Welcome to Banking 101 A Simple Guide to Managing Your Money, where you’ll learn how to navigate the essentials of everyday banking and build a solid financial foundation.
Let’s be real—managing money isn’t always simple. Between paying bills, keeping an eye on your spending, and trying to stash away something for the future, it can feel like you’re constantly trying to keep up. If you’ve ever felt confused or stressed about your finances, you’re not alone. But here’s the upside: once you understand how banking actually works, things get a lot less intimidating. That’s what this guide is all about—making the world of banking easier to understand so you can take control with confidence.
Maybe you’re getting ready to open your very first bank account—or your first one here in the U.S.—or maybe you’ve had one for years but never really stopped to ask yourself, why do I even need this? That’s totally okay. Most of us open a bank account because someone told us to—not because we fully understood how it fits into our financial life.
And now, with all the digital options out there—Venmo, Cash App, Apple Pay, prepaid cards—it’s fair to wonder: Do I really need a bank account at all? And if I do, which type is actually right for me? Between checking accounts, savings accounts, and money market accounts, the choices can feel overwhelming.
So let’s break it down together. We’ll walk through the basics of what banking is, why it matters, and how to choose the type of account that fits your lifestyle—not the other way around. By the end, you’ll feel more confident, more in control, and ready to make smarter money decisions.
Key Takeaways
- Banks are financial institutions that accept deposits and lend money.
- Many people wonder, given the advances in technology today, if a traditional banking account is really necessary.
- Online payment systems like PayPal can be used to send money, while prepaid debit cards are often used for online shopping or to withdraw money from ATMs.
- Advantages of using bank accounts are security, convenience, and the potential availability of other investment options.
- Some online-only banks charge less in fees and offer higher interest rates compared to traditional brick-and-mortar banks.
Why Use a Bank?
If you’re new to the world of banking—or you’ve lived in places where banks aren’t exactly trustworthy—you might find yourself questioning why you should bother with a bank at all. After all, today it’s easier than ever to manage your finances without a traditional bank account.
Prepaid debit cards, for example, allow you to shop online, make in-store purchases, pay bills, and even withdraw cash at ATMs—almost exactly like someone with a standard bank account. The IRS can deposit your tax refund onto a prepaid card, and many employers now offer the option to load your paycheck onto one, though this choice does come with certain disadvantages.
On top of that, online financial platforms like PayPal and Venmo enable you to send and receive money without ever stepping foot in a bank. You could also choose an all-cash lifestyle by cashing your paycheck at a retail giant like Walmart or a local check-cashing store, then paying your bills directly at their service counters.
Still, if you qualify to open a traditional bank account, you may discover that the advantages are worth it. A bank offers robust protections for your money, more reliable financial services, and added peace of mind that your hard-earned cash is safe and accessible when you need it most.
1. Bank Security
Keeping all your cash tucked away at home might seem convenient, but it’s far from safe. A break-in could wipe out your savings in seconds. Even someone you trust—a family member, friend, or neighbor—might be tempted to dip into your stash. Burglars, for their part, know exactly where people hide cash, from mattress seams to cookie jars. Worse yet, you could become the victim of a robbery while you’re home, putting both your safety and your money at risk.
Natural disasters pose an additional threat. If your house catches fire or floods, your cash can easily be lost forever, and homeowner’s insurance will only cover a minimal amount of it. Trying to bury money in the backyard might sound creative, but containers can rot, break down, or shift over time, leaving your money ruined or impossible to find. And let’s be honest—it’s easy to forget exactly where you hid that emergency $100 bill. Was it taped behind the old family portrait, slipped into a novel on the bookshelf, or stuffed in an old coffee tin in the pantry?
Prepaid debit cards might feel like a safer alternative, but they carry their own risks. They’re easy to lose or steal, and recovering lost funds can be difficult, leaving you without crucial resources.
When you’re living paycheck to paycheck, losing even one paycheck could spell financial disaster. That’s why protecting your money should always be a top priority, especially as your savings grow.
