2009-09-04 / Columnists

Notes On Consumer Affairs

By Assemblywoman Audrey Pheffer

AUDREY PHEFFER AUDREY PHEFFER In today's complex banking landscape, it is important that consumers interested in opening a bank account for the first time or opening a new account with a new institution research their options to determine which bank account will best suit their needs.

There are three main types of financial institutions that take deposits. The institutions that most people think of when they hear the word "bank" are savings banks, which are for-profit businesses that take deposits, invest the funds, and pay interest to depositors from the money generated through such investments. Credit unions are another popular option for consumers. These non-profit cooperatives are owned by members who share a common affiliation or connection, such as where they work or live. Because credit unions are non-profit and owned and operated by the membership, account interest rates and terms they offer can be better than those offered by other financial institutions. Another popular option for consumers to save and manage their money is online banks. These institutions exist entirely on the Internet with no physical branches or tellers. Online banks may have lower operating expenses than traditional institutions with "bricks and mortar" locations, and, as a result, may offer customers higher yields and lower fees. Once you have determined the type of financial institution you would like to do business with, it is time to select an appropriate account. Most deposit-taking institutions offer both savings and checking accounts. Savings accounts are designed for customers looking to deposit money and earn interest. Checking accounts allow customers to deposit money and withdraw such funds using paper checks or a debit or automated teller machine (ATM) card. The terms and conditions of these accounts may vary based on the amount of money deposited and maintained in the accounts. Be sure to review the fee schedule associated with an account carefully. Many institutions require depositors to maintain a minimum balance in an account in order to avoid a fee. Institutions may also charge other fees including, account maintenance fees, overdraft fees, and ATM fees.

The New York State Banking Department maintains a website containing current checking account fees for several accounts offered to New York residents at: . This website can help you get an idea of the type and level of fees associated with checking accounts. Certificates of deposit, or "CD," accounts are another popular type of banking account. These deposit-only accounts provide a guaranteed interest rate over a set term. While such accounts often have higher yields than savings accounts, it is important to remember that most subject accountholders to a penalty for withdrawing funds early. Lastly, if you are unable to find an account with favorable terms and affordable fees, you may consider opening what is known as a basic banking account, which all savings banks and credit unions are required to offer under New York law. These accounts must have low fees, initial deposit requirements of less than twenty-five dollars, virtually no minimum balance requirement (one cent), and monthly account maintenance charges of no more than three dollars.

The websites of financial institutions are a good source of information for consumers in the process of selecting a bank account. In addition to surfing the Internet for information, if you plan on doing most of your banking in person, it is a good idea to visit the branch you would use most to get more information. In addition to providing for an opportunity to sit down with a representative to discuss the specifics of the accounts available and any questions you may have, visiting a branch allows you to get a feeling for the atmosphere of the bank and the helpfulness of the staff.

For more information about choosing a bank account, consider visiting the Banking Department website at: . For more information about saving and wealth building and management, you may want to visit the United States Financial Literacy & Education Commission's website at .

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