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Current Accounts
There are two main types of bank account in America: current accounts (known as chequeing accounts) and savings (deposit) accounts. Many Americans are paid by cheque, either biweekly (every two weeks) or monthly, which they then cash or deposit in a bank account. If you want to cash a cheque, you must take it to the branch where it was drawn or a branch of the same bank (usually banks are inundated by employees cashing their pay cheques on Fridays). It’s estimated that around 15 per cent of American families don’t have a bank account. If you’re paid by cheque, one of your first acts should be to open an account with a bank or a savings and loan association. Note that American employers are increasingly paying their employees’ salaries directly into bank accounts and even when it isn’t standard practice, you can ask for your salary to be paid this way.
Before opening an account, you should shop around among local banks and compare accounts, interest rates, services and fees. You should take particular note of a bank’s fees (there may be 200 or more!), which have increased considerably in the last few years and have caused considerable outrage among customers (nowadays most bank robbers are employed by the banks!). To avoid fees you should never overdraw your account or accept cheques from unreliable sources, keep a minimum balance in the account, use your own bank’s ATMs (free), obtain overdraft protection (see below), and read your bank’s fee-disclosure literature.
The best type of account to open initially is a current account, which is the usual account for day-to-day financial transactions in America. To open an account, simply go to the bank of your choice and tell them you wish to open an account. You usually need a permanent address and a social security number (residents only), although you may be asked to provide further identification (ID) such as a state identification card, driving license or passport. You may also be asked for a reference or co-signer, although many banks will waive this requirement in the ceaseless quest for new customers. All banks provide a range of personal and business current accounts, which usually include regular current accounts, special or basic current accounts, and NOW (and super NOW) accounts:
Regular Accounts A regular current account usually requires a minimum balance e g $300 to $2,000 There s usually no charge for writing cheques and no monthly account fees, although if the balance falls below the required minimum there’s a monthly service fee, e.g. $5 to $10. This type of account may not be worthwhile unless you write at least 20 or 25 cheques per month, as you will get a better rate of interest in a savings account.
Special or Basic Accounts: Special or basic current accounts don’t require a minimum balance, but have a monthly service fee, e.g. $5 to $ 10, and/or a per cheque charge of 20 to 350. Some banks may levy a monthly service fee plus 750 for each transaction over a certain number (e.g. eight) in each statement period, irrespective of the account balance.
NOW Accounts: NOW (negotiable order or withdrawal) accounts require a minimum deposit and are a combination of cheque and savings accounts, with no interest rate ceiling or floor. The interest rate is calculated on a sliding scale depending on the account balance. A super NOW account requires a higher minimum balance than a standard NOW account. Some NOW accounts require a high minimum deposit, e.g. $5,000 to $10,000, and include privileges such as no bank charges, a no-fee credit card, preferred credit card interest rates, preferred CD (certificates of deposit) rates, overdraft protection, and a premium savings rate.
Many banks used to provide gifts (e.g. a toaster or blender), ‘prizes’ or goods at a discount when you opened an account (particularly a savings account with a large minimum deposit), although gifts have largely been phased out and replaced by interest payments in recent years. Other inducements may include free cheques for a number of months (or life), a free gold credit card for one year (or life), extended warranty and 90-day purchase protection, $20 off your local telephone bill and free cheques (often the first 50 are free). Although incentives may be attractive, you shouldn’t let them influence your choice of bank or the type of account you open (unless, of course, all other terms, fees and conditions are equal).
Most banks offer free cheques or accounts free of service charges (and a range of other inducements) for customers aged under 18 and over 55 or 65, particularly if their income is paid by direct deposit. Many banks also offer low cost current accounts, e.g. $3.50 per month and no per-cheque charges, and students may be offered accounts with no per-cheque fees or monthly service charges during the summer months. Some accounts are a combination of cheque, savings and credit card accounts, and may combine the balances of cheque and savings accounts as well as other investments.
Cheques aren’t provided free by American banks and typically cost $10 to $20 for
a box containing five pads of2O to 25 cheques. It’s cheaper to buy your cheques from
a cheque printing company, although your bank may penalize you for this. Two such
companies are Checks in The Mail Inc., 2435 Goodwin Lane, New Baunfels, TX
78135-0001 (877-397-1541, www.checksinthemail.com) and Current Inc., Box
19000, Colorado Springs, CO 80935-9000 (1-800-204-2244). Most banks return
cancelled cheques with your monthly statement, although some will ask whether you
prefer an itemized statement or cheques with an automatic carbon copy. Find More information about current accounts >>
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