Specific-Purpose Savings Accounts

The prime examples are the familiar “Christmas Clubs” or “Vacation Clubs.” A person joining a Christmas Club, for example, might agree to deposit $10 per week over a 40-week period; at the end of that time, he or she would have $400 plus interest to use for Christmas spending. In the meantime the bank has the use of each deposit to invest or lend as it pleases. Originally, club accounts paid no interest. They were simply regarded as a convenient way of encouraging thrift. In recent years however, some states have adopted regulations that force banks to pay interest on club accounts, at a rate usually one-quarter percent lower than the interest paid on passbook savings accounts. A depositor who fails to maintain the account with regular payments as agreed may forfeit the accumulated interest.

Statement Savings Accounts

These are much like passbook accounts, the difference being that customers keep track of their own deposits and withdrawals on a form provided by the bank. The customer, however, receives a periodic statement from the bank, which includes accrued interest as well as the bank’s own records of deposits and withdrawals. Because they involve slightly less work for a bank, a few pay a slightly higher rate of interest for statement savings than for passbook accounts.

Passbook Accounts

In this time-honored arrangement, you deposit and withdraw money in any amount and as many times as you wish, with a bank teller recording the transactions, as well as accumulated interest, in a passbook provided to you by the bank. Though the rates have been fairly standard, actual yields can vary depending on the way the interest is compounded — yearly, quarterly, monthly, daily or from day of deposit to day of withdrawal. There may, however, be a small loss of interest if funds are withdrawn before a certain time has elapsed.

Be careful to read the terms of the passbook contract and ask questions if you are uncertain about any detail. If one bank offers a quarter percent lower interest rate on passbook accounts than a competitor, but compounds interest daily, it may actually provide a higher yield than the competitor’s if the money is left on deposit for a full year.

On passbook savings accounts, as well as statement and club accounts (see below), a bank may require as much as 30-days notice before a withdrawal is made. If this is the case, a statement to that effect is included in the contract that sets up the account. As a practical matter, however, banks rarely enforce this injunction and depositors usually have total access to their cash.

Banks do, however, look askance at people who use savings accounts as if they were checking accounts; some institutions limit the number of withdrawals that can be made in a week or month. A bank may even insist that an account be closed if the depositor makes too many withdrawals within a specified period. Another method banks use to limit withdrawals is to charge a service fee for each such transaction in excess of an agreed upon number per month. In a typical situation, a bank might charge a $1 service fee per withdrawal after the customer has made five withdrawals in a two-month period. A bank may also charge a similar fee if the customer closes out the account within three months of the opening date.

Savings Accounts

Among the most familiar bank services to a majority of Americans are ordinary savings accounts, in which they can place their hard-earned money and know that it will be both safe and available on request. Savings accounts, like most other accounts, are insured by federal agencies — the Federal Deposit Insurance Corporation (FDIC) or the Federal Savings and Loan Insurance Corporation (FSLIC) — for up to $100,000 or by state insurance agencies for amounts set by state law. Traditionally, savings accounts have paid minimal interest, but this is changing, too. Savings accounts come in several forms. The main of them are:

• Passbook Accounts
• Statement Savings Accounts
• Specific-Purpose Savings Accounts

Checking Accounts

In the not so distant past, checking accounts were also thought of as a convenience to the customer and paid no interest. In return for the privilege of writing checks, a so-called “regular” checking account required a customer to maintain a minimum monthly balance in order to avoid a service charge or per-check fee. A “special” checking account did not require a minimum balance, but the bank levied both a monthly service charge and a per check fee.

Today, however, competition among banks has resulted in a variety of checking accounts, among them NOW accounts (Negotiated Orders of Withdrawal), which offer the customer an opportunity to combine the thrift advantages of a savings account with the convenience of checking. To learn more about checking account types follow the next links:

• Regular Checking Accounts
• Special Checking Accounts
• NOW Checking Accounts

If you lose your checkbook and a check is forged in your name, you are generally not liable; it is the responsibility of the bank to know the depositor.

Of course, it is in your own best interest to report the loss immediately to your bank. There are some special circumstances under which you might have trouble. For example, a skilled forger who has a sample of your signature may conceivably withdraw your entire balance. Informing the bank promptly will save you problems and, possibly in some limited circumstances, loss of funds.

Make certain to check the next monthly statement that you receive to discover whether you have been charged for a forged check.

