Thursday, 29 October 2020

What Do I Need to Open a Bank Account?

What Do I Need to Open a Bank Account?
24 Feb
12:50
What do I need to open a bank account?
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When you need a place to stash your cash, a bank or credit union is a reliable choice. A bank account will give you access to important services, including checks, a debit card and online banking, as well as the opportunity to take out loans or earn interest from savings accounts. Opening a bank account grants considerable financial freedom and flexibility.

In this post, we’ll cover all the documents you need to open a bank account and help you choose the best account for your needs.

7 documents you need to open a bank account

While specific requirements may vary by financial institution, to open a bank account at most banks and credit unions, you’ll usually need to supply the following information and documentation:

  • Legal name
  • Date of birth
  • Current address and proof of residency (a utility bill, paycheck stub or lease)
  • Social Security number
  • Photo ID: (A driver’s license is preferred, but banks may accept a valid U.S. passport or military ID)
  • Proof of U.S. Citizenship or resident alien status
  • Minimum opening deposit. This is often a nominal amount. For example, Chase and US Bank ask for $25 minimum to start. Certain types of accounts require higher opening deposits, such as Bank of America’s Advantage Checking, which starts with $100.

Online banking: As an alternative to visiting a local branch, many banks also allow customers to open bank account online. With most banks’ online application, you’ll still need to provide your personal information, including your Social Security Number, address, email address and personal information from a driver’s license or other government-issued ID.

Top online bank in 2019

Institution
Minimum Balance to Earn APY
Online Savings Account from Ally Bank
Ally Bank
We'll receive a referral fee if you click here. This does not impact our rankings or recommendations

Ally Bank was named the Best Overall Bank in our study of the Best Online Banks in 2019. This is partly due to the fact that they have one of the best online savings accounts in the market.

Credit unions: To open a bank account at some credit unions, you’ll need to join and some credit unions have an annual fee. Also, credit unions also require proof that you qualify for membership. Navy Federal Credit Union, for example, requires proof that you or one of your family or household members must have ties to the armed forces, Department of Defense or National Guard.

What if you get rejected?

As part of the process of opening a new account, a bank or credit union will likely check your credit and look into past banking habits, including if you’ve bounced checks or unpaid overdrafts. If you don’t meet all the requirements to open a bank account at a traditional financial institution, there are still other options, such as alternative online companies.

Part of the bank’s approval process could include a look at your ChexSystems report. Chexsystem is consumer reporting service that tracks your banking activity and history, including if you’ve written bad checks. Some banks consult your report when deciding whether to open an account or what terms to extend. Consumers are entitled to a free copy of your report. If you’re denied an account, consider checking your ChexSystems report and make sure all the activity is valid. You have the right to dispute any information on the report.

Alternatives to online bank accounts: While they may calls itself a bank, these firms are not your usual usual brick-and-mortar institution. Companies including Chime Bank and Axos Bank, offer alternatives that could work for some customers looking to reestablish themselves. Chime does not do credit checks or use ChexSystems in their process for new accounts. Chime still requires customers to be U.S. residents with a valid Social Security Number.

Simple is another one of these alternatives that offers a really high rate.

Institution
Minimum Balance to Earn APY
Checking Account + Protected Goals Account* from Simple
Simple
We'll receive a referral fee if you click here. This does not impact our rankings or recommendations.

Second chance bank accounts: Some traditional banks, including Wells Fargo, and online banks, will offer an opportunity for customers who have stumbled in the past to reestablish good banking habits. However, the restrictions are more stringent and you might miss out on some perks. Second chance bank accounts could require higher deposits requirements and might be accompanied by higher fees. You also might not get some typical banking privileges, such as overdraft protection or a debit card. Online bank Axos offers lower fees and minimums, including $50 to open an account and monthly fees that range from about $7 to $9.

Prepaid debit cards: Another alternative to access cash without a traditional account is a prepaid debit card. Several major banks, including Chase, offer prepaid cards with a nominal monthly service fee. You can use these cards just like you would a traditional debit card and withdraw money from ATMs or pay directly with the card. Some retailers also offer prepaid debit cards, such as the Walmart MoneyCard, which can be reloaded, used at ATMs, and earns points towards an annual cash back reward. You can also buy prepaid Visa and American Express gift cards and use them to make purchases.

What type of bank account should you open?

Checking: A checking account allows you to keep your money secure in the bank and access funds for purchases and payments. Depending on the type of account you get, you’ll receive a debit card, paper checks and access to mobile and online banking. You can use these tools to withdraw cash, make payments and send funds to others.

Savings: If you’re trying to stash money away in a safe place, a savings account is a great choice. With many banks, your money will earn a small amount of interest. If you need funds, you can transfer the money to your checking account.

Money market: Like a savings account, money markets are a way to save your money and earn interest. Typically, money markets will offer higher interest rates, but may also require higher deposits. Interest rates can be variable. There can be service fees associated with these accounts, although they may be waived if you have a minimum balance. There is no fixed time for a money market.

CD: Short for certificate of deposit, this account allows you to access a favorable interest rate in exchange for a fixed term investment. CDs can be as short as one month or extend for years. Taking your money out early can come with a penalty, so make sure you’re able to tie the money up for the term of the CD to maximize the benefits. See our list of the best CDs here.

What to do after you open a bank account

Once you open a bank account, it is important to keep a close eye on all the activity. To maintain an account with good standing, it is wise to follow these steps:

  • Monitor your account regularly. By staying updated, you’ll have a better understanding of your available funds and expenses.
  • Open your mail. When your bank sends you statements, be sure to review them. Or, alternately, sign up for electronic statements.
  • Make sure you have enough money in your account to cover checks, bill payments and withdrawals.
  • Automate as much as possible by setting up direct deposits with your employer and automatic bill pay for regular expenses with set amounts, such as rent or loan payments.
  • Download your bank’s mobile app. You can use this to easily check balances, make deposits, pay bills and send money to other people.
  • To keep up-to-date with your accounts, you can enroll in text and email alerts, and push notifications. Your bank will send notices when bills have been paid, if your balance is low or there is any unusual activity.

The bottom line

A bank account is a major step towards establishing financial independence and a positive relationship with money. When you’re ready to open a bank account, pick a few banks and visit their physical branch or do research on their website. You should compare the types of accounts, fees and available services. When you find the bank that meets your needs, it can grant both financial flexibility and resources to manage your finances and grow your savings.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Alli Romano
Alli Romano |

Alli Romano is a writer at MagnifyMoney. You can email Alli here

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