If you're planning on opening up a new bank account, there are a few things you should know. You can open a checking or savings account in person at your local branch, or some banks will give you the option of opening an account online.
Once you've set up your account, banks like Chase, TD, and Capital One have mobile applications where you can check your balance, transfer money, and even check your credit score.
Whether in person or online, here's how to make sure you're prepared before opening up an account.
When you're opening an account and deciding which banking institution to go with, there are a few options you can choose from:
● Traditional banks offer financial products and services to their customers through a network of brick-and-mortar branches.
● Online banks are similar to traditional banks but with few or no branches. Online banks often have lower account fees and higher interest rates than their traditional bank counterparts.
● Credit unions offer banking products to a specific group of people within a community. Members are required to meet certain criteria, which are often based on factors such as where they live or work and what organizations they're affiliated with.
- A valid government-issued photo ID
- Your Social Security number
- Proof of address
- Phone number
- Sometimes an initial deposit, which can range from $0-$10,000, depending on the type of account
"Some banks will request a copy of your driver's license in order to verify your identity," says Dana Marineau, Credit Karma VP and financial advocate.
"Many major financial institutions generally require your Social Security number, name, current residence, and previous bank account information for the first deposit. Some bank accounts may also have age restrictions and require a guardian to open the account," she adds.
Before you open up a new bank account, think about what its purpose is. Basic checking accounts are useful for managing everyday transactions. They're also secure and offer easy access to your money, and they let you use a debit card or personal checks to make purchases or pay bills.
"One main benefit of a checking account is bill pay, which allows you to make electronic payments. Many banks can help you set up automatic bill pay, which protects you from late payments and additional fees," says Marineau. "If you do set up automatic payments, make sure your checking account always has enough cash in it to avoid insufficient fund fees."
To save money that you're not going to access on a daily basis, savings accounts are smart. These often have an added layer of security that can promote saving by making it more difficult to access your money at a moment's notice.
"Savings accounts are important when building an emergency fund or saving for specific goals," says Marineau. "Interest paid on savings accounts is oftentimes higher than that paid on checking accounts, [so] when researching options, consider opening a high-yield savings account, as this will give you a higher return on your money."
While a traditional savings account has an average rate of 0.09%, according to the Federal Deposit Insurance Corporation (FDIC), rates on high-yield accounts are up to 1.95% as of January 2020, according to Bankrate.
Before you pick an account, you'll want to make sure it's helping you to meet your financial goals. If you're not sure where to start, Marineau suggests asking yourself these four questions:
● How much money do you plan to keep in your account? Some institutions may charge a monthly fee if you don't keep a minimum balance.
● Does your employer offer direct deposits? Some banks will waive maintenance fees if you're enrolled in direct deposit.
● Will you need overdraft protection? It's wise to avoid spending more than you have in your account, since you can incur hefty fees if your account is overdrawn. Some financial institutions offer overdraft protection, though, which means that your account will not go below zero even if you lack funds for an expense to clear. They may charge a fee for this service.
● What fees come with the account? Statement fees, stop payment fees, overdraft fees, returned check fees, and more can set you back, so make sure you're informed of all potential charges to your account.
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