In tough economic conditions, every financial institution wants to get its hands on consumer money to strengthen its assets and increase its customer base. These days, local and national banks have become so good at marketing and selling their products, they beat grocery stores with their eye-catching, can't-resist, mind-melting, gravy "deals". You probably see at least two or three offers for opening a bank account in your mail box, some banks even offer cash or gift cards to get you started.

Many banks are fighting for survival and trying to grow their business by attracting customers from their competitors through freebie or cash-back offers. Let's take a look at how consumers should take advantage of these deals, and find the best bank account for their financial situation. (If you want to open any type of bank account, read Demystification Of Bank Accounts.)

Select a Right Bank Account
Everyone's needs are different and change depending on time and situations. The following five criteria can help you narrow the choices to find the right type of account for your needs today.

1. Purpose of Use
Obviously, your decisions are driven by your needs. You buy a car when you need a vehicle for commuting. Similarly, you open a new bank account when you need it, ie. to save money or write checks. Your needs should be specific enough to help you to select the right type of account.

For example, if you want to write and cash checks, you need a checking account. Perhaps you already have a checking account, but it has no interest earning capability and you want your money to grow while still having access to it. In this situation, consider putting money in a savings account with checking accessibility. If you don't want the money in the near future, but want to invest it for a long period, consider putting it in a high-interest-yielding certificate of deposit (CD) account. (To learn more about CDs, see Step Up Your Income With A CD Ladder.)

If you plan to start a business, you better keep the business transactions separate from your personal accounts by opening a business checking account. You can still grow your business money by either putting the money away in business savings accounts or CDs. Select the right account that matches your need and don't just open any account. Too many bank accounts can complicate your life and only lead to confusion for beginners.

2. Convenience
A key question to ask yourself when opening an account is: "How easy and fast can I get a hold of my money?" The answer depends on the bank you select as different banks hold different hours, and offer different daily limits and transfer times.

First, determine whether the bank has multiple branches in your city or neighborhood. If not, determine if the bank at least has accessible free automated teller machine (ATM) access throughout the city. If the bank does not have its own ATMs, it should at least have free ATM access partnered with some other ATM networks. Also, check whether the bank has a mobile banking facility with late hours, which helps when you are unable to access the bank during regular business hours.

Internet banking is a must-have facility these days. Find out whether the bank or account offers internet or online money transfer facilities, which is a good tool to move money back and forth from different bank accounts. These convenient facilities will save you a lot of time.

3. Freebies and Fees
When it comes to banks in specific, nothing is free. As consumers, we always pay a certain cost for a service or product, whether it's up front or later. We are given an impression that we are getting something free but in essence, businesses (and banks) selling the product, will eventually add the cost of the freebie to other products consumers buy, making consumers eventually cover their "free" promotions.

Some of the baiting tactics used by the banks to lure in consumers are:

  • No maintenance fee (often, for a limited time).
  • No monthly service charges (again, within a time limit).
  • Free money ($50-100) when you open a new account with direct deposit.

After you are lured in, the bank will set its net to trap you. You may have received a perk, but now you most likely have to keep a specific balance all the time (which limits your access to your own money, and makes them constant interest on your money) or they make you use their other services that don't come with this free package, which in the end makes you pay more for the simple services you forgot about when you were lured by this shiny deal.

In the end, be wary of any freebies, and make sure you get all the details, hooks, and limits before you open the account. This is one of those times when you definitely want to read the fine print.

4. Add-on Membership Offers
Many banks, credit unions and other financial institutions offer add-on benefits for being a member or account holder in the bank. For example, some offer free or discounted safety deposit boxes. If you need a vault-enclosed locker to put your belongings, you could save some money by opening an account in those banks.

Some banks offer free payroll processing or a discounted price for business accounts if you agree to have employee payroll checks direct deposited to their checking accounts, which should be in that same bank. This saves a minimum $40 payroll processing fee charged by other vendors.

Many banks offer free admission to museums or discount tickets to theme parks if you use your debit card (linked to their bank). These are all add-on advantages for opening accounts in certain banks, but they should not be the key factor in choosing to open an account. (For more on this, see Tired Of Banks? Try A Credit Union and Choose To Beat The Bank.)

5. Protection
According to the Federal Reserve System (FRS), any legal bank or financial institution that offers any type of checking, savings, money market, or CD account is insured up to $100,000 for each individual (including all accounts) through the Federal Deposit Insurance Corporation (FDIC). Your investment accounts, by contrast, are not protected under the FDIC umbrella.

If you open an account with a well-known national bank, you can be sure that it has the legal insurance from FDIC. But if you are dealing with a local bank, verify with the bank management that your money is safe and insured by the FDIC. (For related reading, see Are Your Bank Deposits Insured?)

Requirements For Opening an Account
The following items are what you have to provide to the bank when you open a personal account:

  • Your social security number (SSN)
  • Two forms of identification (including one with photo ID). Some examples include: a driver's license, state ID, passport or photo credit card, and sometimes any previous debit or credit card held with the bank.
  • Proof of current residence (address verification). This can be from a utility bill or any mail that shows your name and address.
  • Initial deposit. The amount varies with each bank, but typically $1-100 to open checking or savings accounts; and minimum $500 for CDs.

The following items are what you have to provide to the bank when you open a business account:

  • Two forms of identification (including one with photo ID). Some examples include: a driver's license, state ID, passport or photo credit card, and sometimes any previous debit or credit card held with the bank.
  • Proof of business registration. Identification can include: employer identification number (EIN) or federal employer identification number (FEIN) from the IRS, or a business certificate (in some states this is called a "Doing Business As" (DBA) certificate).
  • Initial deposit. The amount is typically $25-100.

Opening a Checking Account
When in doubt, don't hesitate to ask questions to the bank representative (sales or customer service) regarding the following points:

  • Can you direct deposit and use bill pay services?
  • Will you get special rates, perhaps for additional auto loans or CDs?
  • Do you have multiple choices for debit card offers? Some banks offer money back on debit card usage or a rounding-off forced-savings debit card.
  • Do you have minimum balance or average balance requirements? Sometimes the wording is vague and confusing, make sure you clarify any doubts you have with the bank.
  • Can your paycheck which is direct deposited weekly, biweekly or monthly be deposited without fees?

Conclusion
It is really important to select the right account for the right purpose because it is going to stick with you and to your credit history for a long time. So spend some time comparing different bank accounts, and use the pointers we discussed above to make your decision. They can help you nail down the right account for your personal financial situation.

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