If you need to open a bank account, being well informed and ready-to-go with the right documents will save you time and money. There are a few steps you’ll want to follow to make sure you’ve made the right choice. If you’re wondering what you need to open a bank account, here’s everything you need to know.
To get started, you need to make sure you’re eligible to open an account. You’ll need to be at least 18 years old and have a social security number in most cases. For those between 14 and 18 years old, the account must be opened with a parent or legal guardian as the co-owner of the account. If you meet these basic requirements, keep reading about what else you need to know.
How Much Money Do You Need to Open a Bank Account?
Many people want to know how much is it to open a bank account. Most banks don’t require much to open one. Most online banks don’t have a minimum initial deposit. At many credit unions, it’s as little as $5. It’s best to ask the bank about their minimum opening balance requirements to find out how much is it to open a bank account.
Even if you don’t need very much money to open a bank account, watch out for monthly minimum balance requirements. Some banks may charge you a service fee if your balance falls below their minimum balance amount.
What Kind of Bank Account Should I Open?
If you’re wondering what kind of bank account you should open, ask yourself what you’ll be using your bank account for. Here are the main types of accounts:
Checking account: Checking accounts are used for everyday spending. It’s the account you’ll use to pay your bills. You can order checks to pay bills or request a debit card that’s linked to the account to use for your purchases. Most checking accounts also offer online bill pay so you can create recurring payments or schedule bill payments. You can set up direct deposit for free so your employer can transfer your paycheck directly into your checking account on payday. Some banks will offer a nominal interest rate on your balance.
The current national average rate for an interest checking account under $100,000 is 0.06% APY.
Savings account: When you want to put some money away and earn a small amount of interest while still being able to access the funds quickly, a savings account is best. You usually can’t spend your savings money as easily as if it was a checking account. Your options are a cash withdrawal made at the bank, a funds transfer to a linked checking account or a wire transfer. Federal law limits how much you can withdraw from your savings account to a total of six withdrawal and transfer transactions per statement.
The current national average rate for a savings account under $100,000 is 0.09% APY.
Money market account: Money market accounts are similar to a savings account but you’ll earn a higher interest rate. They may have some checking-account perks like check-writing and an ATM card but you’ll still be restricted to 6 withdrawals per month or you’ll face hefty fees and penalties.
The current national average rate for a money market account under $100,000 is 0.19% APY.
Certificates of deposit (CDs): If you’ve saved a lump sum of cash that you won’t need in the next 6-8 months to cover a bill or emergency, a CD may pay you the best interest rate. You’ll earn more interest from a CD than a money market or savings account because you can’t touch your money for a fixed period.
The current national average rate for a certificate of deposit varies: 0.20% APY for three months, 0.38% APY for six months, 0.54% APY for 12 months and 1.06% for 60 months.
How Do I Choose the Right Bank?
There are many banks to choose from both online and in your city. When choosing a bank, you may want to compare a few to decide which one is best for you. Some things you may want to look for include:
- Banking fees: You’ll want to ask “how much is it to open a bank account?” Although you don’t have to pay a fee to open one, monthly fees like ATM withdrawal charges, maintenance fees, overdraft charges and credit card annual fees can add up.
- Consider credit unions: Credit unions provide competitive interest rates and affordable banking services because they’re not-for-profit. Most credit union banks only accept members from specific professions, colleges, federal government work, military or residents of a certain area. The National Association of Credit Unions provides a credit union finder for your area.
- Digital access: Does the bank have a good smartphone app or online services available so you can bank from anywhere, 24 hours a day?
- Location: Would you like to occasionally run into a local branch to cash a check, make a deposit or talk to someone at the branch? This may be helpful if you’re just learning about banking basics and could benefit from your local banker’s advice. If you’re thinking about an online-only bank, what ATMs can you use? How can you make deposits? How can you reach customer service if you have any questions?
- Minimum monthly balance: some banks may charge you a service fee if you don’t keep a certain amount in the account.
- Other services: Would you prefer a bank that also offers auto loans, credit cards, business loans or investment services?
How to Open a Checking Account
What do you need to open a bank account? Regardless of what type of account you choose to open, you’ll need to fill out an application. You’ll need to sign a signature card (that can be accessed by the bank to verify it’s you) at the local branch or mail one in to your online bank.
To open a checking account or any other type of account, you’ll also need the following:
- A government-issued photo ID like a driver’s license, state-issued ID or passport. Some banks may require two IDs. A birth certificate, social security card or a credit card in your name could serve as the second ID.
- Date of birth.
- Opening balance. Depending on how much your bank requires, be prepared to bring in cash or a check to fund your new account. Checking and savings accounts don’t normally require more than $25 to open one.
- Physical address. Although you can provide a mailing address, a street address is required under federal law.
- Social Security Number (SSN) or Taxpayer Identification Number (TIN).
When opening a checking account, be sure to ask for a debit card. Checks are optional and can be ordered for a fee but with online bill pay and a debit card, you could probably skip ordering checks. You may also want to apply for a credit card if you have good credit.
Don’t forget to request a direct deposit form with your information filled in. You’ll need to give it to your employer to have your paychecks deposited straight into your checking account for free.
How to Open a Savings Account
To open a savings account you’ll need the same items as listed above for a checking account. Savings accounts are limited by the Federal Reserve to six withdrawals and/or transfers total per month. If you have an existing checking account, you may want to link the accounts to make the transfer of funds between the two accounts easier.
How to Open a Money Market Account
You’ll need the same checklist items from how to open a checking account above. Money market accounts usually require a higher minimum balance than a checking or savings account, so be prepared to fund your account with cash, a check or a transfer. A typical opening deposit could vary widely between $1 and $10,000. The larger the opening balance, the better the interest rate.
How to Open a CD Account
As with the checking account item list above, you’ll need an ID, a social security number (in most cases) and the money to fund the account. A CD needs a little more research before you open one because your interest rate can vary widely depending on how long you park your money in one.
To open a CD account, choose the length of the CD you’re most comfortable with. The longer the term, the higher the interest rate. Make sure you have a backup amount in savings for an emergency — withdrawing money from your CD before the term is up could cost you in penalties.
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