A bank account remains the most secure place to store your money. As long as you open an account with a legitimate bank covered by the Federal Deposit Insurance Corporation (FDIC) or a credit union backed by the National Credit Union Administration (NCUA), your deposits (up to the insurance limits) are protected against loss. This guarantee has stood firm for decades, proving its reliability even during severe financial shocks, like the 2008 financial crisis or the savings-and-loan failures of the 1980s and 1990s. In short, a bank is your safest bet for peace of mind and financial protection.
2. Bank Convenience
Keeping your money in a bank isn’t just about safety—it’s also about making your everyday life a whole lot easier. When your money’s in a bank account, you can access it whenever and wherever you need—whether that’s at a local branch, an ATM down the street, on your laptop at home, or even while you’re traveling overseas. It gives you the flexibility to manage your finances on your terms.
Take checking accounts, for example—they’re designed to simplify how you pay for things. No more waiting in long lines at check-cashing places or driving across town just to pay a bill. Forget about buying pricey money orders or paying big fees just to send someone cash. Most banks now offer free, secure online bill pay, so you can settle rent, utilities, or just about any bill with just a few clicks.
Prefer the old-school way? You can still write paper checks and mail them. It’s a low-cost option (aside from the stamp), though it’s not quite as fast or secure as digital payments.
In many ways, banks offer the same convenience you’d get from a credit union—both aim to make managing your money easy and stress-free. Whether you’re transferring money, paying a friend back, or taking care of monthly bills, banking helps you do it all without the hassle—giving you more time to focus on the things that really matter.
READ MORE:6 Features Your Primary Bank Should Have
3. Saving and Investing
Once your income goes beyond just covering the basics, it’s a sign—it’s time to start thinking long-term. Letting that extra money sit untouched in a checking account isn’t doing you any favors. Instead, you can start using it to build real financial stability. Saving and investing might sound like buzzwords, but they’re actually the building blocks of a secure, stress-free future.
A great place to start? Open a savings account just for emergencies. Life is full of surprises—a flat tire, a broken appliance, an unexpected trip to the doctor—and having a little cushion can keep those surprises from turning into full-blown financial setbacks. Even more importantly, a solid emergency fund helps you stay afloat during bigger life disruptions, like a job loss or a drop in income. Most experts recommend saving enough to cover three to six months of your living expenses, just in case life throws you a curveball.
Once your emergency savings are in place, you’re ready for the next step: growing your money. Investing—whether it’s through a 401(k), an IRA, or another long-term account—can turn your extra income into real wealth. That’s how you start working toward the life you want—whether that means retiring early, traveling more, or creating financial security for your family.
Now, if you’re keeping your cash under the mattress or only using a prepaid card, here’s the truth: you’re missing out. That money isn’t earning anything. But even small amounts, when invested wisely, can grow over time thanks to the magic of compound interest. It’s like giving your money a second job—quietly working behind the scenes, helping you build the future you deserve.
How to Choose a Bank
Choosing a bank may seem overwhelming at first, especially with so many options available — from traditional brick-and-mortar institutions to online-only banks and community credit unions. However, with a bit of practical thinking and understanding of what matters most to you, finding a trustworthy banking partner becomes much easier. A good bank does more than just hold your money; it provides security, convenience, and tools to help you manage and grow your finances effectively.
One of the most reassuring aspects of banking in the United States is FDIC insurance. This federal protection safeguards deposits of up to $250,000 per individual per account type at member banks. For joint accounts, that coverage doubles to $500,000. FDIC insurance ensures that even if your bank fails — as happened with Washington Mutual during the 2008 financial crisis — your deposits remain protected. This level of security is especially comforting for individuals from countries where banking systems may not provide such guarantees, offering peace of mind even during economic uncertainty.
While choosing the wrong bank typically won’t devastate your finances, selecting the right one can significantly improve your financial life. A well-chosen bank can help you avoid unnecessary fees, earn higher interest on your savings, and give you easy access to your money when you need it most. Moreover, a reliable bank will simplify everyday money management through user-friendly tools, dependable customer service, and convenient account features.
