7 Reasons To Open A Bank Account
A bank account is essential to American financial life. If you’re coming from a country where cash is king, you might wonder why you need a bank account. We’ll explain the purpose of a bank account and 7 reasons to have a checking account.
The purpose of a bank account
Put simply; bank accounts are a place to keep your cash and transact business. In the U.S., banks are safe. It’s rare for banks to fail, and if they do, customer funds are protected by the Federal Deposit Insurance Corporation (FDIC), an independent federal agency.
While safety and transacting business are the two main reasons to open a bank account, there are many other benefits.
Reasons to have a checking account
Why open a checking account? Let’s count the ways! (There are 7!)
1. Safety
Of all the good reasons to open a checking account, the safety of your money is the most important. When you keep your funds in cash, you risk losing it, having it stolen or destroyed in a fire, flood, or other disaster or accident. If those things happen, the money is gone.
When your money is kept in the bank, its safety is 100% guaranteed.
2. Convenience
Bank accounts can be used to receive and send cash. That means your employer can directly deposit your paycheck into your account; you can deposit checks, pay bills either online or with a paper check, and transfer cash to friends and family.
3. Saving money
Without a bank account, you have to pay a fee to have your checks cashed. And you have to buy money orders to pay your bills. It varies by location, but the average fee for a check cashing service can be from 1% to 12% of the value of the check. The cost of a money order can range from $1 to $5.
Also, consider that money orders have to be mailed to the vendor. That means they could arrive late or not arrive at all (It’s rare, the U.S. Postal Service is very reliable, but it can happen). That can result in late fees or even a cancellation of a service.
Some vendors will offer you a discount if you agree to have their monthly payments directly debited from your account each month; this also means you’ll never forget to make a payment!
4. Proof
A bank account provides a record of all your transactions; all the money that comes into and goes out of the account. This comes in handy if a vendor claims you didn’t pay a bill that you know you paid.
Banks also provide monthly statements of your account activity. You may be required to provide this information when applying for an apartment or a mortgage.
5. Budgeting
Budgeting is essential for financial success no matter where you’re from or choose to live. When all of your transactions are in cash, budgeting is tricky. You would need a receipt or at least to write down every penny you spend. But your bank provides that information, and you can access it 24/7 online.
6. Access to credit
Opening a bank account is the start of a business relationship. If you are a long-time customer with an account in good standing, you can apply to your bank for things like personal, auto, and student loans and a mortgage when you’re ready to buy a home.
7. Interest
Banks pay interest on customer accounts. It’s not much interest, and there are definitely places where your money can earn more, but any interest is more than you earn when your cash is stashed under the mattress!
Upwardli can help
Opening a bank account is the first step to creating your new financial life, and there are many more steps to go. Upwardli to the rescue! Upwardli was created to help new immigrants understand and set up their financial lives in America. We can help you learn how our financial system works and build a credit history, an essential aspect of American finance. As you progress, Upwardli is there every step of the way!
