The idea of setting up a bank account might seem daunting, That doesn’t have to be so. However, here’s everything you need to know about opening a bank account.
To get started, you need to make sure you’re eligible to open an account. You’ll need to be at least 18 years old and have a social security number in most cases.
For those between 14 and 18 years old, the account must be opened with a parent or legal guardian as the co-owner of the account.
What Kind of Bank Account Should I Open?
If you’re wondering what kind of bank account you should open, ask yourself what you’ll be using your bank account for. Here are the main types of accounts:
Checking accounts are used for everyday spending. It’s the account you’ll use to pay your bills. You can order checks to pay bills or request a debit card that’s linked to the account to use for your purchases.
Most checking accounts also offer online bill pay so you can create recurring payments or schedule bill payments. You can set up direct deposit for free so your employer can transfer your paycheck directly into your checking account on payday.
Some banks will offer a nominal interest rate on your balance.
The current national average rate for an interest checking account under $100,000 is 0.06% APY.
When you want to put some money away and earn a small amount of interest while still being able to access the funds quickly, a savings account is best. You usually can’t spend your savings money as easily as if it was a checking account.
Your options are a cash withdrawal made at the bank, a funds transfer to a linked checking account or a wire transfer. Federal law limits how much you can withdraw from your savings account to a total of six withdrawal and transfer transactions per statement.
The current national average rate for a savings account under $100,000 is 0.09% APY.
Money Market Account:
Money market accounts are similar to savings account but you’ll earn a higher interest rate.
They may have some checking-account perks like check-writing and an ATM card but you’ll still be restricted to 6 withdrawals per month or you’ll face hefty fees and penalties.
The current national average rate for a money market account under $100,000 is 0.19% APY.
Certificates of Deposit (CDs):
If you’ve saved a lump sum of cash that you won’t need in the next 6-8 months to cover a bill or emergency, a CD may pay you the best interest rate. You’ll earn more interest from a CD than a money market or savings account because you can’t touch your money for a fixed period.
The current national average rate for a certificate of deposit varies: 0.20% APY for three months, 0.38% APY for six months, 0.54% APY for 12 months and 1.06% for 60 months.
How Do I Choose the Right Bank?
There are many banks to choose from both online and in your city. When choosing a bank, you may want to compare a few to decide which one is best for you. Some things you may want to look for include:
- Banking fees: You’ll want to ask “how much is it to open a bank account?” Although you don’t have to pay a fee to open one, monthly fees like ATM withdrawal charges, maintenance fees, overdraft charges and credit card annual fees can add up.
- Consider credit unions: Credit unions provide competitive interest rates and affordable banking services because they’re not-for-profit. Most credit union banks only accept members from specific professions, colleges, federal government work, military or residents of a certain area. The National Association of Credit Unions provides a credit union finder for your area.
- Digital access: Does the bank have a good smartphone app or online services available so you can bank from anywhere, 24 hours a day?
- Location: Would you like to occasionally run into a local branch to cash a check, make a deposit or talk to someone at the branch? This may be helpful if you’re just learning about banking basics and could benefit from your local banker’s advice. If you’re thinking about an online-only bank, what ATMs can you use? How can you make deposits? How can you reach customer service if you have any questions?
- Minimum monthly balance: some banks may charge you a service fee if you don’t keep a certain amount in the account.
- Other services: Would you prefer a bank that also offers auto loans, credit cards, business loans or investment services?
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What Do You Need to Open a Bank Account?
Here’s the most common information needed to establish your new bank account.
Identification and personal information:
Some banks will request a copy of your driver’s license in order to verify your identity. Bank of America, Chase, and other major financial institutions generally require your Social Security number, name, current residence, and previous bank account information (if applicable) for the initial deposit.
Keep in mind that some bank accounts have age restrictions and may require a guardian to open the account with you if you don’t meet the requirements.
Additional applicant information:
If you are planning to open a joint account, you will likely need the same information for the additional applicant. To make the process easier, go into a branch together to establish the account.
Many banks require an initial deposit in order to open an account. You could fund your new bank account with a previous account, money order or other funding option.
Once you have established your bank account, you can set up additional features such as automatic bill pay, which may help with your budgeting needs and help you avoid extra fees.
You may also want to set up a direct deposit for recurring income, which may help you avoid fees as well. Many banks and financial institutions make the direct deposit process simple and convenient.
Keep in mind you may need to go directly through your employer to set up a direct deposit for your paycheck.
1. Do I need a business bank account if I’m a sole proprietor?
A business account isn’t legally required, but it can make it easier to monitor business spending and manage your tax affairs.
2. I’m about to move the US from overseas- can I open a US bank account before I actually arrive?
Yes, many US banks allow you to open an account from overseas. You can apply online and start depositing funds into your account, but you may need to visit your bank branch to provide additional documents when you arrive.
3. I’m opening a bank account for my child. Are there any tax implications I should be aware of?
Yes, children can be taxed on unearned income over $2,100. Learn more in our guide to taxes on kids accounts.
4. How do I know what forms of ID my bank accepts?
You should be able to find this information at the start of your bank’s online application process. Alternatively, you can call your bank directly for details.
Opening a new bank account is a relatively simple process, but it’s a good idea to have all your personal documents handy to make sure the process runs smoothly.
And to get the best bank account for your needs, compare savings accounts and checking accounts before getting started.
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