When evaluating banks, convenience is often the first factor to consider. Ask yourself: Does the bank have branches or ATMs near your home, workplace, or usual travel routes? If you prefer digital banking, does the bank offer a well-designed mobile app and website that allow you to deposit checks, transfer funds, and monitor transactions with ease? Accessibility — whether physical or digital — can greatly influence how satisfied you are with your bank.
Fees are another critical factor. Many banks charge monthly maintenance fees, overdraft fees, and ATM fees, which can quickly add up. Before committing, review the bank’s fee structure to determine if these charges are avoidable — for example, by maintaining a minimum balance or setting up direct deposit. Some banks, particularly online institutions and credit unions, have built reputations for offering low or no fees, making them attractive options for cost-conscious customers.
Bank Legitimacy and Reputation
Before you open a bank account, it’s worth taking a minute to make sure the place you’re trusting with your money is legit and reliable. Choosing a big, familiar name is usually a safe bet, but if you’re thinking about going with a smaller community bank or regional option—or you just want to double-check—you should make sure they’re properly insured. The FDIC’s BankFind tool makes that super easy. It tells you whether a bank is covered by FDIC insurance, which protects your deposits up to $250,000 per person, per account type. If something ever went wrong, that insurance would help keep your money safe.
Making sure a bank is legitimate? That’s the easy part. Figuring out whether it actually has a good track record? That takes a little more effort. A bank can look shiny on the outside but still have problems behind the scenes.
Take Wells Fargo, for example. In 2016, they made headlines for all the wrong reasons—employees had opened around 2 million fake accounts in customers’ names just to meet sales quotas. People were charged fees for accounts they didn’t even know existed. Thousands of employees were let go, and the bank has spent years trying to regain the public’s trust.
Chase Bank has also come under fire over the years, paying out hundreds of millions in fines and settlements for things like bribery and market manipulation. These cases are reminders that even the biggest, most recognizable names in banking aren’t immune to shady behavior.
So, what should you do? Do your homework. Don’t just go by the ads or the fancy website. Look at reviews, search for any news stories or complaints, and see how the bank handles real-life customer issues. At the end of the day, you want a bank that’s not just big or convenient—but one that genuinely looks out for its customers.
Because let’s be honest: you’re not just opening an account—you’re choosing someone to help protect and grow your money. And that deserves a little extra thought.
Online-Only vs. Brick-and-Mortar Banks
When you’re figuring out where to keep your money, one of the first big decisions you’ll make is whether to go with a traditional bank with branches or an online-only bank. Both have their pros and cons, and the right choice really depends on how you live your life and what feels easiest for you.
Traditional banks give you the kind of support that only comes with being there in person. You can walk into a branch, talk to someone face-to-face, ask questions, deposit cash, or get help with anything complicated. If something unexpected comes up—or if you just prefer dealing with a real human—it can be really comforting to know there’s a place you can go.
On the flip side, online-only banks are ideal if you’re comfortable doing things digitally. Since they don’t have to pay for buildings and staff, they can often offer better interest rates and fewer fees. Plus, their apps are usually super easy to use, and you can manage your money 24/7—from your couch, your office, or even while you’re traveling.
That said, online banks aren’t perfect. Depositing cash can be tricky, and if you need personal support, there’s no branch to walk into. So, if you handle cash often or value face-to-face help, a traditional bank might be a better fit for you.
The best part? You don’t have to choose just one. A lot of people do both—using an online bank for savings so they can earn more interest, and keeping a checking account at a local bank for everyday stuff like deposits and personal service.
At the end of the day, it’s all about what makes sense for you. Your banking setup should work for your lifestyle, help you stay organized, and give you peace of mind—not stress. Forget what’s trendy or what others say you “should” do. Just focus on what helps you feel in control of your money.
Bank Location and Size
If you like the idea of banking at a traditional branch, it’s a smart move to choose a bank that’s close to your home or workplace. Having a location nearby makes it easy to drop in, speak to a teller, deposit cash, or take care of withdrawals without going out of your way. If you’re someone who stays local most of the time, a large national bank or even a smaller community bank nearby might meet all your needs just fine.
