Bank Disclosures Help You Compare Bank Accounts, Bank Fees, Bank Features, and Interest Rates
The law requires depository institutions to provide you with -- or disclose to you -- the important terms of their consumer deposit accounts. This information can help you make a comparison between bank accounts. Banks must tell you:
•The annual percentage yield and interest rate of bank accounts;
•Cost information, such as bank fees that may be charged to your bank account; and
•Information about other bank account features such as any minimum balance amount required to earn interest or to avoid bank fees.
You will usually be provided with banking disclosures before you actually open a bank account. However, if you ask for it, a bank must give you information about any consumer deposit account it offers. In addition, the law generally requires that interest rate and bank fee information be provided on any periodic banking statements sent to you.
In shopping for a bank account, it is important to look closely and compare bank account features. Here are some of the most common bank account features to compare:
Bank Rates
Interest Rate - The rate of interest (interest is money a bank pays you for its use of your funds), expressed as a percentage, that a bank account will earn if funds are kept on deposit for a full year. It does not reflect the effect of compounding interest.
•What is the interest rate?
•Can the bank change the rate after you open the bank account?
•Does the bank pay different levels of interest depending on the amount of your bank account balance, and, if so, in what way is interest calculated?
Interest Compounding - The frequency that earned interest is added to the principal so that you begin to earn interest on that amount as well as on the principal. Often referred to as interest on interest. The more often interest is compounded, the greater the annual percentage yield.
•How often is interest compounded? In other words, when does the banking institution start paying interest on the interest you have already earned in the bank account?
Annual Percentage Yield (APY) - The APY is a rate that reflects the amount of interest you will earn on a deposit on a yearly basis expressed as a percentage.
•What is the minimum balance required in your bank account before you begin earning interest?
When You Start Earning Interest - Interest is money a bank pays you for its use of your funds.
•Do you begin earning interest on the day you deposit a check into your bank account - called earning on your ledger balance?; or
•Do you begin earning interest later, when the bank receives credit for the check - known as earning on your collected balance?
Bank Fees
•Will you pay a flat monthly bank fee?
•Will you pay a fee if the balance in your bank account drops below a specified amount?
•Is there a charge for each deposit and withdrawal you make from your bank account?
•If you can use ATMs to make deposits and withdrawals on your bank account, is there a bank charge for this service? Does it matter whether the transaction takes place at an ATM owned by the bank?
•If you have a checking account or a money market account, how much will ordering checks cost? Will you be charged a bank fee for each check you write?
•Are bank fees reduced if you have other accounts at the bank?
•Are bank fees reduced or waived if you agree to directly deposit your paycheck or government payments, like a social security check?
•What is the bank fee if you request the bank to stop payment on a check you have written?
•Is there a bank fee for asking how much money you have in your bank account (a balance inquiry fee)?
•Does the bank charge a fee for closing a bank account soon after it is opened? If it does, when will the bank fee be imposed?
•What does the bank charge for writing a check that bounces (a check returned for insufficient funds)? And what happens if you deposit a check written by another person, and it bounces? Are you charged a bank fee?
Other Bank Features
•Does the bank limit the number or the dollar amount of withdrawals or deposits you make in your bank account?
•If you close the bank account before interest is credited to your account, will the bank pay you the interest that has been earned until that time?
•How soon does the bank allow you to withdraw funds that you have deposited to your bank account?
Time Deposits - An account, such as a certificate of deposit, with a maturity of at least seven days, from which you are generally not allowed to withdraw funds unless you pay a penalty.
•What is the term of the account? In other words, how long is it until the maturity date?
•Will the account roll over automatically? In other words, does the account renew unless you withdraw your money at maturity or during any grace period provided after maturity? A grace period is the time after maturity when you can withdraw your money without penalty. If there is a grace period, how long is it?
•If you are allowed to withdraw your money before maturity, will the bank impose a penalty? If so, how much?
•Will the bank regularly send you the amount of interest you are earning on your account - or regularly credit it to another bank account of yours, like a savings account?