Lost or misplaced bank credit cards or department store charge cards should be reported as soon as the loss is discovered. While the original card holder may be liable for a maximum of $50 (per card) — card issuers buy insurance against a thief’s shopping sprees or purchase of a first class flight to some distant pleasure island — it is nevertheless to your benefit to have those accounts closed and new registration numbers issued to you (and anyone else authorized to charge purchases on those accounts). If there have been charges which you did not make, you will have to go through the burden of having the billing corrected, including having to demonstrate that the purchases were not in fact made by you. To the extent that credit card issuers bear losses due to forged credit card purchases, there may be increased fees associated with procuring credit cards for all customers. And finally, there is a civic responsibility to report crime to appropriate officials.

It is important, therefore, to have an up-to-date list of your credit card numbers in a safe place other than the wallet or purse in which you carry your credit cards.

Holders of several cards may wish to purchase credit card insurance. For a modest fee, the insuring company retains the list of all of your account numbers and immediately notifies all of the issuers once you call to report a loss or theft. These companies also supply warning labels to paste on your credit cards, which, it is hoped, will deter a thief from making criminal use of the accounts.

How US Banks Treat Their Customers’ Privacy?

Although information about your bank accounts and transactions is usually a matter between your banker and yourself, there can be exceptions.

State laws vary on bank-account privacy. In some states banks are allowed to reveal to merchants whether a customer has sufficient funds to cover a large check a retailer has just been given for a purchase. Some banks will even reveal the exact balance in an account over the telephone. Check with your own bank as to its policy in this area.

On the other hand, the 1978 Right to Financial Privacy Act places limitations, in certain circumstances, on disclosure of your private bank records to federal officials. Not all requests by the government need be honored. Moreover, if a bank is asked or required to turn over your records to a federal agency, you will usually be notified of that fact.

A bank customer standing in line one evening to buy some theater tickets, discovered, when he got to the window, that his wallet was missing. In the jostling crowd, a professional pickpocket, Jimmy the Lift, had deftly removed the wallet, which contained several credit cards and a bank electronic fund transfer (EFT) card and personal identification number (PIN). The victim immediately called the credit card companies to notify them of the loss, but did not call the bank, on the assumption that it was closed.

Jimmy the Lift, being conversant with electronic banking, made his first stop at a nearby branch of his victim’s bank. He let himself into the bank’s 24-hour vestibule with the card, then withdrew $300, the maximum permitted in cash withdrawals at one time.

The next morning the victim called the bank as soon as it opened for business. Because he notified the bank within 48 hours of his loss, his personal liability was limited to $50 and the bank restored the remainder of $250 to his account.

Not so alert, or fortunate, was another of Jimmy’s targets, who also lost his EFT card and PIN to Jimmy’s educated hands. Unlike the first victim, this man neglected to notify his bank, and Jimmy made off with his savings as well as $1,000 from his automatic line of credit. Moreover, because the victim did not look at the bank statement on which these withdrawals appeared, but simply filed it away for examination several months later, he could not recover any of the stolen money. Since more than 60 days had by then elapsed between the time the bank sent him the statement and he reported the error, his liability was unlimited. (See discussion of Electronic Funds Transfer Act)

Moral: Never carry both your EFT card and your PIN together in your wallet or purse, and notify your bank immediately if your card has been stolen or misplaced.

Whean dealing with a bank, the first step is to try to establish yourself in its mind as a valued, or at least potentially valuable, customer, and to do it on a business like basis. It is important to get this impression across at the start. Never, never start a relationship with a bank by ‘walking in’ and going to the nearest bank officer and announcing ‘I want to open an account.’ Do that, and you are, in his mind, a ‘walk-in,’ and you lose. You are interrupting his work, and worse, coming at him unexpectedly. Beyond that, you are not being what he considers ‘businesslike.’ If he can spin you off down into the vulgar pits of the Special Checking Accounts, he will.

Instead, first learn as much about the bank and its services as you possibly can. Talk to friends, relatives, business associates, your lawyer, your accountant. Above all, ask someone in your company’s treasurer’s office, particularly if the company does business with the bank. If any of these people seems a particularly good reference, and is satisfied with the bank, ask for the name of a specific officer to whom you can speak, using your reference’s name — and, thus, his or her clout.

