If you’re wondering how to open a bank account, take heart: It’s a fairly painless process if you know what you need, what kind of account you want, and what kind of obstacles you could face along the way. And if you’re still on the fence about whether you need a bank account, we’ll tackle that question, too.
If you’re opening a personal savings or checking account in your own name in the United States, you’ll typically need to be at least 18. You’ll also need some fairly standard information, including the following:
What do you need to open a bank account at a branch?
- Photo identification: You’ll need a government-issued ID such as your driver’s license or passport. Some banks may also require secondary identification such as a credit card or a utility bill.
- Social Security number: Despite growing fears over identity theft, most banks still require your Social Security number. If you’re wary of providing your number, you may be able to use a Taxpayer Identification Number that you get from the Internal Revenue Service.
- Other personal information: This will include your date of birth, physical address, phone number, and sometimes even your email address.
- Initial deposit: You’ll only need this right away if your bank requires a minimum amount to open an account. You can usually fund your new account with a check, debit card, or money order.
What do you need to open a bank account online?
There are a lot of excellent online banks, but you can also open an account online with most major brick-and-mortar banks, too. Smaller community banks and credit unions may not offer this convenience, though.
To open a bank account online, you’ll need your Social Security number and the other personal information outlined above. To fund your account right away, you’ll need your existing debit card (if allowed) or your existing bank’s name, address, routing number, and your account number to set up a direct link between accounts.
Why would a bank deny my application for a new account?
While opening a bank account is a relatively straightforward process, there is always the possibility for a few hiccups. Here are some reasons you might be denied a new bank account:
- The bank couldn’t verify your personal information. It’s common for identity thieves to open new accounts using someone else’s data, so banks are very cautious when it comes to double-checking your personal information. Be sure to triple-check for mistakes before submitting your application.
- You are flagged as a high-risk customer. If you mismanaged a previous bank account or were suspected of fraud at a previous bank, you may be flagged in a database called ChexSystems. Banks check this database before approving applications for new accounts, and are likely to reject anyone who is listed. In that case, you may need to apply for a second-chance checking account.
- You have bad credit. Some banks simply check ChexSystems before approving applications, but it’s not uncommon for others to pull your credit report instead of (or in addition to) your past banking record. If they don’t like what they see, you might be denied.
If you are denied an account, the bank should provide a reason as well as the name of any consumer reporting agency it consulted in denying your application. You can then contact that agency for a free report to ensure its information is accurate.
Why do I need a bank account, anyway?
While it’s not absolutely necessary to have a bank account, there are a number of reasons why you’ll want one:
- To make your life easier: If you’ve tried to pay big bills without a checking account, you know how much of a pain it can be. Simply being able to write a check is a big relief for anyone who’s had to use money orders, cashier’s checks, or wire transfers. Today, banks also offer a lot of other conveniences, including direct transfers between accounts online, person-to-person payments, and 24/7 account access.
- To keep your money safe: Still stashing your money under your mattress? It’s time to stop — just one house fire or home invasion is all it would take to rob you of your personal fortune. In a bank, your money will be insured by the Federal Deposit Insurance Corporation (up to certain limits). So even if something happens to your bank, you won’t lose a penny of your money.
- To meet your savings and investment goals: If you want to grow your money, a bank can help with the basics, including savings accounts, certificates of deposit, and money market accounts. Some banks also offer access to more sophisticated investment vehicles such as stocks and bonds, mutual funds, retirement accounts, annuities, and more.
- To save money: Not having a bank can be expensive. If you rely on check-cashing services, money orders, and prepaid debit cards, you’ll be paying steep fees for each service. You may also be more vulnerable to using services aimed at people outside the banking system, including payday loans, auto title loans, pawnshop loans, and rent-to-own shops. Most have exorbitant interest rates and use predatory tactics to trap you in a cycle of debt.
What kind of bank account do I need?
Basic banking accounts boil down to checking, savings, and CDs, or certificates of deposit. To help figure out what you need, you’ll want to think about how often you want to access your money and whether you need an account for day-to-day life or long-term savings goals:
Think of a checking account as your day-to-day workhorse. It’s the most liquid kind of account, meaning you’ll be putting money in and taking money out fairly frequently. It will be easy to access via your debit card, ATM, or checks.
In most cases, your money won’t earn much (if any) interest in a checking account. You’ll want to be sure you understand (and avoid) your bank’s fees for things such as an overdraft — which is when you try to withdraw more money than your account holds. Be sure to check whether there’s a monthly maintenance fee, and whether you can avoid paying it by maintaining a certain minimum balance or hooking up direct deposits.
A couple of good options with bigger banks include Chase Total Checking® and USAA Classic Checking. Online bank Bank5Connect offers a checking account that earns 0.76% APY, an interest rate that’s high even among savings accounts, let alone checking.
Everyone should have an emergency fund for unexpected expenses. A savings account can be a convenient place to stash this and other short-term savings.
This kind of account isn’t as liquid as checking — in fact, under federal regulations you’ll be limited to six withdrawals per month. But you can earn a bit of interest on your money in a savings account, especially if you seek a money market account or a high-yield savings account online.
Fees typically aren’t as numerous or steep for savings accounts as they are with checking, but you’ll still want to be sure to get a full list of them before opening an account.
Good bets nationally include the Ally money market account, which earns 1.0% APY and has no minimum deposit or monthly maintenance fees. Another solid option is with Discover Bank savings account, which offers 1.75% APY.
Certificate of Deposit
A certificate of deposit is the least liquid of banks’ common accounts. You open a CD for a certain term, such as six months, a year, or five years. During that time, you can’t access your money without paying an early withdrawal penalty. In exchange, you’ll usually receive a higher interest rate than you would get with a savings account that helps you grow your money. You can also use certain strategies such as CD laddering to maximize your interest.
Some banks offer a range of accounts within these categories, such as checking accounts that do earn interest but require higher balances, or savings accounts specifically aimed at college students or kids. Be sure to look at all of your bank’s offerings to make sure you’re getting the best account for you.
To open a bank account, do your homework
Remember to do a bit of research before opening a bank account. You’ll want to pick a bank that meets your needs. For instance, if you want to bank in person, are their branches nearby with hours that fit your schedule? Will you have access to a wide network of ATMs? Are you clear on all account fees and how to avoid them, if possible?
If you don’t place a high priority on face-to-face service, don’t overlook online banks in your search. Most offer higher interest rates than traditional banks, and if you’re tech-savvy, you’ll probably find online-only banking just as convenient as going to a branch.
For additional guidance, check out The Simple Dollar’s guides to all things banking:
- The Best Free Checking Accounts
- The Best High-Interest Savings Accounts Online
- Best Money Market Accounts
- The Best Banks in America
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