Banks are places that take your money, keep it safe and let you use a debit card or checks to take care of day-to-day purchases. A depository for your day-to-day funds and short-term savings is the main features most consumers use the local bank for. And there is a good likelihood that your bank is a large one located very near your home or office. Of course, it might be a bank that ran a good special a while ago, or even just the first bank you found when you were ready to cash your first paycheck. But looking beyond your own bank accounts, banks do have a purpose – making money.

Safe Storage
Banks are a safe place to store your money every month when the paycheck comes through. They are insured up to $100,000 and you can get to your money any time you need it. Of course, while your money is sitting in your savings account waiting for use, it is earning a bit of interest and keeping your checking account safe from overdraft fees – at least in theory.

Money-Making Money
But while your money is sitting in the savings account, it is doing something else as well. It is making the bank money. The interest earned on your savings account is a pittance compared with how much is earned by the bank each time it makes financial deals in the money marketplace.

While your money is sitting there, your bank probably lends it out to others at high rates of interest. Of course if you were to walk into the bank and demand your money, they could easily give you the right amount of cash – all the investments and earnings are done with virtual numbers that include the deposits and savings of every member of the bank.

Banks also make money through the fees charged on various accounts. These fees might be maintenance fees, overdrawn fees, returned check fees, failure to maintain a minimum balance fee, etc… Added together these fees can seriously add up not just for you and your fledgling account, but for the bank, too. After all, the bank is the big winner with all of that additional money coming through the doors.

Finding the Right Bank
While all banks make money from your business (and your money), there are some banks that offer more agreeable terms than others. Most of the large banking centers, however, have high overhead costs due to the number of retail establishments and storefront locations. These banks, which are often the best known in the financial community, tend to charge more and offer less to customers.

Smaller banks that do not have to maintain a great number of locations, or possibly even any at all, often offer customers higher rates of return on their money and charge fewer fees. This means you might just get a better return on your money from a bank that operates from a single location or online. But how can you know for sure?

Take the time to actually compare what banks offer. Also examine your needs in regard to physical location. How often do you actually visit the bank? Do you use ATMs or can you get by with just a debit card? If you haven’t set foot in a physical bank location for months, you might be paying fees or accepting lower interest rates on your savings simply to help maintain the centers you’re not using.

Of course the only way to tell that is to look at the minimum dollar amounts required to open and maintain checking and savings accounts at each bank. Check out the savings rate as well as the frequency and amount of any fees. Do both banks offer free checking and online bill pay? Only when you’ve come to a decision about which bank is best for your specific needs should you open an account.

Your Accounts
Your banking accounts are your business, of course, but you should also be aware of what experts advise you to do. Your savings account will have a small rate of interest. Leave only the amount in the account that is required to keep it free of fees and to cushion your checking account if the two are linked. Your checking account should be used to pay bills and for spending money, but not as a savings account. Keep it cushioned, but don’t let large amounts accumulate there.

Save money every month, and when you’ve reached the minimum opening amount, invest the money in a more suitable vehicle than a standard savings account. That doesn’t mean you must invest it in the stock market or in mutual funds, rather look at money market accounts your bank may offer. These often have a high minimum balance, but will earn you considerably more interest than a standard savings account. And that’s putting your money to work for you – not just the bank.

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