But if you travel often, it’s worth doing a little homework. Look for banks that have branches and ATMs in the places you visit most. Access to your money while you’re on the road is a must—and being able to speak with someone in person if something goes wrong can be a lifesaver. Also, check whether you’ll get hit with fees for using out-of-network ATMs. Those small charges can add up fast.
When it comes to the size of the bank, don’t overlook smaller community or regional banks. They often offer more personalized service, and many take pride in supporting the local community. If you care about relationships and being treated like more than just an account number, a smaller bank might feel more like home. That said, every bank is different—so it’s worth walking into a branch, chatting with the staff, and getting a feel for the culture before you decide.
If you’re leaning toward an online-only bank, you won’t have in-person branches—but you’ll usually get access to a large nationwide network of free ATMs. Some even reimburse ATM fees if you use an out-of-network machine, which can be a nice perk if you’re on the go a lot and still want flexibility.
Banking Fees
Bank fees can sneak up on you if you’re not paying attention. Some banks are pretty chill—as long as you keep a positive balance, you’re in the clear. But others? They seem to find a way to charge you at every turn. And even small fees, if you’re not watching closely, can quietly chip away at your balance until you’re wondering where your money went. That’s why it’s so important to look closely at a bank’s fee schedule before opening an account. Don’t just trust the marketing. Read the fine print. Make sure you know exactly when and why they’ll charge you—and what you can do to avoid it. This is especially true even when a bank promises “free checking.” That phrase sounds great, but most banks still tuck fees into the fine print somewhere. You might get charged for dipping below a minimum balance, not setting up direct deposit, overdrawing your account, using an out-of-network ATM, asking for paper statements, or even for closing your account too early. The bottom line? Taking a few extra minutes now to understand the rules can save you a lot of headaches (and money) down the road. Look for a bank that’s clear and fair about its fees, and make sure you know how to stay on the bank’s good side. That way, you keep more of your money where it belongs—in your account.
Opening a Checking Account
If you are mostly using your bank account as a source of ready cash and to pay bills, what you need is a checking account. (You might also need a savings account if you want to use your bank for money funds; see below.) Except for some specialized free or low-income accounts, checking accounts generally let you make unlimited deposits and withdrawals, unlike the rules that limit the number of monthly withdrawals from savings accounts.
Before you spend too much time deciding on which bank to use, you should first make sure you qualify to open a checking account. Here’s what banks generally need from customers.
Opening Deposit
Opening a bank account requires proving your identity, which is a standard legal requirement for all financial institutions. This process protects both you and the bank by preventing fraud and ensuring compliance with federal regulations such as the USA PATRIOT Act. Fortunately, the identification requirements are straightforward and easy to meet, whether you open your account in person or online.
When you visit a bank branch in person, you’ll typically need to bring a government-issued identification document, such as a driver’s license, state ID, U.S. passport, Social Security card, or birth certificate. Some banks may ask for two forms of identification, especially if you are opening multiple accounts or applying for credit products. The goal is to confirm your personal details — including your name, date of birth, and address — before allowing you to proceed.
Opening a bank account online follows a similar process, though it’s entirely digital. Instead of presenting documents physically, you provide personal information like your legal name, date of birth, Social Security number, and address during the application. In many cases, the bank will ask you to upload a photo or scanned copy of your identification, such as a driver’s license or passport. Verification usually happens quickly, often within minutes, thanks to automated systems.
Contact Information
This will include your physical address (where you live), phone number, and email address. The reason banks ask for all this information is to comply with federal laws that require them to obtain and verify identifying information for every person who opens an account.
Also, you have to be at least 18 years old (or the age of majority, which is higher in some states—19 in Alabama, for example) to open a bank account.8 If you’re younger, you may be able to open a joint account with a parent or legal guardian.
6 Ways to Receive Deposits to Your Account
Keeping your checking account funded is essential for maintaining access to your money. Without regular deposits, you’ll quickly run out of funds, making it impossible to pay bills, withdraw cash, or use your debit card for purchases.
