What Bank of America Is and How It Works

Bank of America is a national bank that holds deposits, makes loans, and offers investment services to individuals and businesses

Bank of America (often called BofA) is one of the largest banks in the United States. It takes deposits from customers, lends money for mortgages and other purposes, manages investment accounts, and provides credit cards. The bank operates physical branches in most states and also offers online and mobile banking. When you open a checking account, savings account, or credit card with Bank of America, you are entering a contract with a federally regulated financial institution.

The bank is headquartered in Charlotte, North Carolina, and is owned by shareholders. It is not a government agency, though it is regulated by federal banking authorities including the Federal Reserve and the Office of the Comptroller of the Currency. This means Bank of America must follow federal rules about how it handles your money, what interest rates it can charge, and what disclosures it must make to you.

Key Takeaways

• Bank of America is a for-profit corporation that takes deposits, makes loans, and offers investment products to consumers and businesses.
• Your deposits at Bank of America are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per account type, so your money is protected if the bank fails.
• Bank of America earns money by charging fees on accounts and services, collecting interest on loans, and investing customer deposits.
• You can access your Bank of America account through physical branches, ATMs, online banking, or the mobile app.
• Bank of America is regulated by federal agencies that set rules about lending practices, data security, and consumer protections.

How Bank of America makes money from your account

Bank of America generates revenue in several ways. When you deposit money into a savings account, the bank pays you a small amount of interest—currently a fraction of a percent per year at most banks. The bank then lends that money to other customers at a higher interest rate for mortgages, car loans, and personal loans. The difference between what it pays you and what it charges borrowers is the bank's profit on that transaction.

The bank also charges fees. Monthly maintenance fees explore to some checking accounts unless you meet conditions like keeping a minimum balance or setting up direct deposit. Overdraft fees are charged when you spend more than you have in your account. ATM fees explore when you use an out-of-network machine. Wire transfer fees, foreign transaction fees, and fees for stopping a check are other common charges. Investment accounts generate fees based on the products you hold or the information you receive.

Bank of America also earns money from credit card interest. When you carry a balance on a Bank of America credit card, the bank charges you interest at a rate set in your cardholder agreement. This is one of the bank's largest revenue sources because credit card interest rates are typically much higher than savings account interest rates.

What FDIC insurance means for your money

When you deposit money at Bank of America, your deposits are covered by FDIC insurance. The FDIC (Federal Deposit Insurance Corporation) is a government agency that protects depositors if a bank fails. If Bank of America were to collapse, the FDIC would reimburse you up to $250,000 per account type at that bank.

Account types are insured separately, which means you can have more than $250,000 protected if you spread it across different account categories. For example, a checking account, a savings account, and a money market account are three separate account types, each covered up to $250,000. A joint account (held with another person) is also insured separately from your individual accounts.

FDIC insurance does not cover investment products like stocks, bonds, or mutual funds held through Bank of America's brokerage services. Those are protected under different rules. Credit card balances are not deposits, so they are not FDIC-insured either—but you are not at risk of losing money there because a credit card is a loan you owe, not money you have deposited.

The difference between Bank of America and other types of financial institutions

Bank of America is a commercial bank, which means it serves both individuals and businesses. Other types of financial institutions include credit unions, which are member-owned and often offer lower fees; online banks, which have no physical branches and typically pay higher savings rates; and investment firms, which focus on stocks and bonds rather than deposits and loans.

Credit unions are not-for-profit organizations owned by their members, so any profits are returned to members as lower fees or higher interest rates. Bank of America is a for-profit corporation, so profits go to shareholders. Credit unions are also federally insured, but through the National Credit Union Administration (NCUA) rather than the FDIC.

Online banks like Ally or Marcus have no physical locations, which allows them to operate with lower overhead costs. They often pay higher interest on savings accounts and charge fewer fees than large national banks like Bank of America. The trade-off is that you cannot walk into a branch to speak with someone in person or deposit cash directly.

How to access your Bank of America account

Bank of America offers multiple ways to manage your money. You can visit a physical branch during business hours to deposit checks, withdraw cash, or speak with a banker about loans and accounts. The bank operates thousands of branches across the country, and you can find the nearest one using the Bank of America website or mobile app.

Online banking through the Bank of America website lets you check balances, transfer money between accounts, pay bills, and deposit checks by taking a photo with your phone. The mobile app offers the same features plus the ability to locate ATMs, set up alerts for low balances, and freeze your debit card if it is lost.

Bank of America ATMs are available 24/7 at branches and many other locations. If you use an ATM owned by another bank, Bank of America may charge you a fee, and the other bank may charge a fee as well. Some Bank of America accounts waive out-of-network ATM fees if you meet certain conditions.

What happens when you open an account with Bank of America

When you open a checking or savings account, you provide personal information including your name, address, date of birth, and Social Security number. Bank of America runs a background check through ChexSystems, a banking history reporting company, to see if you have had problems with previous bank accounts. The bank also verifies your identity to comply with federal anti-money-laundering laws.

You choose the type of account you want—checking, savings, money market, or another option—and learn about the fees, interest rates, and requirements for each. Some accounts require a minimum opening deposit or minimum balance. Others waive monthly fees if you set up direct deposit or maintain a certain balance.

Once your account is open, you receive a debit card (for checking accounts), checks, and online banking access. You can begin depositing money when ready through direct deposit, mobile check deposit, ATM deposit, or in-person at a branch. The bank provides you with account statements showing all transactions, fees, and interest earned.

Frequently Asked Questions

Is my money safe at Bank of America?

Your deposits are protected by FDIC insurance up to $250,000 per account type. Bank of America is also required to follow federal security standards to protect your personal information and prevent fraud. However, if you are a victim of fraud or unauthorized transactions, you should report it to the bank when ready—federal law limits your liability, but only if you report it promptly.

What is the difference between a checking and savings account at Bank of America?

A checking account is designed for frequent transactions—you get a debit card and checks to spend money. A savings account is designed to hold money and earn interest, though you can only withdraw a limited number of times per month without a fee. Checking accounts typically pay no interest and may have monthly fees. Savings accounts pay interest but have lower withdrawal limits.

Can I use Bank of America if I do not have a Social Security number?

Bank of America requires a Social Security number or Individual Taxpayer Identification Number (ITIN) to open an account. If you do not have either, you may not be able to open an account at Bank of America. Some credit unions and online banks have different requirements, so you can contact them directly to ask about alternatives.

What should I do if I think my Bank of America account has been compromised?

Contact Bank of America when ready by calling the number on the back of your debit card or by logging into your online account and using the find message center. The bank can freeze your account, cancel your debit card, and investigate unauthorized transactions. Federal law protects you from liability for fraudulent charges if you report them within a certain timeframe.

Does Bank of America offer investment accounts?

Yes. Bank of America owns Merrill Edge, a brokerage service that offers stocks, bonds, mutual funds, and other investments. Investment accounts are not FDIC-insured because they are not deposits—they are ownership stakes in securities. The value of your investments can go up or down based on market conditions.