What should I know about banking and banking alternatives?

Contents

• What are my rights when I open a bank or credit union account?
• What are my responsibilities when I open a bank or credit union account?
• What are the bank or credit union's rights and responsibilities?

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What are my rights when I open a bank or credit union account?

If you decide to open a bank or credit union account, you have rights under federal law, including:

• Your money in a checking or savings account, up to $250,000, is protected under the FDIC. This means that if the bank or credit union goes out of business, you will still have your money.

• Your money is protected if there is an unauthorized electronic transaction on your account. 

• You have the right to opt out of overdraft service.This means the bank will not authorize a payment if there isn't enough money in your account. With overdraft service, the bank often makes a payment even if there isn't enough money in your account. This means you have to pay back the bank the money for the transaction, plus an overdraft fee. You must be given this option when you open an account. Opting out may help you avoid overdraft fees. 

• You have the right to information about your account, including:

  • Fees

  • The annual percentage yield (APR),

  • The interest rate, and 

  • Any other requirements, such as minimum balance requirements and transaction limits. 

• If your application to open a checking account is denied, you have the right to know why. 

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What are my responsibilities when I open a bank or credit union account?

When you have your money in a bank or credit union account, you are responsible for keeping track of the money in your account. This means:

• The bank does not have to notify when you bounce checks because you do not have enough money in the account.

• You must understand that money you deposit may not be available immediately. A bank must make cash available to you the next business day, but can take up to 9 days to clear some checks.

  • Ask your bank about their “funds availability schedule.”

• You are responsible for alerting your bank if there is an unauthorized transaction on your account. In some cases, if you do not tell the bank within a certain amount of time that there is a problem with your account, your money will be lost.  

• If you deposit or cash a bad check and use some of the funds, the bank can hold you responsible for that money. 

• When you open an account with a bank or credit union you have to agree that if you owe the bank money it can use the money in your account to pay off the debt. This is called a setoff.

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What are the bank or credit union's rights and responsibilities?

Banks and credit unions are regulated by state and federal law. Under these laws, they have responsibilities to you and your money. They are also given rights to how they can handle your money and what they can require of their customers. 

 

What types of identification can a bank ask for?

A bank can require you to provide identification when you open an account or request certain transactions. At a minimum, when you open an account, you must give a bank your:

• Name,

• Date of birth (for an individual),

• Address,

• Identification number (a social security number or immigration number), and

• Documents that confirm this information.

Banks also have the right to ask for other forms of identification, including your fingerprints when you cash a check.

 

What fees can a bank or credit union charge?

Although they are regulated by law, banks and credit unions have the right to charge you various fees. Excessive fees are one of the many problems that people have with traditional banks and credit unions. When your money is tight, it can be devastating to get hit with a fee you didn’t anticipate. If you apply for a bank account, make sure you understand what fees are associated with that particular account. You might be charged: 

• Overdraft fees

• ATM withdrawal fees,

• Wire transfer fees,

• Charges for low balance, 

• Bounced check fees,

• Paper statement fees,

• Debit-card replacement fees,

• Check fees,

• Inactivity fees,

• Account closing fees.

 

When you sign up for an account, the bank or credit union is responsible for giving you information about any fees they might charge.

 

Can a debt collector garnish money from my bank account or prepaid card?

If a debt collector wins a judgment against you, it can ask the court for an order garnishing your money. This order can force the bank or credit union to turn over money from your bank account or prepaid card. If your bank account is garnished, you must get a notice of garnishment.

 

However, some federal benefits are automatically protected from garnishment. As long as they are automatically deposited into your account, the bank cannot turn over some federal benefits, including:

• Social security,

• Supplemental Security Income,

• Veterans benefits,

• Federal Railroad benefits,

• Civil Service Retirement benefits,

• Federal Employee Retirement benefits.

 

The bank must protect two months worth of these benefits from the debt collectors. If your federal benefits are loaded onto a prepaid card, these are automatically protected from garnishment.

 

There are two exceptions to the protection for federal benefits.

1. Social Security and Social Security Disability Insurance can be garnished to pay for:

   1. Government debts (back taxes or student loans), and

   2. Child or spousal support.

2. If you receive your benefits by check, the bank will not automatically protect this money. You must go to court to prove the money comes from protected benefits.

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Contents

• What can I do if I am denied a banking account?
• What can I do if I find a charge I didn't authorize on my bank account?
• How can I stop automatic payments from my bank account?
• What are the issues with not having a bank account?
• What are alternatives to bank accounts?

