Rebecca Lake is a certified educator in personal finance (CEPF) and a banking expert. She's been writing about personal finance since 2014, and her work has appeared in numerous publications online. Beyond banking, her expertise covers credit and deb.
Rebecca Lake Banking ExpertRebecca Lake is a certified educator in personal finance (CEPF) and a banking expert. She's been writing about personal finance since 2014, and her work has appeared in numerous publications online. Beyond banking, her expertise covers credit and deb.
Written By Rebecca Lake Banking ExpertRebecca Lake is a certified educator in personal finance (CEPF) and a banking expert. She's been writing about personal finance since 2014, and her work has appeared in numerous publications online. Beyond banking, her expertise covers credit and deb.
Rebecca Lake Banking ExpertRebecca Lake is a certified educator in personal finance (CEPF) and a banking expert. She's been writing about personal finance since 2014, and her work has appeared in numerous publications online. Beyond banking, her expertise covers credit and deb.
Banking Expert Michael Benninger Managing EditorWith more than 15 years of experience crafting content about all aspects of personal finance, Michael Benninger knows how to identify smart moves for your money. His work has been published by Intuit, Insider and the Los Angeles Times, and he's been.
Michael Benninger Managing EditorWith more than 15 years of experience crafting content about all aspects of personal finance, Michael Benninger knows how to identify smart moves for your money. His work has been published by Intuit, Insider and the Los Angeles Times, and he's been.
Michael Benninger Managing EditorWith more than 15 years of experience crafting content about all aspects of personal finance, Michael Benninger knows how to identify smart moves for your money. His work has been published by Intuit, Insider and the Los Angeles Times, and he's been.
Michael Benninger Managing EditorWith more than 15 years of experience crafting content about all aspects of personal finance, Michael Benninger knows how to identify smart moves for your money. His work has been published by Intuit, Insider and the Los Angeles Times, and he's been.
Updated: Apr 25, 2024, 11:09am
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A bank account can be convenient if you need a place to deposit paychecks or a way to pay bills and cover everyday spending. But not everyone has a bank account: Federal Reserve data shows about one-fifth of U.S. households are either underbanked, meaning they rely on nontraditional banking options, or unbanked, meaning they have no bank account at all.
Opening a bank account has its benefits, and the process isn’t as complicated as it may seem. Whether you’re preparing to open your first bank account or you’re ready to switch to a new bank, it helps to know what to expect.
Every bank is different when it comes to opening new accounts but, typically, you’ll need the following to open a bank account:
Banks can also require you to complete an application for a new account. This means providing additional information such as your physical address, phone number and email address.
If you’re in the market for a new bank account, you’re likely considering traditional banks, online banks and credit unions. Though all three offer a range of products and services, it’s important to choose the option that fulfills your specific financial needs.
Traditional brick-and-mortar banks typically offer a range of account types, including personal and business checking and savings accounts. The main advantage traditional banks offer is local branch access. If you need to deposit cash, you can do so at a drive-through or in person at a teller window. Under the umbrella of traditional banking, you’ll find big banks as well as smaller, regional or community banks.
Online banks and banking services offer many of the same account options you’d find at traditional banks. The difference is that you’re banking through a website or app versus accessing your money at a physical branch. Online banks typically charge fewer fees and offer better interest rates on deposit accounts than on traditional banks. Neobanks, fintech firms that offer banking services, are included in the online bank category.
A credit union is a financial institution in which each account holder is a member. Typically, you need to meet certain requirements to join a credit union. Some cater exclusively to military members and their families, while others target state employees or people who live in certain geographic regions. Other credit unions are nationally available. Credit unions often charge fewer fees, and they may offer more favorable interest rates for savers and borrowers.
If you like having access to cash, a traditional bank with a wide ATM network might make sense. If your primary goal is to earn interest on your money, online banks and credit unions may offer better rates than traditional banks.
When deciding where to open a bank account, consider your lifestyle and preferred money management style first. Then, think about what you need from a bank and a bank account. Here are some questions you’ll want to ask as you compare traditional banks, online banks and credit unions:
Reading online reviews of the best banks can help you narrow down the list of places where you might like to open an account. You also can ask friends and family what they like—or don’t like—about their current banks.
If you like having the option to bank in person but also want the competitive rates and low fees offered by online banks, you might not have to choose between the two. Hybrid banks like Capital One 360 and Synchrony Bank operate like online banks while still offering branch locations, although their footprint and in-person services may be more limited.
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Once you decide where to bank, it’s time to choose the type of account to open. Again, the answer depends on your specific banking needs.
Here are the most common types of bank accounts:
Checking accounts, savings accounts and money market accounts are all deposit accounts. But they work in different ways and don’t always share the same features and benefits.
A checking account, for example, is designed to hold the money you’ll use to pay bills or cover everyday expenses with a linked debit card or by writing checks. Some checking accounts earn interest or offer rewards, but that’s usually not the main purpose of having a checking account.
