Bank Accounts

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Last Updated: Monday, 03 February 2025 14:48
Published: Tuesday, 18 October 2022 00:12
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Bank Accounts in USA:

This section deals with opening bank accounts in USA. When I say banks, it includes Credit Unions too.

First of all, having bank accounts and then having any money in it, is for suckers. You can thank FED for that. In an open market (not the one controlled by FED), interest on deposits would be very close to the GDP growth, since GDP growth is basically money expansion. So, if all the other money in the system expanded by a certain %, your principal should also expand by same % to be fair to you. So, interest rates will be at least as much as gdp growth in a free market. Most of the times, people will be willing to pay a premium over the gdp rate to any money you lend them, but if FED can print and lend them money at much lower rates, then of course no one needs to come and get money from you.

As of 2018, there is about $10T in bank deposits in USA, and the banks pay less than $100B in interest to customers. As we have nominal GDP growing at 5% a year, that means we should get about $500B in interest on that $10T in deposits, but customers get only $100B or so. Remaining $400B is our money, that FED is stealing out of our bank accounts. Assuming there about 100M families in USA, each family is losing $400B/100M = $4K every year. So, every family's goal should be get their fair share of $5K from the banks. Since we can't have a bank to pay us 5% interest rate, we have to get creative to claim our $5K. In following sub sections, I'll list deals to claim it back. I keep it as a target for my family to hit $5K per year in bank bonuses and interest. It's easy to hit that, if you follow all our bank deals below every year, opening and closing 5-6 accounts per person every year, which will yield you $1.5K - $2K per year. To top off that, open a very high interest paying kasasa account, that can net you $1K per person per year. We'll make sure each person with an SSN can get at least $2.5K back in interest+bonus from banks+CU each year.

NOTE: FED will eventually get all bank deposit rates to 0% and even to negative interest rates to keep stock and housing market afloat. There is no other way to make that happen, other than with interest free money on debt. The only reason to put little money in banks is to pay your everyday bills, and to move that money around to get sign on bonuses.

Bank Accounts:

There are 3 kinds of bank accounts:

  • Savings Account: Savings account pay you higher interest rate, but you are limited to making 6 withdrawals a month. They also don't offer check books.
  • Checking account: Checking account pay you lower interest rate, but you can make unlimited withdrawals a month. They do offer check books.
  • Money market accounts: These are new kind of accounts which give you best of both world. They give you higher interest rate similar to savings account, but offer perks of checking account, as no withdrawal limit, check writing, etc. Different banks advertise it differently, most of them classify it as savings account. You can think of these accounts as a different kind of savings account.

All the above accounts are the same when it comes to paying interest, as In the current environment, all of these accounts pay you close to 0% in interest.

Opening bank accounts is very easy, and 99.9% of the time you can open it all online w/o ever stepping into a bank. However, you should always look for a bonus before you open the bank account. Some banks will offer you higher interest rate as a promotion.However those rates are valid for a short period of time, or can change at any time. One good website for finding highest rates or bonuses is: Dr of credit . Other accounts to consider, which give decent interest rates or sign on bonus are listed on this great website hustlermoneyblog . One more website to look on is depositaccounts.

Many of the offers are expired or don't exist in links above. Dr of credit is more particular about updating offers, but confirm with the bank directly for any offers. Trouble with most bank deal websites is that they never show you the highest rates offered by a bank on a given date, but will instead show you 100's of banks giving mediocre rates. Most of the offers that I show on my site are ones that I gathered from people comments on the websites above. Dr of credit website is the most up to date and reliable so far. They put any deal out there, irrespective of whether they are getting commission or not. 

All banks tax you on bonus and interest, so your real return is lot lower.

Buying Checks for banks:

Some banks will offer you check writing facility while some won't irrespective of type of account. They may offer you free checks or may charge you for checks. Walmart charges around $12 for 100 checks (with shipping included), and that's the cheapest option to get your checks (12 cents per check). If you buy more than 100, then it will be even cheaper. In case your bank charges you more than $12 for 100 checks, head to https://www.walmartchecks.com. Check with your bank though to confirm that will honor those checks from walmart. I still use checks from walmart for all of my banks, and it allows you to withdraw your money from your bank at any time, and in any amount. This is helpful since many online banks have a lot of restrictions around withdrawing your money. They become more like a CD in absence of a check writing facility. Do not waste your time looking for better "check book" deals, as most of these "check printing" companies advertise a lower rate than walmart, but eventually after adding fees, etc, they are always higher than walmart's prices.

Credit check:

Some of the banks run your credit in order to open your account. You are opening a deposit account, where you, the customer, is giving money to the bank. So, why do banks need to do a credit check? Sometimes they do "hard pull", which hurts your credit score (hard pull is the same kind of credit check that credit card companies do when you open a credit card). A "soft pull" is OK as it doesn't hurt your credit score. So, when ever you open a bank account, ask them if they run a credit check, and if they do, whether it's a "hard pull" or "soft pull". Avoid banks which do a hard pull, as that extra interest is not worth the "hard pull".

