effort to make…

Trent Hamm
Trent Hamm
Oct 24, 2013
Creating a CD Ladder for Your Emergency Fund or Other Savings to Earn a Better, Safe Return

As I’ve mentioned before, my family has a pretty good sized cash emergency fund, somewhere around nine months’ worth of…

Trent Hamm
Trent Hamm
Oct 5, 2008
Money Market Accounts vs Savings Accounts

Understanding Money Market Accounts Kathleen writes in with a good question: A lot of personal finance books I read suggest…

Trent Hamm
Trent Hamm
Aug 16, 2019
What Features Are Most Important For Your Primary Bank? My Thoughts and Recommendations

As most longtime readers know, I’m a very happy customer of ING Direct for both my primary checking account and…

Trent Hamm
Trent Hamm
Nov 1, 2018