For those who are new to the world of personal finance and banking, making a decision on what type of bank account to open can be overwhelming. To start, some of the most common types of accounts you can open are checking accounts or savings accounts, and you can open those at either a traditional bank or a credit union. In this guide, we will walk through what to consider when opening an account and the steps required to create one.
Getting Started: How To Open a Bank Account
1. Decide If You Want a Bank or Credit Union
Before opening your bank account, you’ll want to choose the bank or credit union where you want to open your bank. Banks and credit unions are both financial institutions but they have some slight differences.
- A bank is a for-profit institution where anyone can open an account.
- A credit union is a type of non-bank financial institution that is non-profit, but may only be available to a certain group of people.
While some credit unions are limited to people in certain geographic locations or employees of certain companies, many credit unions open up membership to anyone for a nominal fee. The choice between a bank or credit union will essentially come down to what you prefer in terms of convenience, locations, banking technology, fees, etc.
2. Determine the Banking Services You Want
Another factor that you’ll want to consider when opening a bank account is what type of services are provided to customers and the features that come with the account.
For example, here are some features to consider:
- Online and mobile banking: Most banks offer online banking services so you won’t even need to visit a branch to handle your transactions, including deposits and transfers. But if you prefer banking in a physical branch, you might want to consider a traditional bank that has retail locations near where you live.
- Customer service: Many banks offer customer service support on evenings and on the weekends. Some even have online chat features and the ability to email customer support.
- Fees and rates: Do your research on the rates and fees associated with an account. For example, some banks offer waived ATM fees for withdrawals while other banks offer competitive interest rates.
- Bonuses for Sign Ups: Banks will occassionally offer bonuses for new customers who sign up for an account. Check out our list of bank bonuses to find a bank that is offering an incentive for opening an account.
3. Visit the Bank Branch or Website
Once you’ve identified the bank or credit union where you want to open your bank account, you can visit the bank branch or go to their website. Most financial institutions offer mobile banking either through their mobile website or through a mobile app. So if you prefer to open an account from your phone, most institutions will allow you to do most if not all of the opening process online.
4. Pick an Account That Suits Your Needs
There are many different kinds of personal bank accounts that you can sign up for. Do you want a free checking account to deposit your monthly paycheck? Or do you just want a high-yield savings account with a higher interest rate to park your emergency funds?
Review the different account features and check what is required to open one. Some banks require a specific initial deposit, minimum opening deposit or minimum balance that you have to keep in your account to avoid bank fees. If you need checks, a debit card or access to direct deposits, pick a product that offers those features.
What Types of Bank Accounts Can You Open?
Here is a breakdown of the various types of bank accounts to choose from:
- Cash Management Accounts: Cash management accounts is a term that encompasses checking accounts or savings accounts.
- Money Market Accounts: A money market account works like a savings account but usually has a limit to the amount of purchases and transfers per month. Check out some of the current higher paying money market accounts.
- Credit Cards: Credit cards allow you to purchase items and pay for them later. To avoid paying interest on balances, pay back any negative balance on the credit cards in full, each and every month. Here are some credit cards with the best bonuses.
- Investment Products: Investment products include retirement accounts like IRAs as well as taxable investment accounts. Investment products may have minimum balance requirements that you would need to satisfy.
- College Student Accounts: Many banks or credit unions have specific types of accounts targeted for college students. If this is your first time applying for a credit card, learn more about how to apply for a credit card as a student.
What You Will Need to Open a Bank Account
1. Personal Information and Financial History
Banks and credit unions are legally required to verify the identity of anyone who is opening an account with them. As such, you will need to enter in identifying information about yourself. This might include:
- Name and email address
- Address and phone number
- Social Security Number or Alien Identification Card Number
- Basic financial information such as employment history, salary or net worth
2. Signed Agreement of the Terms and Conditions
When you open a bank account, you’ll also likely be required to agree to the terms and conditions of the bank. This could include security policies, transaction limitations or other additional terms. It is common for certain savings accounts to have a maximum number of withdrawals per month, as an example. Many bank accounts have fairly flexible terms, but you’ll want to review these policies and make sure that you understand them before opening your account.
Can I Open a Bank Account If I’m Under 18?
Different banks have a different minimum age for opening a bank account, but even those under 18 years old can be eligible for a bank account. Accounts targeted for children and young adults can include special features such as overdraft protection and low or no-minimum deposits.
Parents also have the option of opening a joint or custodial deposit account for their child, using the parent as the primary account holder.
What Is a Joint Account?
A joint checking or savings account is one where two people are listed as accountholders on the account. Usually, there will be one person who is listed as the primary account holder and has the primary banking relationship. With a joint account, both people have equal access to the money that is in the account, so individuals should only open one if there is complete trust in the other person, such as in a spousal relationship.
To open a joint account, both parties will need to provide the bank with the required personal and financial information, including Social Security numbers, addresses, dates of birth, etc.
Frequently Asked Questions
Different banks and credit unions have different minimum balance requirements to open a bank account. Some banks allow you to open a bank account without any money upfront, as long as you make an initial deposit within 30-60 days.
If a bank has a monthly minimum requirement, make sure to fulfill that minimum to avoid paying a monthly service fee or any overdraft fees.
Once the bank account is open, you should have immediate access to cash from your online account or ATM locations. You have the ability to transfer funds or open up a certificate of deposit.
Most banks offer the ability to open a bank account entirely online without having to visit a branch. You will need to visit the bank’s website, go through the application process and provide information that confirms your identity.
1. Review Transactions Regularly: Monitor your transactions and daily balances on a regular basis. This can help you be more aware of your overall spending habits and help to avoid incurring a fee for having insufficient funds.
2. Create a Budget: Having a budget can help to keep excess spending in check. Create a budget that accounts for food, housing, entertainment, savings, retirement, etc. and try to stick to that budget.
3. Set an Emergency Fund: Setting up an emergency fund is one way to be prepared for financial emergencies. Set aside money every month for the emergency fund so you have a cushion to fall back on when unexpected but necessary expenses arise.