Now coming to our original question: Why do banks do a "hard pull" - reason is simple - they want to sell you their products down the line (credit cards, insurance, mortgage, etc). So, under the pretext of opening the account, they want to know your financial and credit situation, so that you can be marketed effectively !! It's not your money they are interested in -it's your data that is more valuable to them.

Bank Insurance:

In USA, there is government insurance provided on the money you deposit in banks or credit unions. For banks, insurance is provided by www.fdic.gov, while for credit unions, it's provided by www.ncua.gov. They both provide insurance in case of bank failure. Any amount up to $250K for single account and up to $500K for joint account is covered. Remember many banks fail in USA every year (though very few have failed in times of prosperity as 2015-2020). So, never ever have more than $250K for single accounts or $500K for joint account at any bank. If you start reaching that limit, spread the money across multiple banks, and start putting the money in S&P500 ETF or something similar.

Whenever you want to open account at any smaller bank, always go to fdic or ncua website and search for that bank. Look at that bank website link, and follow bank's website from the link here. Make sure that the link is pointing to the bank that you are considering. Bookmark this link, and always this link, instead of using links from some email. It's hard to have a fake bank setup a website and not get caught by the banking officlas, but it's better to play safe.

Not only fdic and ncua websites lists the bank/CU general info, they also show all their past financial information. So, it's good info to know. If the bank is too small with very few branches,  they may give you a hard time with your account activity, since they may be monitoring a lot of these things manually. I usually don't go with very small banks.

Below links allow you to search for your bank/CU using their name, FDIC/Charter number or via their address, etc. Your bank better show up on one these 2 sites, or it's fake. Many times, you will see a lot of different links showing up for the same bank/CU. That's OK. They will all have the same fdic/charter number, even though their address, website might be different. You can always call your bank/CU and ask their fdic/charter number and confirm it on govt websites below.

Bank: https://research2.fdic.gov/bankfind/

CU: https://mapping.ncua.gov/ResearchCreditUnion.aspx

NOTE: At both Banks/CU, you can get maximum coverage of up to $1.25M by having joint account and different kinds of accounts. There are calculators provided on these websites. You should never get to these limits, as putting money in bank is for losers. Below are the calculators anyway:

Bank:  https://edie.fdic.gov/calculator.html

CU: https://www.mycreditunion.gov/insurance-estimator

Bank Offers:

There are 2 kinds of offers that you get from banks. One is the Bank Bonus and the other is interest rate offer. What offers to chase depends on current interest rate environment. Before the dawn of new age in 2008, you would get decent rates in banks (still under nominal gdp growth rate, but nothing close to 0). Since 2008, 99% of the banks/CU give you deposit rates close to 0, and there is no hope for the foreseeable future that rates will ever go to much more than 0%.

It's 2020, and it's certain that long term direction of bank interest rates is to go down. So, it's no point trying to chase rates. Most large banks offer 0.01% interest rate on their checking and savings account. Why not keep it simple at 0% interest rate? Maybe they don't want their computers to sit idle. If you shop around a lot, you may be able to find few banks offering 1%. If you were to live on money deposited in your bank account at 1% interest rate, and assuming $60K in expenses every year (home rental, car, health insurance, food, utilities, etc), you would need to have $10M in a bank account paying highest interest rate of 1%. And with that you may barely be able to survive. So, no one can survive saving money and lending it out. First of all, 99% of can never save that kind of money in their lifetime, and secondly, FED is lending money for free, so no one will pay you anything to take that money from you.

A decent rate that you should be targeting would be something at least 1% over the short term treasury rate for 1 year bills/notes. 

As of 2020, short term interest rates are 0%, and 30 year treasury are close to 1% So, consider yourself lucky to get 1%. And since these rates are lower than what US stock market pays you in dividend (it's close to 1.8% dividend for last 15 years), it's a no brainer that you shouldn't put any money in bank accounts for the sake of earning interest.

Chex System:

How many bank accounts should you open in a year? A safe number would be no more than 6 accounts a year. Why is that? Well, just as credit cards get reported to credit rating companies, bank accounts also get reported to Chex systems (similar to credit card reporting companies). More bank accounts you open, higher is the risk you carry of getting denied by future banks. This applies only to banks that use ChexSystems when you apply for a bank account with them.Some banks are not Chex Sensitive (i.e don't use Chex Systems at all). Such banks are always safe to apply. Whenever you see a link for bank offer, look thru the details or look in comments section to find out if the bank is Chex Sensitive.

There is a nice little intro about ChexSystems here:

https://www.doctorofcredit.com/an-introduction-to-chexsystems-inc/

Referral bonuses for Banks:

A lot of banks now-a-days offer refrral bonuses if you use a referral to join banks. Many times they provide info regarding refrral on their website or to their existing customers. All you have to do is to send a referral link to your friends or family, and they need to signup using that link. Many times, both the refrrer and the person being refrred get the bonus, so there's nothing to lose in using a referral link. If you ever see a refrral for any of the bank offers here, feel free to email me.