So, don’t pop in to see the officer unannounced. Call and make an appointment, preferably at the officer’s convenience. If you are capable of doing significant business with the bank — one or more family accounts, a separate business account, possibly trust or investment services — convey these facts immediately. The officer who sees you as someone with “potential,” is apt to give you full attention. Don’t try to impress the banker by spouting off numbers, and don’t launch into an angry attack on your present bank. If you do, you may be instantly labeled as a “bouncer,” one who unhappily goes from one bank to the next and might well choose another again in a month or two.

If you like the bank and are able to work out the details to your satisfaction, open a checking account, and a savings account too, if necessary, with as large a balance as you can reasonably afford. You are probably much better off putting all your accounts in one bank and doing business with it as a regular customer than spreading yourself thin over two or three banks, where you won’t mean much to anyone. Money talks. Even if you have only $5,000 in savings, deposit it all in one bank and let it talk for you there. If you have approached the bank correctly to begin with, you will indeed have a “personal banker” in the officer who signed you up. He or she may turn out to be the financial friend you need, bending the bank’s rules in your favor, if necessary, to get you a loan or offering sound financial advice.

Some people search out a bank about as seriously as they look around for a mailbox or trash can: the nearest one is fine. But it really is not wise to be overly swayed by convenience. It’s always helpful to have a bank branch reasonably handy to your home or place of business, but what you should look for is a bank whose staff is the most knowledgeable and responsive to your needs.

In comparing banks, if you like the idea of being able to get cash or conduct other financial business at odd hours, or wherever you happen to be, you may want to consider a network: either one owned by a large institution or one shared by a number of smaller banks. An interstate network enables a customer of any of the member banks to use other members’ ATM machines for any routine banking transaction, including depositing or withdrawing money. The holders of one main credit card have their own growing system: they can draw cash or travelers checks from 24-hour machines at more than a thousand locations around the country at airports, supermarkets and banks. An increasing number of savings and loan companies and credit unions are also making use of electronic tie ins.

If you expect to be depositing your paychecks, pension or dividend checks, or conducting other business regularly in person, observe the lines at the counters during peak hours when everyone else is apt to be doing the same thing — from noon to 3 P.M. on Fridays, for example, particularly those falling on major paydays around the 15th and 30th of the month. If the lines look intolerably long — there can be more than a half hour wait at some big-city banks — you might find faster, less harried service on Tuesdays or Wednesdays, generally the quietest days of the week. Or you can inquire if the bank will arrange for automatic deposit of your checks so that you do not have to go there at all.

Read more: Criteria when Choosing a Bank

In looking around for the financial institution that best serves your purposes — assuming there is more than one commercial bank, savings institution or credit union to choose from where you live — first determine what you really want to use it for: savings, checking, a credit card, online banking, a personal loan or home mortgage, stock purchases or a combination of several or all of these. Compare each bank’s offerings and policies on minimum balances and fees.

On the other hand, don’t overlook the length of time each holds different kinds of checks deposited in your account before permitting you to draw on the funds they represent. Most banks clear a local check immediately or in a day or two, but others can take as long as 10 days; in a few instances out-of-town checks have taken as long as three weeks to clear.

Banks have claimed that they maintain waiting periods in order to prevent losses on bad checks, but critics have pointed out that only about 1 percent of all checks passed turn out to be no good. Moreover, banks can get credit for checks from the Federal Reserve usually within 24 to 48 hours, then invest the money to make more money for themselves, a strategy known as “playing the float.” In effect, depositors are giving the bank free loans of their money for days or even weeks. Public and legislative pressure has already forced banks to cut down on their holding time, but it still pays to compare. Ask also if a bank officer can give clearance to make needed funds immediately available in emergencies, or to cover checks written against deposits you were given to believe had already been credited to your account.

If there is a chance that you will need a personal loan or a new mortgage within the next year or two, by all means inquire now about a bank’s rates and policies. Many banks will give their depositors preference over others, particularly when loan money is tight. If you are a good customer — and if you ask — you may even be able to get a preferential rate as much as 1 or 2 percent lower than that offered outside applicants.

In picking a bank, it is well to bear in mind two facts of financial life. One is that bankers, especially when they are parting with depositors’ money, like to deal with someone they know. The second is the Golden Rule of 80-20: some 80 percent of a bank’s income, on average, derives from 20 percent of its clients — so it pays the bank to be particularly cooperative with that ctop one-fifth. Putting those facts together before starting to deal with a bank at least starts a customer on the right track. To the two banker’s canons you might add one of your own: banks need you at least as much as you need them.

Read more: Shopping for a Bank