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Economy & Finance

Banks in the US

What types of banks and bank accounts exist in the US? How do you choose the right bank for you? Find out about different types of bank accounts, building up your credit history, and making money transfers in this InterNations guide on US banks.

The US banking system is regulated by the federal and state governments. New and stricter regulations were set in place due to the recent financial crisis. As of October 18, 2013, there were 6,895 FDIC-insured commercial banks in the United States. The five largest banks in the US are JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, and Goldman Sachs. As of December 2011, the assets of these five banks combined were equal to 56% of the US economy.

Types of Banks

Savings banks are for-profit businesses. They take deposits of money, which they then invest. Bank account holders are paid interest out of the profits generated from these investments.

Credit unions are non-profit cooperative financial institutions. They are owned and controlled by their members. All members have something in common, such as living, working, or worshipping in the same place. Their mission is to be community-oriented and serve people, not profit. Credit unions offer many of the same financial services a bank would, although often under different names. The US has 92 million credit union members, the highest number worldwide.

Commercial banks originally only served businesses, but many now take private customers as well. This kind of bank provides services such as accepting deposits, granting business loans, and offering basic investment products.

Savings and loans banks pay interest on deposits made into savings accounts. They use the money deposited into bank accounts to make loans, usually to people buying houses.

Investment banks are companies that give investment advice. They buy and sell stocks and bonds. Depending on the bank, they may not accept deposits or make loans, and not all are FDIC insured.

Choosing the Right Bank Account

Depending on your banking needs, you will probably want to open a checking and/or a savings account. Sometimes these two bank accounts can be linked to each other. The money in checking accounts is always available to you and can be withdrawn from the bank at any time, but you earn very little, if any, interest on it.

There are several types of savings accounts which may be attractive to you. Savings accounts earn more interest than checking accounts, but the idea is that you will leave your money in the bank account for an extended period of time. The first is a regular savings account, which is a good choice if you have a limited yet steady income. The interest you earn is known as an annual percentage rate (APR), which is the amount of interest you would earn if you left your money in the bank account for a full year.

A high-interest savings account has a higher minimum balance, but also, as the name suggests, higher interest rates. A certificate of deposit (CD) is a bank account in which you deposit a certain amount of money, which you promise not to touch for a specified amount of time, usually six months to five years. CDs have a fixed interest rate, which is usually higher than other types of savings accounts. A penalty must be paid if you remove your money from this bank account before the CD matures.

What to Consider When Choosing a Bank

When choosing a bank in the US, you should first do some research on the bank’s reputation and security. If a bank is FDIC (Federal Deposit Insurance Corporation) insured, you will receive the maximum insured amount (usually USD 250,000 per account holder) back if the bank goes bankrupt. Next you should consider convenience. Is the bank located near your home or work? Does it offer online banking services? Do you prefer a large or small bank? A large bank can be more convenient, as it has many branches and ATMs, but a smaller neighborhood bank can offer friendlier, more personal service.

Be aware of fees when opening an account at a bank. Are there monthly fees, check processing fees, ATM fees, or overdraft fees? Do you need to maintain a minimum balance? Is there a limit to the number of transactions you can make per month? Does the bank account come with a debit card? You can often save on fees if you maintain a minimum balance or deposit a certain amount into your bank account each month. If you opt to receive paperless statements through online banking, you can also usually avoid some fees.


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