How to Open a Bank Account – What Do You Need To Open a Bank Account

Do you want to know How to Open a Bank Account? I bet you want to. Many are also asking, “Can you open a bank account online?” Well, yes, you can open an account online, but before you do so, you should, first of all, know what is needed to even open a bank account.

That is what today’s article is all about. It is all about how one can possibly get an account in a bank and also how one can be prepared to do so. Just read on and get all the best information you need.

How to Open a Bank Account

Before you open a bank account, the first step you should take is to decide where to keep your money. The options simply or generally include traditional banks, online banks, and credit unions. Understanding how each of them works and what they offer can help you decide where to open a bank account.

Traditional Bank

Traditional, brick-and-mortar banks typically offer a range of account types, including personal checking and savings accounts, and even business checking and savings accounts. The main advantage of the traditional banks’ offers is local branch access. For example, if you simply need to deposit cash, you can then do so at a drive-through or in person at a teller window. Traditional banking encompasses both large and small banks, as well as regional and community banks.

Online Bank

Online banks and banking services can then offer many of the same account options you would find at traditional banks. The difference is that you are simply banking through a website or app versus accessing your money at a physical branch. Online banks typically charge fewer fees and, even then, offer better interest rates on deposit accounts than traditional banks. Neobanks, fintech firms that offer banking services, are included in the online bank category.

Credit Union

A credit union is also a financial institution in which each account holder is also a member. Typically, you will then need to meet certain requirements to join a credit union. For example, some cater exclusively to military members and their families, while others target state employees or even people who live in certain geographic regions. Other credit unions are also nationally available. Credit unions often charge fewer fees, and they might even offer more favorable interest rates for savers and borrowers.

What Kind of Account Should You Open?

Traditional banks, online banks, and credit unions can then offer different account options. The list can include:

• Checking accounts
• Savings accounts.
• Money market accounts.
• Certificate of deposit accounts.

Thinking about what you then need to manage your money can also help you decide which kind of bank account to open. It also helps to then compare the features of different account options.

Checking vs. Savings vs. Money Market Account

Checking accounts, savings accounts, and money market accounts are all deposit accounts. But they can work in different ways and even do not always share the same features and benefits.

A checking account, for example, is designed for depositing money that you will simply use to pay bills or cover everyday expenses with a linked debit card or by writing checks.

Some checking accounts can earn interest or offer rewards, but that’s usually not the main purpose of having a checking account.

Savings accounts and money market accounts can also earn interest, and both are simply designed to hold the money you do not plan to spend right away.

For example, you might then use a savings account for your emergency fund, or you could even save money toward a down payment on a home in a money market account.

Some money market accounts can then offer debit cards or check-writing capabilities. Both money market accounts and savings accounts have since been subject to federal rules regarding the number of withdrawals you can make each month (suspended in 2020 by the Federal Reserve).

Checking accounts are not even subject to these limitations, although the bank or credit union might then set limits on withdrawals.

Certificates of deposit, or CDs, are one more type of bank account you might open. A CD lets you simply save money and then earn a guaranteed rate of return. These are time deposits, which means that you simply agree to save for a set period of time.

Your money then earns interest and, once the time is up and the CD matures, you will be able to withdraw your original savings deposit along with the earned interest. Just be aware that taking money out of a CD ahead of its maturity date could trigger an early withdrawal penalty.

What to Expect When You Open Your New Account

Opening a bank account is even something you can do relatively quickly, either online or simply at a bank or credit union branch.

Generally, you can even expect the bank to then ask you to fill out an application for a new account—that is usually the first step.

From there, you will then need to verify your identity and also provide any other information the bank asks for, such as your address or phone number.

If the bank then requires a minimum deposit, you will then have to make that deposit when you open your new account. If you are opening an account online or simply making your first deposit using an ACH transfer from another bank, you would then need to give the new bank your routing number and account number to complete the transfer.

Some banks can then require further verification before you can even start using your new account if you are linking it to an account at another financial institution. For example, the bank might then make one or two small test deposits into your new account. You will then have to verify these amounts to activate your account, which can take a day or two.

You should also keep in mind that there might even be a holding period on your initial deposit. For example, if you are making your first deposit by check, it can then take a few days for that check to clear. You might even be waiting several days for your debit card or first order of checks to arrive.

