Are you planning to open a 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.
What You Need to Open a Bank Account
To open a bank account, you will usually have to provide some personal and financial information to the bank. This can vary depending on the bank and the type of account you are opening, but some common requirements include:
- Proof of identification, such as a driver’s license, passport, or government-issued photo ID
- Your Social Security number or taxpayer identification number
- Your date of birth
- Your current address
- A minimum deposit, which may be required to open the account
- Parent or guardian’s information if you’re under 18 years of age
- Identifying information of your co-applicant if you’re opening a joint account
Some banks may also require additional documentation or information, such as a reference or a co-signer. Be sure to call the bank or check their website to find out exactly what you need to bring with you when you open the account.
How to Open a Bank Account
Ready to open a bank account? Follow these simple steps to get started.
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 choosing a bank or credit union and opening a bank account, 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, 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.
When choosing a bank, you should consider the level of customer service they provide. This includes:
- Extended call center hours
- Multiple ways to contact customer service
- Responsive and helpful representatives
- A wide network of branches and ATMs
- A user-friendly website and mobile app
A bank with good customer service will help you resolve any issues you may have in a timely manner and make you feel confident and supported.
Step 2: Apply for a New Bank Account
Once you’ve decided on a bank and the type of account (generally a checking or savings account) you’d like to open, you have to submit an application.
You can either visit a bank branch in person or apply for a bank account online.
The bank will review your application and may request additional information if needed. Once your application is approved, you’ll receive instructions on how to activate your account and start using it.
Step 3: Fund Your Bank Account
Upon approval, you’ll need to fund your account by making what’s known as the minimum initial deposit. In most instances, there’s a minimum opening deposit 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 online banking, an electronic funds transfer (EFT) will usually suffice. Furthermore, 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 new checking accounts for consumers. 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 want to open a basic checking account. If you have a track record of excessive overdraft fees or account abuse, they may deny your application.
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 a bank 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 bank account was closed involuntarily?
Are you searching for a new checking account or savings account because your last one was closed? 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 checking or savings account was closed due to unauthorized use, file disputes to recoup your losses. But if your deposit accounts were 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).
The Pros and Cons of Traditional Banks, Credit Unions, and Online Banks
There are several factors to consider when choosing a bank or credit union. Here are a few key points to keep in mind:
These are financial institutions that have a physical presence, with branches and ATMs located in communities across the country. They offer a wide range of banking products and services, including checking and savings accounts, loans, and credit cards. Traditional banks may have higher fees than some other options, but they also tend to offer more comprehensive services.
Credit unions are non-profit organizations that are owned and controlled by their members. They offer many of the same products and services as traditional banks. However, they may have lower fees and more favorable terms, such as higher interest rates on savings accounts. Credit unions often have a more local focus and may have more personalized service.
Online banks operate entirely online, without physical branches. They often offer higher interest rates on deposits and lower fees than traditional banks. However, they may not have the same level of in-person customer service.
Some online banks, known as “neobanks,” offer a full range of banking services, including debit cards and checkbooks, while others may be more limited in the products they offer.
See also: Best Alternatives to Traditional Banks
Which one is right for you?
When choosing a financial institution, carefully consider your financial needs and goals. For example, if you need a wide range of banking products and services and are comfortable conducting most of your banking online, an online bank or neobank may be a good fit.
On the other hand, if you value in-person customer service and prefer the convenience of a local branch, a traditional bank or credit union may be a better choice.
Furthermore, be sure to compare the fees, interest rates, and online banking options offered by different financial institutions to find the one that best meets your needs.
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.
Banks make billions of dollars each year in overdraft fees. In fact, Bank of America, Chase, and Wells Fargo 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. Furthermore, 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 constantly 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 bank 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.
Learn More About Opening a Bank Account
- Free Online Checking Accounts: No Opening Deposit Required – These online checking accounts do not require an initial deposit and offer many other benefits as well.
- How To Open a Bank Account in the US as a Non-Resident – As long as you have the necessary documentation, it is possible for a non-US resident to open a bank account.
- What Is the Easiest Bank Account to Open Online? – There are some banks that have made it very easy to apply online. Using the options on this list, you can open a bank account online in just a few minutes.