Financial Literacy: Banking

I am not an expert on banking. I have written this page to the best of my knowledge. If you see any mistakes, or think there is useful information to add, please contact me at guatemala@grivel.net.

Why would you want a bank account? There are a lot of reasons that a bank account is useful, but the most important ones are that it is convenient and that it is safe.

A bank account is convenient because it allows your boss to pay you directly, without having to have a lot of cash. More and more companies only pay their employees through a bank account. It also gives you access to certain benefits: many benefits from the government require a bank account.

A bank account is safe because nobody can steal your money. Even if the ban somehow loses your money, they still have insurance to pay you your money back.

A bank account also helps you build your credit history, which will be important in the future if you want to get an unsecured credit card, or want to borrow money.

Open a Bank Account

To open a bank account, you normally need two things: an identification, and a social security number. If you don't have any American identification papers, a passport from your home country will also work. If you don't have that, you will have to work with your embassy or consulate to get one.

Americans get their social security number when they are born, but if you come from another country, that may not be so easy. However, if you don't have a social security number, you can still get a “taxpayer ID number” from the IRS. You may want to ask a professional to help you get that number. You will also need it to be able to pay taxes.

Once you have your identification and your social security number or taxpayer ID number, you can go to a bank and ask them to open a “checking account.” You may want to ask friends what banks they use, and whether they are happy with their bank.

What to Watch Out For

First, make sure that the account you are opening is “FDIC insured.” This is important: it means that even if the bank goes out of business, you will still get your money back. All regular banks are FDIC insured. If someone is trying to sell you an account that is not, walk away. That is NOT a regular bank account.

Make sure you know about fees the bank charges. The bank wants to make a profit, and just keeping your money safe doesn't make a lot of profit. They have come up with fees for just about everything. Different banks have different fees, so you want a bank that does not charge you money for the things you need the bank for.

Usually, there is a minimum amount of money you need to keep in the bank. Often this is something like 200 or 300 dollar. Some banks may not have a minimum, or a lower amount. You want to make sure you always keep the minimum balance until you are ready to close out the account altogether. If you don't keep that minimum, expect the bank to charge a lot of money.

The bank may be telling you about the interest they pay you. While this is nice, you have to have a lot of money in the bank for a long time for the interest to be worthwhile. Be careful getting an account just because it pays a lot of interest, unless you know exactly what you're doing.

How to Use the Bank Account

Your bank account holds your money. Just like you don't leave a lot of money lying around at home, you also need to make sure that you keep your bank account information safe. The money is safe, as long as you don't tell anyone the “secrets” that you need to use your money.

The things you shouldn't tell anyone, unless you know who they are and you trust them with your money, are your full account number, any password to your account, any security questions you may have been asked to set up, and most of all the PIN number you use for your bank card.

Many banks will have an app for on your phone, where you can do things like check on how much money is in the bank, see when your paycheck is deposited, and possibly pay many of your bills directly from your phone. Make sure someone explains to you exactly how that app works before you start using it.

Your Bank Card

One of the things you will receive when you open a bank account is a bank card. There should not be a fee for the bank card (you asked about fees when you opened the account, right?), and it will be replaced when you lose it, but you still want to make sure you are very careful with it.

A bank card, also known as ATM card, can be used to get cash from the bank, at any hour of the day or night, without having to go into the bank. There is a limit to how much money you can take out at the ATM, and of course your account must have the money in it. When you take money out with the ATM, it is immediately taken from your account.

You can use the ATM card at any ATM from any bank, but usually you want to only use your own bank's ATM. Other banks may charge you a fee of a few dollars to use their ATM, and your bank may also charge you a fee if you use ATMs from other banks. Only use your own bank's ATMs.

Many bank cards can also be used as a credit card, but be very careful with that. Usually, when you use your bank card as a credit card, you end up paying extra money (fees) to your bank. It is usually better to get a real credit card if you want to use a credit card.