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What can I do if I am denied a banking account?

If your application for a checking account is denied, it is most likely because the bank or credit union got a bad report from a checking account reporting company. Banks rely on these companies to give them information about your checking history. 

 

If your application is denied, the bank must give you an “adverse action” notice that tells you the name and contact information of the credit reporting company that they used. With that information you can:

• Request report a free report from the credit reporting agency,

• Check the report for accuracy,

• Ask the agency to investigate and correct any errors.

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What can I do if I find a charge I didn’t authorize on my bank account?

If you find an unauthorized charge, contact your bank or credit union right away. You have protections if the money was taken electronically, through:

• An ATM transaction,

• A purchase on your debit card, 

• Automatic payments, or 

• An online bill payment.

 

If your debit card or PIN was lost or stolen, you must notify your bank within 2 days. If you do, you are only responsible for up to $50. If you tell them after 2 days, you can be responsible for up to $500. If you wait more than 60 days after your bank has sent a statement that shows the theft, you might be responsible for the full amount that is stolen.

 

If you find an unauthorized charge on your statement, but you did not lose your debit card or PIN, you must notify your bank within 60 days. If you don’t, you might be responsible for the full amount that is stolen.

 

Once you notify the bank, the bank generally has ten business days to investigate the theft.

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How can I stop automatic payments from my bank account?

If you sign up for a recurring automatic debit payment, you have the right to stop them at any time. Here are the steps you must take:

1. You must tell the company they no longer have permission to take the payments out of your bank account. You should call and write a letter.

2. Tell your bank that the company no longer has permission. You should call and write a letter to your bank.

3. Give the bank a stop payment order. This will stop all future automatic payments from a company, even if they try to charge you. Do this in writing.

4. Watch your account to make sure the payments have stopped.

 

Two things to know:

1. Your bank may charge a fee for a stop payment order.

2. Cancelling your payment does not cancel your contract with the company. 

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What are the issues with not having a bank account?

Not everyone wants to keep their money in a traditional checking or savings account. Millions of households in the United States do not use bank accounts for a variety of reasons. Some people do not trust banks, others cannot qualify for an account. Still others cannot afford the many fees that come with a traditional bank account.

 

While not having a bank account is a reasonable choice, not having a bank account can also present issues, like:

• High fees to cash checks,

• Paying bills by money order can be expensive,

• Carrying cash can be dangerous. Cash that is lost or stolen cannot be recovered.

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What are alternatives to bank accounts?

There are other options for people who do not wish to open traditional bank accounts. Like banks and credit unions, they also have issues that you should be aware of. 

 

Prepaid cards

Many people use prepaid cards instead of bank accounts. There are different types of prepaid cards:

• Reloadable cards. Prepaid cards that allow you to load more money.

• Payroll card. This is a card that your employer deposits your paycheck onto. You are allowed to choose how you get paid, so you do not have to accept a payroll card if you do not want.

• Government benefit card. This is a prepaid card where your government benefits are deposited.

• College ID cards. Many colleges offer a prepaid card that can pay for items at campus stores.

 

In order to have protections, some prepaid cards must be registered. The card provider should give you information on how to register your card. Registered cards, payroll, and government benefit cards have built-in protections, including:

• You generally cannot be held responsible for unauthorized charges, if you report them.

• The card provider must generally credit the stolen amount while it investigates the loss.

However, you must report any loss or theft right away.

 

Prepaid cards generally charge more fees than traditional banks. Federal law requires that prepaid card providers must disclose fees before you buy the card. However, that means that they have to give:

• A short summary of the fees on any packaging, and 

• Provide a website and toll-free number where you can find a complete list of fees.

 

Some fees you might see on prepaid cards include:

• A monthly transaction fee,

• A fee for each purchase,

• ATM withdrawal fee,

• Fee to reload the card,

• ATM balance inquiry fee,

• Customer service fee,

• Inactivity fee.

 

Prepaid cards do not have overdraft protection. This means that you cannot spend more than is in your account, but also that your transaction will be denied if you do not have enough money loaded onto your card. 

 

Check cashing

Many people rely on check cashing services to cash their payroll or government benefit checks. These businesses cash checks for a fee. The fees are often high, but there are limits. In Georgia, businesses can charge no more than:

• 3% of the amount of a check for state public assistance or social security,

• 10% of the amount of a personal check, and

• 5% of the amount of all other checks.

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