Why Do You Need a Reserve Bank?
There are a million apps and services that will let you pay bills and move money around, but you’ll still need a bank account. Yes, banks can be kind of crappy , but there’s a reason why less than 5% of the population doesn’t have access to banks : it makes everything more expensive and more difficult.
But despite the crucial importance of a bank account, you don’t actually have a right to one. Banks can refuse to open an account for you at all, refuse to accept a check for deposit at their discretion, and can also close your accounts and send you (and your money) away whenever they want , for a variety of purposes. causes. And they do this all the time , usually without any explanation. Add to this the prevalence of bank fraud and the real possibility that you won’t get your money back, even if it was clearly stolen and you didn’t do anything illegal, and it becomes clear that while not having an account is not an option, having one is possible. be a nightmare.
Instead of trying to live on cash alone or moving into the wilderness to eat berries, there is one thing you can do to protect yourself: have an emergency bank.
How can a bank deceive you?
This is a nightmare scenario: You have a checking account at Bank A where your paychecks are directly deposited and from which you pay all your bills. You wake up one morning to a long list of bounced checks, failed debits and late fees, and a message from Bank A saying your account has been closed due to “suspicious activity” or some other unspecified reason.
The bank is required to return any funds remaining in the account to you , but this is often done in the form of a check, which may take some time to arrive. At the same time, you don’t have access to your funds and you can’t easily pay your bills and your job has nowhere to send your paycheck. Once you receive that check, you can of course open a new account at Bank B and then switch everything over there. But at the same time it is chaos.
Benefits of a Reserve Bank Account
But if you already have an account with Bank B, you can immediately transfer all your debits and deposits (including salary) to this account. The sudden closure of your Bank A account turned out to be just an inconvenience, not a financial crisis. If you’re someone who pays almost all of your bills with a points-earning credit card , you may only need to visit two websites to get your finances back on track after closing your account—your credit card and your job. Human Resources Department.
A reserve bank account can also act as a quasi-emergency fund. The checking account at Bank B likely won’t earn much interest, but it’s also likely to remain untouched, and since it’s not directly tied to your daily spending, you won’t be regularly tempted to dip into it.
Additionally, money in bank accounts is federally insured up to $250,000 , but that limit applies to banks, not your total net worth, so if you have significant savings, having money in separate accounts allows you have more funds protected by Federal Deposit Insurance. Corporation (FDIC).
Finally, if you choose to have a reserve account with a local bank rather than an online giant, you can enjoy better customer service and perks like the ability to easily cash checks or talk to a real person in person if you have problems or questions.
Disadvantage of Using a Reserve Bank
On the other hand, having multiple bank accounts increases the amount of work you’ll have to do to keep track of everything. If you’re not careful, your second account could end up costing you in fees if you don’t maintain the required minimum balance, and for maximum efficiency you’ll need to record all account information so you can quickly switch payments and deposits to the reserve bank if something goes wrong with your main bank.