Apart from banks using their their own referral system, one of the other most popular service being used for referral purposes is referlive. I had seen it advertised at many banks (on their websites and in branches), and used to think of it as fake. However, it's real, and they pay you the bonus pretty quick, once you meet the requirements. You don't even need to contact your bank in case there are issues. Just call referlive customer service and they will straighten it out. Their phone number is: 1-800-925-2160. Their email is: This email address is being protected from spambots. You need JavaScript enabled to view it..

This is their site. https://www.referlive.com

There is no info on the referlive site itself regarding what banks are participating, contact info, etc. You can find out if your bank is participating by searching on that bank's site, and if you find referlive on that bank's site, you can use that to send refrrals for that bank. Or you can goto referlive with bank name appended at the end of url, For ex, Amerant bank has refrral link as shown below:

https://www.referlive.com/amerant

There is nothing to sign up on referlive. referlive has a different login/password for each bank that it has on it's site. So for ex bank shown above, https://www.referlive.com/amerant will have a signin info, which you use to signup and then send email to friends/family. For a different bank, it will be a different signup link specifically for that bank.

Most of the times with referlive, both the referrer and the referral get the bonus. The bonus is in form of Visa/Mastercard, so there's no tax implication. Also, using this link doesn't affect your actual bank bonus eligibility, as it's a separate bonus, and nothing to do with referlive bonus. However, read the terms or go on to doctorofCredit website and look at comments to make sure. 

NOTE: If you ever need a referral for any bank, email me at This email address is being protected from spambots. You need JavaScript enabled to view it., and I can get you a referral link. Use that link to open the account at that bank. Apparently you can also self refer, by signing up as referrer with an alternate email and fake name (still keep address the same), and then use that link to signup for that bank. referlive doesn't verify identity or anything, it just sends out visa cards to address listed on site.

 

Bank Direct Deposit (DD) Requirements:

Many banks have DD requirements for eaning bonus or avoiding monthly fees. What counts as DD is different for different banks. Sometimes a simple ACH push from some bank/brokerage may count as DD, while other times you may have to do a DD from an employer. Many times, it's not possible to have DD from real employer. Below is the list of all Banks/CU and what counts as DD for them. You can use this as a data point (DP) to see if you can avoid doing a real DD, and still collect the bonus (or avoid monthly fees).

DoC Link: https://www.doctorofcredit.com/knowledge-base/list-methods-banks-count-direct-deposits

Bank Interest/bonus taxable:

All of the interest or bonuses that you earn in any bank account is taxable at the highest rate applicable to your tax bracket. This is different than how stock market gains get taxed, which is usually maxed at 15% tax rate, no matter what tax bracket you fall in. So, you lose money both ways by putting money in bank - first, you get almost close to nothing in interest or bonus, and whatever little you get, you are taxed heavily on that. All of these policies are designed to hit poor people the hardest, and reward rich people.

There are 2 tax docs that Banks may send out for reporting this income:

  • 1099-INT: These are used to report interest on bank deposits. Many reward bonus, etc are reported by banks on this form, as they see it equivalent to interest income.
  • 1099-MISC: These are used to report prizes/awards and other income. Some banks report their bonus payment on 1099-MISC. The only difference b/w 1099-INT and 1099-MISC is that 1099-MISC requires income to be reported only it's over $600. Most of the bank bonus are under this limit, and so it may not get reported at all, if bank chooses to use 1099-MISC.

NOTE: Stay clear of companies which send tax forms for Credit card bonus, reward points, etc as these are not income. You have to spend money to get these rewards, which doesn't qualify as interest income. It isn't even income to start with. Rather it's a discount on your purchase. It's akin to buying a $100 product for $10 on a website, and paying income taxes on the difference ($90) claiming it as an income, rather than a discount. Makes no sense.

 

Bonds as alternative to bank interest:

Instead of trying to find a high interest rate with a bank, you might be better off buying short term Bond ETF thru your brokerage accounts. However, if FED keeps interest rates at 0%, then those Bond ETF will also give you close to 0%. However, when FED raises rates to > 1%, then you get a higher interest rate with those Bond ETF, than with any bank. These bonds carry almost zero risk when invested in ultra short term (i.e < 1 year maturity). See in "Bonds" section for more details.

 

 

Conclusion:

Never chase interest rates at banks, as rates are down for last 15 years starting 2008. They will remain down for ever, since there's no way out. Best is to go for bank bonus. A $500 bonus with 25K or $50K deposit pays you way more than what a highest paying bank with 1% APR will ever pay you.  For general purposes (i.e regular bank to hold your day to day money), look for a decent rate (even if it's not the highest out there). This will make sure you are at least making some money while the money is idling. Any money you put in banks is little money lost every day, until you lose all your money. Bond ETF provide an alternative, and bleed less. Look in following sub sections and keep hunting !!

UPDATE 2024: Bank interest rates have gone up since 2023. For all of 2023 and 2024, rates in select banks have been > 5%. So, at least you haven't lost much money keeping money in bank. But it can never match stock market, and when the rates go down (which they eventually will), you will again be stuck in the same place.