What Are the Advantages of Having a Bank Account?
In lieu of hoarding money in your home -- whether its dropping loose change in a piggybank or hiding bricks of cash behind drop ceilings -- placing your money a bank account may be a preferable option. Many financial institutions, including credit unions and banks, will hold onto a client's money for him, allowing him to deposit and withdraw funds at will.
Perhaps the foremost advantage of having a bank account is safety. Money that is left in a home or on your person can be stolen or lost in a disaster, such as a fire. By contrast, up to £162,500 placed in a bank account is automatically insured against loss by the federal government. Even if the bank where you hold the account is robbed or goes bankrupt, your money is still safe.
Certain kinds of bank accounts, such as a savings account, can offer the holder a small profit on her deposit. In exchange for allowing a bank to use your money to make investments, the bank will compensate you by paying you a small rate of interest. In some kinds of accounts, your money is placed in liquid money market funds, generating higher revenues.
Many bank accounts are set up so companies to whom account holders make regular bill payments -- insurance companies, utilities, lenders -- can extract money directly from the account. This saves the account holder the time and cost of mailing a check or money order. In addition, many banks offer direct deposit, in which an account holder's paycheck is automatically deposited into their bank account.
Savings on Financial Transactions
Many simple bank accounts, such as current accounts, cost little or nothing to the account holder. Holding an account, however, can offer access to a number of financial services at a reduced rate. This includes cashing checks, which can cost money at a check-cashing outlet, but which is generally free to account holders. Similarly, while companies that wire money charge a fee as a percentage of the amount wired, banks charge account holders a lower flat rate.
Instead of carrying all of your money with you, having a bank account gives you the option to withdraw a small amount of money from a variety of locations using a debit card. This card can generally be used to make purchases or to withdraw money from a an ATM. For larger sums, a person can write a check, allowing the recipient to withdraw a certain amount of money from her account.