Savings accounts and money market accounts can also earn interest, and both are designed to hold the money you don’t plan to spend right away. You may use a savings account for your emergency fund, or you could save money toward a down payment on a home in a money market account.
Some money market accounts offer debit cards or check-writing capabilities. Both money market accounts and savings accounts have been subject to federal rules limiting the number of withdrawals you can make each month. (In response to the Covid-19 pandemic, the Federal Reserve lifted the restrictions in 2020, but many banks still impose limits.) Checking accounts are not subject to these limitations, although the bank or credit union may set limits on withdrawals.
Checking vs. Savings. vs. Money Market Account
Designed for Paying bills, making purchases, transferring money Saving for short- or long-term goals Saving, with the option to spend via debit card or check Earns interest? The majority do not Typically, yes Typically, yes Debit card/check access Typically, yes Yes, depending on the financial institution Limited withdrawals Daily ATM withdrawal or purchase limits may apply Yes, banks and credit unions may limit you to 6 withdrawals per month Yes, banks and credit unions may limit you to 6 withdrawals per month See More See LessCD accounts are one more type of bank account you may open. A CD lets you save money and earn a guaranteed rate of return. These are time deposits, which means you agree to save for a set period of time. Your money earns interest and, once the time is up and the CD matures, you can withdraw your original savings deposit along with the earned interest. Just be aware that taking money out of a CD ahead of its maturity date could trigger an early withdrawal penalty.
Opening a bank account is something you can do relatively quickly, either online or at a bank or credit union branch.
Generally, you can expect the bank to ask you to fill out an application for a new account—that’s usually the first step. From there, you’ll need to verify your identity and provide any other information the bank asks for, such as your address or phone number.
If the bank requires a minimum deposit, you’ll have to make that deposit when you open your new account. If you’re opening an account online or making your first deposit using an ACH transfer from another bank, you’d need to give the new bank your routing number and account number to complete the transfer.
Some banks require further verification before you can start using your new account if you’re linking it to an account at another financial institution. For example, the bank may make one or two small test deposits into your new account. You will have to verify these amounts to activate your account, which can take a day or two.
Also, keep in mind that there may be a holding period on your initial deposit. For example, if you’re making your first deposit by check, it could take a few days for the check to clear. You may also be waiting several days for your debit card or first order of checks to arrive.
Opening a bank account is generally a fast process that can take anywhere from a few minutes to a few days, depending on the financial institution and the type of account. Most banks can open accounts on the same day when you apply in person.
Opening a bank account online can take minutes, but you’ll have to wait five to seven business days for a physical debit card if you plan to use the account for purchases at retailers that don’t support digital wallets.
When opening a new bank account you’ll need to consider how much the bank requires you to deposit initially, generally referred to as a minimum opening deposit. This amount can vary by bank and credit union.
Some banks, for example, may let you open a bank account with no minimum deposit required or a minimum deposit as low as $1. Others may expect you to have amounts ranging into the thousands of dollars to open a new account.
If a bank or credit union requires a minimum deposit, there are a few ways you can make it. For instance, you can use cash or a check that’s written out to you to make your initial deposit. If you already have a bank account, you also can use an ACH transfer to move money from it to your new account electronically.
Typically, you need to be at least 18 years old to open a bank account on your own.
Some banks and credit unions offer teen checking and student checking options for kids under 18. These usually require a parent or guardian’s signature to open.
Financial institutions may also offer savings accounts for kids, with parents acting as the custodian until the child turns 18. Once the child reaches their 18th birthday, they automatically assume ownership of the account.
A joint bank account has more than one owner. You may open a bank account with your spouse if you’re married, or you may set up a joint checking account with an aging parent if you’re helping them manage their finances.
Joint accounts typically belong to both account owners equally. This means you both have access to funds for making purchases or withdrawals and you can both add to the account. Normally, both people have to be 18 or older to open a joint account. Your financial institution may, however, offer joint accounts for parents to share with minor children.
If you already have an existing bank account and you’re moving to a new bank, you may need to close the old account. There are a few important things to do here to make sure the transition is a smooth one, including:
You also should consider what needs to be done with any accounts you plan to leave open at your previous bank.
For example, if you have CD accounts there, think about what you want to do with them once they mature. You could roll them over into new CDs at the same bank, but if your new bank offers a higher annual percentage yield (APY), you may be better off withdrawing your savings and starting fresh.
It’s also a good idea to get a written statement from the old bank specifying that your account is closed. This can help you avoid situations where the bank may reactivate your old account, triggering fees.
Opening a bank account is relatively straightforward once you decide where to bank and which type of account you want to open. Start by assessing your current financial situation, then choose the option that best matches up with your needs.
Forbes Advisor Banking Expert Rebecca Lake and Writer Theresa Stevens contributed to this article.
