Benefits of Having a Bank Account

A saving piggy with the words "bank account" written above it.

Benefits of Having a Bank Account

Opening a bank account is one of the most important steps you can take to manage your money wisely. Whether you’re saving for the future, paying bills, or building credit, a bank account makes your financial life easier and more secure. For unbanked individuals or those relying on cash and prepaid cards, switching to a bank or credit union can offer real long-term benefits.

In this guide, we’ll explore the many advantages of having a bank account, break down the different types available, and help you understand how traditional banking compares to alternative financial services.

What Is a Bank Account?

A bank account is a safe place to store your money, whether you’re planning for emergencies or working toward a big purchase. Banks and credit unions offer different types of accounts to meet your needs, and most include features like direct deposit, debit cards, and online banking. These tools make it easier to access your money, transfer funds, and track your financial goals.

Opening a bank account also helps you keep your money secure, reduces the risk of theft, and gives you access to services like financial counseling, bill pay, and savings products.

Savings Accounts Help You Grow Your Money

Savings accounts are designed to help your money grow over time. When you deposit money into a savings account, the bank pays you interest. This means your balance increases as you save, even if you don’t make additional deposits. While the interest rate may vary by institution, the key advantage is that your funds are safe and earning money while you’re not using them.

For those looking to build an emergency fund or save for long-term goals, savings accounts are a great place to start. You can learn more about how to manage your savings wisely in Credit.org's guide to savings accounts.

Checking Accounts for Everyday Use

Checking accounts are the most common type of bank account and are used for everyday transactions. With a checking account, you can pay bills, use a debit card to make purchases, and set up direct deposit for your paycheck. Unlike savings accounts, checking accounts typically don’t earn much interest, but they offer easy access to your money.

You can also use online banking to monitor your balance, transfer funds, and even use services like online bill pay to stay on top of monthly expenses.

A piggy bank placed on a calculator, symbolizing the concept of managing bank accounts.

Avoiding High Fees and Costly Alternatives

People without a bank account often turn to alternative financial services like check cashing services, money orders, and payday loans. These options can be expensive and time-consuming. High fees, longer waiting periods, and limited access to funds are common downsides.

According to the FTC, a quarter of American households are unbanked or under banked. They spend hundreds of dollars per year just to access their own money. Opening a bank account can help avoid these unnecessary costs and offer more secure and convenient ways to manage funds.

Prepaid Cards vs. Traditional Banking

Prepaid cards are often marketed as convenient alternatives to bank accounts. While they can be helpful for budgeting, they lack the full benefits of traditional banking. Prepaid cards may not offer the same consumer protections as debit cards, and they often come with hidden fees.

Additionally, using a prepaid card won’t help you build credit history or improve your financial profile. That’s why prepaid cards should not be viewed as long-term financial tools. A checking or savings account offers better flexibility and more options for managing your money.

Building Credit History Through Banking

Having a bank account is the first step toward building a strong credit history. While bank accounts themselves don’t appear on your credit report, using your account responsibly sets the foundation for other credit-building activities. For example, setting up automatic payments for your bills can help you avoid late fees and missed payments, both of which affect your credit score.

To learn more about how compound interest and timely payments affect your financial future, see Credit.org's guide to the power of compounding interest.

Reaching Your Financial Goals

Having a bank account makes it easier to set and track financial goals. Whether you want to buy a car, pay off loan debt, or save for college, your account gives you the tools to plan ahead. You can schedule automatic transfers, set savings targets, and monitor your progress online or through mobile banking apps.

If you’re working toward better money habits, a bank account gives you a strong foundation to stay on track and avoid high interest debt. You’ll have fewer surprises and more control over your financial journey.

Credit Unions and Other Account Options

While most people think of banks, credit unions are another option worth considering. Credit unions are nonprofit financial institutions that often offer lower fees, better interest rates, and more personalized service. If you’ve had trouble opening a traditional account in the past, a credit union may offer second chance checking accounts or flexible membership requirements.

You can compare banks and credit unions to find the institution that best fits your needs and offers the most helpful banking services.

Understanding Banking Services

Bank accounts come with a wide range of services designed to help you manage money easily. These include:

  • Debit cards for everyday purchases
  • Direct deposit for fast access to your paycheck
  • Online banking for monitoring your balance and making transfers
  • Automatic bill pay to avoid missed payments
  • Mobile apps to manage your account anytime, anywhere

Most banks also offer alerts to warn you about low balances, large sums, or suspicious activity. These features increase security and help prevent fraud or theft.

Avoiding Minimum Balance Requirements

Some accounts require you to maintain a minimum balance to avoid monthly fees. If your balance drops too low, you may be charged high fees or lose access to certain benefits. This is especially important for unbanked individuals who are just getting started with formal banking.

Look for accounts that fit your lifestyle, such as those with no minimum balance requirements or ones specifically designed for underbanked individuals.

Alternative Financial Services to Avoid

Many people without access to banks rely on services like check cashing, wire transfers, and money orders. These services can be time consuming and expensive, with fees that quickly add up. Some unbanked households also turn to payday loans, which often carry extremely high interest rates and can lead to cycles of debt.

Instead of relying on these costly services, opening a bank account can give you safer, easier access to your money. You’ll also be more protected against fraud and better positioned to manage your finances in the long term.

How to Get Started with a Bank Account

Opening a bank account is usually simple. You’ll need to provide basic personal information and identification. Most banks now allow you to open accounts online, and many offer starter accounts with no monthly fees.

If you’ve had past banking issues, such as a negative ChexSystems report, you still have options. Restoring your banking privileges is possible, and second chance checking accounts may be available.

Get Help Through the BankOn Program

If you’re new to banking or need help getting started, Credit.org partners with the BankOn Coalition to offer education and support. Through the BankOn program, we help individuals in the Inland Empire region of Southern California learn how to open safe, affordable bank accounts and avoid costly alternative financial services.

BankOn-certified accounts are designed to be low-cost, easy to access, and free of surprise fees. They meet national standards for safety and usability, making them a smart first step toward long-term financial health.

To learn more about how Credit.org supports local residents through banking education, visit our BankOn Banking Education page.

Jeff Michael
Article written by
Jeff Michael is the author of More Than Money, a debtor education guide for pre-bankruptcy debtor education, and Repair Your Credit and Knock Out Your Debt from McGraw-Hill books. He was a contributor to Tips from The Top: Targeted Advice from America’s Top Money Minds. He lives in Overland Park, Kansas.
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