Money & Debt

A bank account is a place to keep money at a bank. The bank holds the money for the account holder. 

Based on the account terms, the bank may:

• Charge fees for this service, and
• Pay the account holder interest on some or all of the money held.

Money deposited at an FDIC-insured bank is protected by the Federal Deposit Insurance Corporation (FDIC) up to certain limits. This insurance protects depositors if an insured bank fails.

Bank accounts can help people:

• Protect their money,
• Receive money through direct deposit,
• Access funds at an ATM or by online transfer,
• Manage funds online or on a mobile device,
• Get a debit card or checks,
• Keep records of transactions, and
• Show proof of address using bank statements.

Keeping money in a bank account can be safer than storing cash. Some bank accounts also provide interest on money stored in the account.

Common risks of keeping money in a bank account include:

• Fees,
• Limits on when money is available, and
• The bank closing the account.

Banks can charge different types of fees. The fees depend on the bank and the type of account. In some cases, fees can use up all the money in an account.

When multiple account holders share a joint account, another risk is that any account holder may withdraw funds without checking with the others.

Access to money in a bank account may be limited due to:

• Account terms,
• Bank hours and holidays,
• Problems with electronic systems,
• Power grid issues,
• Legal restrictions that can freeze funds, and
• International banking rules.

Access may also be more difficult when a person is traveling.

Yes, a bank may decide to close a person’s account. The term “debanking” is sometimes used when a bank closes or restricts a customer’s account.

The reasons and process for closing an account depend on:

• The bank,
• Account terms, which often include rules about closing accounts, and 
• Applicable laws. 

If this happens, the account holder may need to move money, change direct deposits or automatic payments, and find another way to receive or make payments.

Interest is money a bank pays an account holder for keeping money in specific types of accounts. The bank calculates interest as a percentage of the amount in the account over time.

Some accounts pay compound interest. This means the bank calculates interest on both the money in the account and interest that was added earlier.

No, not all bank accounts earn interest. Interest rates vary by bank and account type. Accounts that earn interest usually list an annual percentage yield (APY).

APY stands for “annual percentage yield.” The APY number is a percentage that shows the total amount of interest an account can earn in one year, including any interest that compounds during that time. For example, if an account starts with $100, has a 3.3% APY, and no money is added or withdrawn, the account will have $103.30 after one year.

APY accounts for the interest rate and how often interest is added to the account. A bank may add interest daily, monthly, or at another set time.

Use the FDIC’s BankFind tool to check whether a bank is insured by the FDIC. However, scammers may impersonate a real bank. Compare the bank’s name and website with the information listed by the FDIC. 

Finding a bank in BankFind does not mean that a website, app, email, or person using the bank’s name is legitimate.

Banks may operate online, at physical locations, or both. If the bank has a physical location nearby that serves new customers, a person can visit to verify information and discuss account types and options.

Use Get Legal Help to find local legal resources.