Personal Banking

Questions about Personal Banking

1. Why do you need a bank account?

2. Who is eligible to open a US bank account?

3. What type of services do I get with a personal Bank account?

4. Are there different types of personal retail banks?

5. How can you make sure your bank account is safe and secure?

Why do you need a bank account?

Bank accounts are helpful to protect your money from theft. They are also a safe and effective way to facilitate receiving or sending money to other parties. For example, you may be able to have your paycheck or other sources of income (e.g. social security) deposited directly into your bank account. You can also pay others directly from your bank account through checks, ACH transfers or debit cards. If you have accumulated some cash, your cash money is better protected in a bank than it is in your purse, car, or home where it may more easily be stolen. Further, the US government ensures deposits in US retail, bank accounts up to $250,000 (through the F.D.I.C.) to protect individuals from any bank failures. Additionally, depending on the type of bank account, you can earn interest on your money. Lastly, a bank account is good way to have an official record that your payments to other parties were made. The bank will keep records of all transactions so that you can easily prove you paid your bills.

Who is eligible to open a US bank account?

You do not have to be a US citizen to open a bank account in the US. Nonresidents with legal visa or green card are also permitted to open a US bank account. The bank will ask you for a federal tax ID (TIN) in order to report any bank account interest, or certain other financial transactions, to US federal government agencies like the IRS (Internal Revenue Service) which manages US income tax collection. You can get a federal tax id by applying to the IRS. More detailed information can be found (in English or Spanish) on IRS web site at  IRS Tax Identification Numbers . You will have to complete application form W-7 and present evidence of your immigration status and identity. Form W-7 and instructions are also available on IRS web site in Spanish at  About Form W-7, Application for IRS Individual Taxpayer Identification Number

What type of services do I get with a personal Bank account?

Banks servicing individuals are known as Retail (or Consumer) banks. They typically offer the following services:

·        Checking

·        Saving

·        Bill Pay

·        Mobile banking

·        Money market (high interest savings type account)

·        CDs (Certificates of deposits) fixed investments

·        Loans (auto, home mortgage, other)

·        Wire or ACH money transfer services, including foreign currency transactions

Are there different types of personal retail banks?

Personal Retail banks are mostly grouped into the following categories:

• Local Community Savings and Loans

  • Local banks are useful if you will be making a lot of cash deposits. While they typically do not offer great interest rates on savings, you can supplement them with an on-line higher interest bank account and transfer excess funds from the local to the on-line bank electronically. Community banks may also be helpful if you run a small local business / need a line of credit.

• Regional Consumer banks

  • Regional Banks are larger banks that operate across bigger geographies like Bank of America, Wells Fargo or JP Morgan Chase. They typically have physical branches in multiple geographic areas and usually offer more services than community banks. However, they may come with higher fees and not provide the degree of care / service you would get in a community bank.

• ·Credit Unions

  • Credit Unions are “not for profit” banks that are typically available to members of a large company, trade union or other organization. Credit Union deposits are also guaranteed by the Federal government. They come with very low fees and can be an excellent way to obtain low-cost banking capabilities. However, credit union accounts can also be challenging if you will be making a lot of cash deposits and don’t live near a branch office.

• On-line / Internet banks

  • On-line banks usually have the best interest rates (due to low overhead costs) for high yield money markets or CD deposits. They are easy to work with electronically, but not great if you need to make “cash” deposits. Some examples of on-line banks are Ally Bank, Discover bank, SoFi or Synchrony Bank (savings only).

How can you make sure your bank account is safe and secure?

·        The first advice I can give is to never give your bank account user id and password to any person or company. Some financial apps like Bilt are now asking for your bank account credentials. In addition to being a huge security risk, if you give the credentials to a third party, it typically invalidates your agreement with your bank. These third-party financial applications do not need your bank account credentials to make transfers on your behalf. They do need your bank routing number (which is public information) and your bank account number to perform ACH money transfers. They also need to verify your identity and that you are the true owner of the bank account, but they can do that through other means without having to know your bank user id and password.

·        Enable MFA (multi factor authentication) security on your bank account log in. This typically involves the bank sending a security code to your phone as a text or email. This prevents someone who has learned your user id and password from being able to access your account – unless they also have your phone and can log into it.

·        Never stay “logged in” to your bank account (or other financial apps) on your phone or computer.

·        Enable debit card and credit Card controls. Many banks now allow you to put restrictions on your transactions by geography, amount, or category of spend. This can help prevent fraudulent bank charges.

·        Do not keep more money than necessary in your checking account. If a fraudulent transaction occurs that you are responsible for, you will limit your loss.

·        Make sure that wherever you keep your money, the account is ensured by the federal government (FDIC).

·        Do not log into banking apps (or other financial apps) from an unsecure network – like an airport free wifi network.

·        Do not leave your bank account credentials lying around in plain sight. If you must write your password down to remember it, write it in some sort of code that only you will remember e.g. your favorite vacation city plus your childhood phone number.

·        Do not click on a link in a text or email. Hackers often send fake emails that look real, but contain links to try to get you to supposedly log into your bank account when in reality, they are stealing your user id and password.

 Written by Francis Daly. Fran is a Life Science Business Technology Executive. He earned a Bachelor of Science degree in Business and Spanish from the State University of New York - Oneonta, and a Master’s of Business Administration in Finance from Fairleigh-Dickinson University. Fran is a Certified Public Accountant and has extensive experience working in the pharmaceutical and life sciences industry over the last 40 years, working for Schering-Plough Pharmaceuticals, Revlon, and Apps Associates.