There are several ways to deposit funds — whether you’re adding cash or checks — but first, you’ll need to get your deposit ready.
When depositing a check, turn it over to find the endorsement area, usually marked “Endorse Here.” You may also see a note like “Do not write or stamp below this line.” Make sure to sign your name above that line. You can sign before or after writing additional details.
Endorsing simply means signing the back of the check so the bank knows you approve the deposit. If you skip this step, the bank will reject the check. Some banks also require you to write “For Deposit Only” along with your account number. If you’re depositing cash, make a note of the amount before handing it over or using the ATM.
In-Person Deposits at a Bank Branch
One traditional method is to visit a bank branch in person. Bring the cash or endorsed check along with a deposit slip, which you can usually find on a stand in the bank lobby. If you have a checkbook, you might already have pre-printed deposit slips with your account information on them, saving you time.
On the slip, list each check by its check number and amount, and record the cash total if you’re depositing bills. When you reach the teller, you may need to present your debit card or photo ID for verification. The teller will then process your deposit and give you a receipt if you request it.
Depositing at an ATM
Depositing through an ATM is another convenient option. You’ll endorse the check the same way but won’t need a deposit slip. Although you can withdraw cash at any ATM, you typically must use your own bank’s ATM to make deposits. Online-only banks may have agreements with certain ATM networks to accept deposits as well.
After inserting your debit card and entering your PIN, follow the on-screen steps to select the account for your deposit. You may be asked to type in the amount, although many modern ATMs automatically scan your check or count your bills. Then you confirm the total before finalizing the transaction.
Some ATMs require you to place deposits inside an envelope; others accept checks and cash directly. Always request a receipt so you have proof in case of any issues with your account.
Depositing Online or via Mobile App
Depositing checks by smartphone is fast, secure, and user-friendly once you get the hang of it. Most banks offer mobile apps that allow you to photograph both the front and the endorsed back of the check. You’ll enter the amount and select which account to deposit to.
For online deposits using a computer, you’ll typically scan the check or transfer photos from your phone, then upload them to your bank’s website. Your bank will let you know how long to keep the original paper check before shredding it.
Depositing by Mail
If you can’t get to a branch or an ATM, and mobile banking isn’t an option, you can mail checks (but not cash) to your bank. Use the bank’s deposit address, endorse the check, and write “For Deposit Only” on the back to discourage theft. Include a completed deposit slip in your envelope.
Keep in mind that mailed deposits are the slowest option because of postal delivery time and check processing, which is why the method is sometimes called “snail mail.”
Receiving Direct Deposits
One of the easiest ways to add funds to your account is through direct deposit. If your employer offers this method, your paycheck goes straight into your bank account, giving you access to your money on payday with no delays.
Many banks reward customers who use direct deposit with waived fees or other perks. Direct deposit also works for other types of payments, like annuities, Social Security benefits, pensions, bonuses, child support, or Veterans Administration payments.
These transfers happen through the Automated Clearing House (ACH) network — a secure electronic system that usually completes transfers in a few days with no fees. The payer schedules the transaction so your money is available as soon as you’re paid. To set up ACH transfers, you’ll need to share your bank’s routing number and your account number.
Transferring Funds Electronically
ACH transfers can also move money between your accounts at different financial institutions. For instance, you might transfer funds from a checking account to an investment account, or the other way around.
If you sell items online — for example, on eBay with funds going to PayPal — you may want to transfer your earnings to your primary bank account. You can do this easily through PayPal’s website or app by providing your bank account details.
Similarly, if you receive payments from friends, family, or freelance clients through services like Venmo, PayPal, or Zelle, you can move those funds into your checking account. Just be aware that some online services may charge a small fee for transfers.
Funds Availability
As a general policy, banks place holds on customers’ deposits to protect themselves from banking fraud. When you look up your bank account balance at the ATM or online after making a deposit, you may see a difference between your account balance and your available balance. This lets you know that a deposit you’ve made hasn’t cleared yet. It’s extremely important to be aware of how your bank’s deposit hold policy works so that you aren’t penalized for trying to make a payment with money you don’t yet have access to. The bank’s hold policy will always apply to business days, not calendar days. A business day is any day that is not a Saturday, Sunday, or federal holiday.
