What Do I Need To Open a Bank Account?

Posted by in Banking | Updated on August 23, 2022

The requirements for opening a bank account vary from country to country. If you are looking to open your account in a U.S.-based bank, the main requirements are your Social Security number and other personal details.

The other common requirement banks ask for is an initial deposit. Here is everything else you should know before visiting a bank to open an account.

How Much Money Do You Need To Open a Bank Account?

It is always better to research what a bank requires before attempting to open an account to avoid back and forth. Some banks prefer people make an initial deposit when opening a bank account, while others may not.

Online banks usually don’t follow the minimum opening balance requirement or initial deposit. However, it is still best to ask your bank about its minimum balance and initial deposit requirements as they can vary from bank to bank.

Most banks require a small initial deposit, $5 to $10, which is returned when you close the account.

Types of Bank Accounts

Next is what type of bank account you should open.

So, in the U.S., you will find four types of bank accounts, namely:

Checking Account

A checking account is a basic account anyone can open for monthly spending, receiving paychecks, paying bills, and withdrawing money when in need.

You can also request a debit card linked to your checking account. You can perform all essential banking functions like sending money and scheduling bill payments through your online checking account.

Above all, you also receive a nominal interest rate on your balance. This rate is currently 0.06% for accounts with less than a $100,000 balance.

Some banks also levy specific fees like maintenance fees, overdraft fees, or bounced check fees on checking accounts.

Savings Account

A savings account earns a slightly higher rate of interest than a checking account. The aim of every savings account, as the name suggests, is to instill the habit of saving amongst people.

For this reason, it is easier to deposit money in a savings account, but the withdrawal options are limited. You can only make a cash withdrawal or transfer funds to your linked checking account. There are also restrictions on how much money you can withdraw at once.

According to federal law, one can only make six transfers and withdrawals per statement. A savings account earns an interest rate of 0.09% APY under $100,000.

Above all, there are no extra fees charged on a savings account.

Money Market Deposit Account

You can earn a higher rate of interest than a savings account on a money market deposit account. It is a more stringent form of savings account where you can even be charged with penalties if you cross the limit of withdrawals you can make (i.e., six withdrawals per month).

The rate of interest on a money market deposit balance amount is 0.19% APY under $100,000.  

Certificate of Deposit (CD)

A certificate of deposit locks in a certain lump sum kept aside. It is a fixed deposit type that fetches a higher interest rate than a money market deposit account.

You can get a certificate of deposit for a lump sum for a fixed period. The longer the period of the CD, the more interest you’ll make.

The current certificate of deposit interest rates are as follows:

  • 0.20% APY if the CD is for three months
  • 0.38% APY if the CD is for six months
  • 0.54% APY if the CD is for 12 months
  • 1.06% APY for 60 months

How To Choose the Right Bank

With so many online and physical banks available, choosing the right bank has become crucial. Some considerations in choosing the right bank are:

Banking Fees

Look out for hidden banking charges to maintain the bank account. Such charges may include extra fees for ATM withdrawals, overdraft charges, credit card fees, and others.

Digital Presence

These days it is absolutely unnecessary to visit the bank for many banking services. It’s good to know if the bank provides online banking services and possesses a good smartphone app or not.

Minimum Monthly Balance

Check if the bank requires you to keep a minimum monthly balance, i.e., certain fixed amounts that should always be present in your bank account.

How To Open a Checking Account

Certain documents have to be submitted for opening any bank account. First, you will need to fill out an account application form. Then, you will have to sign a signature card.

You should also be able to provide:

  • A government-issued photo ID (i.e., driving license, passport, or state-issued ID). In the case of a second ID, one can use a birth certificate, Social Security card, credit card under your name, etc.
  • Date of birth
  • Physical address, i.e., your mailing or street address
  • Opening balance money that could range between $5 to $20
  • Social security number or Taxpayer Identification number

Don’t forget to ask for a debit card when opening a checking account. Asking for checks and a credit card is optional and completely dependent on your own wishes. However, having a debit card makes it easy to make quick withdrawals.

Also, make sure to ask for a direct deposit form with your information. You will need this to allow your employer to deposit your paycheck into your checking account for free.

How To Open a Savings Bank Account

Follow the same procedure as above to open a savings account.

However, don’t forget to link your savings account to your checking account (if you have one) to enable the easy transfer of funds between the two accounts, as a savings account has restrictions on the number of withdrawals you can make.

How To Open a Money Market Account

Apart from following the same procedure to open a money market account as a checking account, make sure you make a substantial initial deposit. This is to ensure that you get better interest on your bank balance.

Also, opening a money market account may require you to make an initial deposit ranging from $1 to $10,000.

How To Open a CD Account

Opening a CD account is also the same as a checking account. It is important to know the rate of interest provided by the bank on CDs before opening.

Ask your bank about the interest rate on the CD account over a different period of time. Research if the bank charges penalties if you withdraw your money before the fixed term is over.

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Conclusion

Hopefully, this article has helped you decided which type of bank account is best for you and showed how you can open one. Make sure to accompany your CD account or savings account with a checking account to make things easier for you.


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