Are you planning to open a new bank account? The good news is it’s a fairly simple process. But before you get started, you’ll need to do a little legwork and gather some important documentation to ensure you won’t hit any roadblocks.
Read on to learn more about what to expect when opening a bank account.
Step 1: Explore Your Options
Not all banks are equal. Offerings, qualification criteria, and account holder benefits vary from institution to institution. And some tack on heavy fees to boost their bottom line. So, before you choose a bank, consider the following:
Will you be visiting the branch often? You’ll need to find a brick and mortar bank within near of your home or job. Local credit unions may also be a good fit if you can meet the qualification criteria.
If you prefer to handle all your banking needs online, an online bank may be a viable option. Online banks are convenient if you’re always on the go, and most of your banking needs can be handled from a computer or smartphone.
Non-US citizens may still qualify for a bank account. However, you’ll need to speak with a banker to learn more about banking products and services that may be available to you.
Banks usually assess monthly maintenance, overdraft, and NSF fees. Some banks also assess fees for wire transfers and cashier’s checks. The lower the fees, the better.
If the bank has many ATMs in your area, you won’t have to worry about fees. But if they don’t, inquire to determine if they reimburse for fees incurred at out of network ATMs.
Most banks offer the following:
- Checking and savings accounts, certificates of deposit (CDs), money market accounts, interest-bearing accounts and prepaid cards
- Loan and credit products, including credit cards, auto loans, mortgage loans, student loans, personal loans and lines of credit
- Investment accounts, such as ETFs, mutual funds, and bonds
- Small business banking, payroll, merchant and retirement planning services
But some have limited offerings, so confirm that their offerings will best suit your needs before applying for a new account.
Rate of Return
Online banks typically have the highest rate of return since their overhead is minimal. But if you prefer a brick and mortar bank, be mindful of the rate of return.
Financial Literacy Resources
Are you interested in learning more about ways to improve your financial situation? Check to see if the bank has educational resources available to customers.
Does the bank you’re considering offer a 24/7 customer hotline? This could be important if you travel often or only have time to call after hours. How about online banking and mobile banking capabilities, such as remote check deposits?
Step 2: Apply for a New Account
Once you’ve decided on a bank and type of account you’d like to open, you have to submit an application. Be prepared to provide your:
- Name, date of birth and Social Security number
- Contact information, including your mailing and email address
- A government-issued ID, such as a driver’s license, Social Security card, passport or state ID to prove your identity
- Cosigner’s information if you’re under 18 years of age
- Identifying information of your co-applicant if you’re opening a joint account
Step 3: Fund Your Account
Upon approval, you’ll need to fund your account by making what’s known as the initial deposit. In most instances, there’s a minimum amount required for the account to be placed in active status. Review the bank’s policies to determine if you can make the initial deposit in person using cash or check, or over the phone.
If you have a bank account online, an electronic funds transfer (EFT) will usually suffice. Also, keep in mind that the opening deposit requirement could be higher if you pose a high risk to the bank. More on that shortly.
What if you’re denied for a bank account?
Some financial institutions run credit checks before approving consumers new accounts. They do this to confirm that you don’t have any major outstanding debt obligations to other banks.
But it doesn’t stop there. The bank may use ChexSystems or Early Warning Services to look at your banking history. If you have a track record of excessive overdraft fees or account abuse, they may deny your application.
Keep in mind that some banks offer second chance checking accounts. They usually come with higher monthly maintenance fees. And you’ll have to go into a branch to learn more because the bank may not advertise this option to the public. But they’re worth looking into if you know your banking history is shaky.
Step 4: Close Dormant Accounts
Planning to bank with more than one financial institution? If not, you should close your other bank accounts. Doing so streamlines the management of your finances. Plus, it minimizes monthly account maintenance fees.
Closing an account is as easy as visiting the branch or submitting a request in writing. But before you pull the cord, be sure to:
- Reroute all recurring billings to your new account
- Update your direct deposit information with your employer
- Allow all incoming transactions, such as checks that have not posted yet, to clear
- Deactivate your online account and unsubscribe from real-time text alerts
Most importantly, retrieve written documentation that includes the date the account was closed. This will serve as proof in case you have to file a complaint if improper fees are incurred after the fact.
What if your account was closed involuntarily?
Are you searching for a new checking account or savings account because your last one was closed by the financial institution? This typically occurs when your account sits dormant for too long. Most banks will also close your account if it is overdrawn for an extended period of time.
So, It’s in your best interest to sort everything out to protect your banking history and avoid being denied for a new account.
If your account was closed due to unauthorized use, file disputes to recoup your losses. But if you account was closed because of an overdrawn balance, make payment arrangements with the bank. (The latter could also prevent the unpaid balance from going to collections and tarnishing your credit rating).
Helpful Tips and Tricks
To successfully navigate the banking system once you open an account, there are some helpful tips and tricks to keep in mind.
Minimize Overdraft Fees
Banks make billions of dollars each year in overdraft fees. In fact, Bank of America, Chase, and JP Morgan Chase raked in over $6 billion in 2016 alone, notes CNN Money.
So, stay on top of your account balances and always make sure there are more than enough funds on hand to cover transactions. And in the event that you incur an overdraft fee, call and request that it be waived as a one-time courtesy.
Understand How Overdraft Protection Works
Overdraft protection helps minimize the fees you’ll incur each time your account is in the red. But there’s still a fee assessed if the bank has to pull funds from one account to another for the transaction to clear.
And in the event the backup account does not have enough funds to cover the transaction, the bank may still clear the charge and assess an overdraft fee. In that situation, you’d be on the hook for the amount of the initial transaction, overdraft fee and subsequent fees on any other transactions that post.
A better idea: keep track of your scheduled online payments at all times. Also, call the bank and ask that they reject any debit card transactions that exceed your available balance to avoid incurring fees.
Be Vigilant of Account Activity at All Times
Fraudsters are always looking for ways to steal money from innocent consumers. And a debit card is one way to do so. That’s why it’s important to pay close attention to account activity at all times. Balance alerts can assist, but you want to keep an eye out for unauthorized transactions.
In the event your card is lost, stolen or compromised, call your bank immediately and follow it up with a letter in the mail. They should close the card right away and issue a new one with a different card number.
If the compromise is reported within two business days, you’re only liable for up to $50. But between day two and 60 calendar days, it increases to $500. And after this point, your liability is unlimited.
Understand Your Bank’s Policies
You’ll need to read the fine print to know what to expect from your account. This helps avoid surprises later on down the line. And you may discover there’s a better account or fit for you elsewhere.
Having issues with your bank?
Your first order of business should be to speak with a branch or customer service manager directly. If this doesn’t resolve your issue, you can use the Consumer Financial Protection Bureau’s (CFPB) online tool to file a formal complaint.