I recently had a conversation with someone who maintained the stance that banks are full of sharks who wish to steal your money. He felt that it was pointless to have a bank account, when you could just handle and store your own money. Why should he trust a business with the money he worked his butt off for?
I gave him a long list of reasons as to why it’s best to have a bank account, but he still didn’t believe me. Turns out, he is not alone in the belief that banks are not the benevolent entities they present them self as.
You may be surprised to learn (I was!) that one in four (28.3%) of all U.S. households opt to conduct financial transactions outside of the mainstream banking system. In other words, they choose to not go through a bank.
Why Do People Distrust Banks?
A big part of this comes from the fact that many people distrust banks. A good amount of this distrust stems from the fact that banks are, at their very core, a business. They are more likely to take risks with your money, and are notorious for gouging clients with hidden fees and other issues.
Those who distrust typical banks, but still want to keep their money safe, opt for a credit union account over a typical bank account. This is definitely a great idea. Credit unions offer the same financial services as a regular bank does, but with lower fees, better customer service, and a variety of other advantages.
Why Should You Get a Bank Account?
As you probably know, bank accounts have two different aspects: Checking and Savings. Your checking account is generally designated for the day-to-day things, such as buying new video games or taking that trip to Starbucks. Oh, and paying your bills. Can’t forget that.
Savings accounts are for…well…saving your money. Pretend you’re a dragon, and hoard that gold.
In case you’re still wondering why you should get a bank account:
- Bank accounts keep your money safe.
It’s pretty impractical to keep stacks of cash in your sock drawer, or in a shoebox. I suppose you could just get a safe, but that’s pretty much what a bank is for.
- Paying your bills is easier.
When you set up a bank account, you can get a debit card. This lets you take out the money from your checking account with ease. You can use this for in-person purchases, or you can use it online to pay your bills. You can also use it to buy awesome things online.
- Cashing your check is FAR easier.
Did you get a check from your favorite aunt for your birthday? What about your paycheck? If you do not have a bank that lets you cash your check, then you will have to go through a bunch of hassle just to do so. You can go to a check-cashing place, but you will be charged with fees. Plus, there is the fact that your check can be refused by these places if it goes over a certain amount. Banks don’t care. They’ll store your money for you.
- Direct Deposit is an incredible convenience.
Banks let you receive money electronically. Most employers will just send your money directly to your bank, rather than you having to deal with cashing a check.
- Makes tax things easier.
When it comes time to file your taxes, you have the option to do so electronically (Direct Deposit). Depending on when you file, and how many paper checks they have to process, going for the electronic option can save you months of time.
What about the fees?
Honestly, any fees that are charged when you get a bank account are pretty minor. Regardless, your bank will give you a whole bunch of paperwork that explains exactly how your bank account will work. You can also ask the person helping you set up your account, should you have any questions or need clarification.
While some tricky banks have hidden fees, the most common type of fee are monthly maintenance fees and/or overdraft fees. Even then, not all banks charge these fees.
- Monthly Maintenance:
Some banks may charge a fee if your balance goes below a certain amount.
Some banks may not care about your minimum balance, but will just charge a flat rate in order to keep your account open.
Some banks have additional stipulations, such as forgoing a maintenance fee as long as you do your banking online or through the ATM.
This is exactly what it sounds like. Overdraft fees are charged when you try to spend more money than you actually have. So, the bank has to cover these charges, and then you essentially are paying them back via the overdraft fee.
Why would I trust someone else with my money?
While there are a bunch of reasons as to why many Americans do not trust banks, there are things banks do to keep your money safe.
The Federal Deposit Insurance Corporation (FDIC) insures up to $250,000 per bank account. While people may still have to worry about hacking and identity theft, there are things you can do to protect your money while it is the in the bank.
- Use multifactor authentication.
This is when the bank sends a text with a one-time password in order to log into the bank’s website. This capability is not easy for hackers to access or find.
- Don’t spread your money around.
Using multiple banks increases the risk of your information being compromised. Banking, investing, and insuring through the same place will cut down on your risk of identity theft, since it makes your profile smaller.
- Don’t use public wifi to check your account.
Public wifi lacks the sophisticated encryption that you need to ensure the security of your account information. Basically, don’t check your account at the restaurant or when you’re out at Starbucks.
- Keep a close eye on your account.
Check your account for weird transactions each day. If you see something you do not recognize as being a transaction you made, contact your bank right away.
Do not automatically trust emails that say there has been an account breach. Instead, call your bank to confirm this information. Otherwise, you may fall victim to a scam.
Now that you have all that information, you will be better able to make the decision to go keep your money in your home or in a bank.