- How long you’ll have to wait to access deposited funds varies. According to the U.S. Treasury’s Office of the Comptroller of the Currency, a bank has some flexibility in the hold times it imposes on deposits: It can make them available immediately, or it can delay deposit availability up to the maximum length of time prescribed by law under federal regulationWhen you are a new customer who has had an account with the bank for 30 or fewer calendar days, the bank is allowed to hold your deposits longer under the Expedited Funds Availability Act.
- Larger deposits, especially those over $5,525, usually take longer to credit to your account than smaller deposits. Banks can hold deposits in excess of $5,525 (as of 2021) for up to nine business days.
- Cash deposits are generally available by the next business day. Cash may not be available immediately even if deposited with a teller.
- Government checks deposited via teller will be available no later than the next business day.
- Direct deposits become fully available to you the next business day following the deposit. (That’s why you might see your paycheck in your account late on Thursday night—so you can access the money on payday, Friday, instead of having to wait until Monday.)
Accounts for Your Savings
After checking accounts, savings accounts are the next offering most people think about when they think about banking. Having a savings account where you can securely store extra cash that you can access easily in an emergency—but not so easily that you’ll spend the money on things you didn’t intend to—is a key component of any good personal financial plan. While a checking account helps safeguard your money and facilitate bill paying, a simple savings account helps you set aside money for near-term goals like going on a vacation, paying a large upcoming bill, or establishing an emergency fund.
There are a number of different types of savings products that banks offer; ahead are the pros and cons of each. First, we will cover the two types of savings accounts.
Regular Savings Accounts
Almost all banks offer regular, basic savings account that you can sign up for in person, by phone, or online. This is the type of savings account you might get by default from a traditional brick-and-mortar bank. The difference between this account and a checking account is that it generally doesn’t have check-writing privileges and it may have a higher opening deposit requirement and, possibly, a higher daily minimum balance requirement. This type of account may be called “Statement Savings,” “Goal Savings,” “Day-to-Day Savings,” “Way2Save,” “Savings Plus,” or something else that the bank’s marketing department thought was clever.
A regular savings account is easy to set up and maintain. You can link it directly to your checking account at the same bank and quickly and easily move money between the two accounts. Having these two accounts linked can sometimes help you avoid overdraft charges and minimum balance fees from your checking account.
The main disadvantage of this type of account is its often-pitiful interest rate. The national average savings account rate as of April 2024 is just 0.47%, according to the FDIC.
Federal Deposit Insurance Corporation. “FDIC: Weekly National Rates and Rate Caps—Weekly Update.”
If you’re serious about making your money work for you, you’ll probably want to minimize the amount of money you keep in a regular savings account—if you use one at all—and opt for a more powerful savings vehicle instead.
Online Savings Accounts
An online savings account differs from a regular savings account in that you deal with it exclusively through the internet (sometimes also by phone, but not in person) and it pays a higher interest rate. As of April 2024, for example, one of the highest interest rates available for a savings account was 5.50% APY for a Betterment account.
Automatic Savings Plans
Many banks offer automatic savings plans, and these can be a great way to develop a regular habit of saving money. At some banks, establishing such a plan is also a way to obtain lower banking fees.An automatic savings plan is something you need to set up. It simply involves choosing a specific dollar amount that you’re willing to have automatically transferred from your checking account to your savings account, usually once a month and on the same day every month (except when that day falls on a weekend or holiday).
The Bottom Line
Banks provide security and convenience for managing your money and sometimes allow you to make money by earning interest. Convenience and fees are two of the most important things to consider when choosing a bank, whether you are opening a checking, savings or money market account or putting funds into a certificate of deposit. Be sure to develop methods to stay on top of your account balances in order to avoid fees, declined transactions, and bounced payments.
To protect your money from electronic theft, identity theft, and other forms of fraud, it’s important to implement basic precautions such as having complex passwords, safeguarding your PIN, and only conducting online and mobile banking through secure internet connections.