Checking and savings: what each is for
A checking account is for money you move all the time: paychecks in, bills out, card purchases. A savings account is for money you want to keep and let grow a little; it usually pays some interest and is a good home for an emergency fund. Many banks offer both under one login. You do not need a large balance to open an account — some accounts have no minimum at all, and there are basic low-cost account options designed exactly for people who were told banking was not for them. If you have been managing entirely in cash, a simple checking account with no monthly fee is the usual first step, because it makes rent, bills, and direct deposit cheaper and safer than money orders and check-cashing fees.
Choosing a bank or credit union
Banks are businesses owned by shareholders; credit unions are nonprofit cooperatives owned by their members, and many serve a particular area or workplace group. Both are legitimate and federally insured. Compare five things before opening an account: monthly fees and minimum balance requirements, overdraft policies and fees, ATM access (fees to use other banks' machines add up fast), the quality of their mobile app if you do everything by phone, and whether branches near you offer the services you need. Ask directly: 'Is there a monthly fee? What are the overdraft rules? Is there a low-cost or no-minimum option?' A good account costs you little or nothing when you stay within its rules.
Deposit insurance, in plain words
When you keep money in a bank insured by the FDIC or a credit union insured through the NCUA, the federal government insures your deposits up to a standard limit per depositor, per institution. If the bank fails, insured deposits are protected — this is one of the safest places to keep money in the United States. The insurance does not cover everything: it does not protect against a scam where you send money to a criminal, it does not cover investments like stocks or crypto, and it does not cover money held at payment apps that are not insured banks. Check the official FDIC or NCUA sites to confirm any institution is insured and what the current coverage limits are.
Avoiding the fees that hurt most
The two fees that cost low-income households the most are overdraft fees and check-cashing fees. Overdraft happens when you spend more than your balance; many banks now offer lower-cost overdraft alternatives, and you can often turn overdraft coverage off so a purchase is simply declined instead of creating a fee. Check-cashing stores charge a percentage of every check — an account with direct deposit can eliminate that cost entirely. Other tips: use your own bank's ATMs, watch for monthly maintenance fees you can avoid by meeting simple conditions, and never let anyone (including friends or family) use your account to receive or move money for them — that is how people unknowingly become part of fraud.
A real-world example
Hypothetical example: a resident cashes a $900 paycheck monthly at a check-cashing store for a $45 fee — over $500 a year. They open a no-minimum checking account at a local credit union, set up direct deposit, and turn off overdraft coverage so a mistake declines the purchase instead of charging a fee. They move $20 a month into savings. The account's debit card is insured the same way their cash under the mattress was not. When a stranger on a payment app asks them to receive and forward money 'for a small fee', they recognize it as a money-mule scam and report it.
Steps to take
- List what you need: direct deposit, a debit card, ATM access, mobile app.
- Compare two or three local banks or credit unions on fees, minimums, and overdraft rules.
- Ask specifically for a no-minimum or low-cost account if the first option has fees.
- Set up direct deposit if you receive regular pay or benefits.
- Decide your overdraft preference and confirm it with the bank.
- Set up the FDIC or NCUA official site bookmarked to check insurance questions.
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Official provider guides
These independent provider guides offer additional learning resources. Check current details directly with the provider; sharing a link does not imply an official affiliation with P.E.A.C.E.
- CFPB: Bank accounts and services (opens in a new tab)
Official guidance on choosing and using checking and savings accounts, avoiding fees, and resolving problems.
- FDIC: Consumer resources (opens in a new tab)
The federal agency that insures bank deposits. Learn what deposit insurance covers and check facts about banking safety.
- MyCreditUnion.gov (NCUA) (opens in a new tab)
The federal regulator's consumer site explaining how credit unions work and how share insurance protects your deposits.