What Do You Need To Open a Bank Account

Every bank is simply different when it comes to opening new accounts, but, typically, you will need at least three things:

• government-issued photo ID.
• Individual Taxpayer Identification Number (ITIN) or Social Security number
• A minimum initial deposit

Almost any bank or credit union will even then require some form of a government-issued ID to be able to verify your identity. This can be a driver’s license, state-issued ID card, official passport, or even a birth certificate. In some cases, you might need more than one form of ID.

Banks can also require you to complete an application for a new account. This can then mean providing additional information such as your address, phone number, and even email. If you are then opening a joint account with someone else, that person also has to provide their ID and even their Social Security number.

How Much Money Do You Need to Open an Account?

When opening a new bank account, you will then need to simply consider how much the bank requires you to deposit initially, generally referred to as a minimum opening deposit. This amount can then vary by bank and even by the credit union.

Some banks, for example, might then let you open a bank account with no minimum deposit required or a minimum deposit as low as $1. Others might even expect you to have amounts ranging from thousands of dollars to open a new account.

If a bank or credit union requires a minimum deposit, there are a few ways that you can make it. For instance, you can simply use cash or a check that’s written out to you to make your initial deposit. If you already have a bank account, you can also use an ACH transfer to simply move money from it to your new account electronically.

How Old Do You Have to Be to Open a Bank Account?

Typically, you just need to be at least 18 years old to be able to open a bank account on your own.

Children’s Accounts

Some banks and even credit unions offer teen checking and also student checking options for kids under 18. These usually require a parent or guardian’s signature to open.

Financial institutions might then also offer savings accounts for kids, with parents acting as the custodian until the child turns 18. Once the child reaches their 18th birthday, they can then automatically assume ownership of the account.

Joint Accounts

A joint bank account simply has more than one owner. For example, you might be able to open a bank account with your spouse if you are married. Or, you might even set up a joint checking account with an aging parent if you are helping them manage their finances.

Joint accounts can typically belong to both account owners equally. This means you both then have access to funds for making purchases or making withdrawals, and then you can both add to the account. Normally, both people would have to be 18 or older to open a joint account. Your financial institution might then, however, offer joint accounts for parents to share with minor children.

Closing Your Old Bank Account

If you already have an existing bank account and you are then moving to a new bank, you might then need to close the old account. There are a few important things to do here to simply ensure the transition is a smooth one, including:

• Update your direct deposit information with your employer so your paychecks go to the right bank.
• Update direct deposit information with anyone else you receive money from, such as government benefits or child support.
• Switch any automatic bill payments over to your new account.
• Cancel recurring transfers between linked accounts.
• Update your bank’s account information in mobile payment apps.
• Set up new text and email notifications for your new account.
• Discard paper checks and the debit card linked to your old account.

You will also be able to consider what needs to be done with any accounts you plan to leave open at your previous bank.

For example, if you have CD accounts there, think about what you will want to do with them once they mature. You can even roll them over into new CDs at the same bank, but if your new bank simply offers a higher annual percentage yield (APY), you might then be better off withdrawing your savings and starting fresh.

It’s also a good idea for you to get a written statement from the old bank specifying that your account is closed. This can then help you avoid situations where the bank might reactivate your old account, triggering fees.

FAQs

How Long Does It Take To Open A Bank Account?

It’s possible for you to open a bank account online in just a few minutes. You can even decide which type of account you need, enter the relevant information, and also link an external account to make your initial deposit. If you are simply opening a bank account at a branch, the process might take longer.

Is My Bank Account Safe From Creditors?

Creditors can even levy your bank account to collect certain debts. But bank accounts that only hold government benefit payments cannot then be garnished. Another option is to open a bank account in a state that does not allow bank levies or garnishments. There are also other ways to fight a creditor’s levy on your bank account.

When Should I Open Multiple Bank Accounts?

Opening multiple bank accounts can then make sense if you need to keep different funds separate from one another. For example, you might then want to open a checking account for spending and also paying bills, and savings account to stash your emergency fund. Married couples might then choose to share a single joint account and also be able to maintain separate accounts. If you run a business, it’s likely you will want to have both a personal and a business checking account.