How to Open a Bank Account

Image Gallery: Banking This little piggy might be cute, but he's a poor substitute for the security of a bank account. See more pictures of banking.

Fires, floods, hurricanes, burglars, you name it -- for cash stashed in a shoebox in your closet, potential threats lurk everywhere. You need a safer place to hide your hoard. Your neighborhood bank is a great place to start.

Banks offer a safe haven for your money. They've got fireproof vaults, they're nearly impossible to break into and perhaps best of all, at least in the United States, their assets are guaranteed by the Federal Deposit Insurance Company (FDIC) for amounts up to $250,000. Banks offer your cash security and stability that no shoebox can.


You can open accounts for individuals, groups and businesses. There are many types of bank accounts available. The services and features associated with each vary from bank to bank. Regardless of the fancy names you might see associated with different accounts, there are only two fundamental functions of these accounts -- credit or debit.

A debit account means the bank owes the customer the amount listed in the account. A credit balance means the customer owes the bank that amount, in effect meaning that you're taking a loan from the bank.

Account types are often named according to their primary function, for example, many are checking or savings accounts. There are five broad types of accounts -- checking, savings, interest-bearing checking, money market deposit and certificate of deposit.

The same type of account may be very different from bank to bank. Each bank offers different incentives and services with their accounts, so it pays to shop around and ask a lot of questions before you make a final decision.

The process of opening a bank account is fairly straightforward, but there are some interesting and useful details that can make a big difference in the level of value and service you receive with your account. Keep reading to see how to find the best kind of account for your needs and learn more about fees and penalties that can have a big affect on your long-term savings.

Your local bank can offer you a variety of different accounts to suit specific banking needs and keep you happy.
Your local bank can offer you a variety of different accounts to suit specific banking needs and keep you happy.
Comstock Images/Comstock/Thinkstock

A basic savings account is probably the simplest and most important type of bank account. A savings account safeguards your money and easily lets you deposit and withdraw funds. You can also collect a modest amount of interest.

Savings accounts have several important purposes. They safeguard the money you deposit so you don't have to hide cash in a shoebox under your bed. They also provide psychological motivation to save money.

However, there are limitations and drawbacks to some savings accounts. Although a savings account does draw interest, that rate is usually lower than you'd receive with a CD (certificate of deposit) or MMDA (money market deposit account). Also, a savings account won't let you write checks to make any sort of payment, and if your account balance falls below a specified minimum, some banks will charge you a fee.

With a checking account, though, you can write checks to pay for goods and services. A so-called basic checking account has very few extra features and if it pays interest on your balance, it's generally not as much as a savings account would.

Specific rules and restrictions often apply to checking accounts. For example, you may be limited to a certain number of transactions per month. Other checking accounts may require a minimum number of debit card transactions.

If you select an MMDA over a traditional checking or savings account, the bank invests your money in a short-term debt account, such as CDs or treasury bills. An MMDA lets you write a small number of checks per month but often charges you a fee if your balance falls below a specified minimum. MMDAs usually offer better interest rates than other account types, but banks raise the initial minimum balance you must deposit before you can even open an MMDA.

Alternately, you might choose to open a CD account. CDs are also known as time deposits because when you deposit your money into a CD, you agree to leave it there for a predetermined amount of time. The time frame might range anywhere from a few months to several years.

One downside to CDs is that you cannot access the money after you deposit it. The upside is that the bank offers you a higher interest rate on your balance. The longer the duration on a particular CD, the higher the interest rate you should receive in return.

If you do remove your money (called an early withdrawal) before the maturity date you'll have to pay heavy penalties. There's no point in opting for a CD if there's any chance you'll need the money soon.

Bankers appear more buttoned down than workers in other jobs, but handling your money isn't a trivial task. They want to look professional to let you know they're taking your money seriously.
Bankers appear more buttoned down than workers in other jobs, but handling your money isn't a trivial task. They want to look professional to let you know they're taking your money seriously.
Jupiterimages/Creatas Images/Thinkstock

The banking industry is sometimes painted as a staid, drab industry, in part because banks want to exude calm stability and not the excited frenzy that other services might seek to provoke. Banking professionals may seem a little intimidating for someone who has never set up an account before, but rest assured, they want to help you get started. When you walk into your local branch to start an account, you'll need to speak to a banker who can go through your options with you to help you find the right account to suit your needs.

After you discuss what type of account you want, one of the first things you'll want to find out is whether or not there are fees associated with the account you're interested in. Many banks offer free checking accounts, but they're usually very simple accounts. If you need a lot of features and benefits, you may end up paying a few dollars extra per month for the service. You may also need to keep a minimum balance in the account to get the extra bells and whistles.

What kinds of features are important to you? For instance, will you need a safety deposit box? Are you going to use printed checks? If so, you'll want to know how much these features are going to cost you. How about online access and bill pay? What about cashier's checks? Are they really worth the extra fee or having to keep a minimum balance?

Some banks place a restriction on the number of checks you can write per month before incurring a fee. Ask your local banker to find out what that limit is. You'll also want to know whether or not you're going to incur fees for using ATMs, especially out-of-network machines.

If you're leaning toward an interest-bearing account, you should find out how much interest the account will pay. This is especially important if you're shopping around, because this information will help you compare different banks more easily. If it's important to you to have paper copies of your cancelled checks returned, rather than scanned and uploaded online, you should determine whether that's an option, or if you have to pay extra for that benefit.

As you search for the best bank, be sure to take your time, ask a lot of questions and make sure the employees you speak with know you're shopping around, as they'll be more likely to add extra enticements to land your business.

Opening a bank account usually takes just a few minutes. In most cases, a bank employee will even do most of the paperwork for you.
Opening a bank account usually takes just a few minutes. In most cases, a bank employee will even do most of the paperwork for you.
Comstock Images/Comstock/Thinkstock

Opening an account begins with a visit to your local bank branch. Most banks require you to deposit a minimum amount in order open an account. That minimum varies depending on the account type. A basic checking account might require an initial deposit of only $25. A checking account with more features and interest might require at least $100 initially. In addition to that cash, you'll need photo identification.

Banks go out of the way to make the opening of new accounts as easy and painless as possible. Usually it takes just a few minutes to complete the paperwork, and an employee will do this for you as you supply the necessary personal information.

If you open a checking account, the bank may provide you with a few starter checks, but you'll receive a full book of personalized checks and a debit card later in the mail. The bank will also give you information about fees regarding your account.

Other types of accounts usually take a little more time and effort to open. To open a joint account with a spouse or business partner, you need the same information as when you open an individual account. Both parties must be present to provide their signatures.

The process for opening a business account requires extra documentation. In the United States, you may need your previous year's tax forms, business employer identification number (EIN) and the owner's Social Security number.

If you want a credit card account, or a loan, you'll first have to meet certain requirements that prove you're a trustworthy borrower. If you have little or no credit, you may need to start by opening a deposit account, which is good for your credit score because it's seen as a sign of financial stability.

Building good credit is one excellent reason to open an account when you're very young. All banks have age restrictions of some sort for their accounts, but most will work with young people and allow them to open a deposit account. Every bank is different, so you'll have to call around to learn the restrictions on the minimum age for certain accounts.

As you call, you'll likely encounter a wide range of options. Many banks have special types of savings and checking accounts designed just for students and teens. If these options aren't suitable, and you're not old enough to have your own account, you can open a joint account with a parent or responsible adult.

No matter what kind of account you're able to open, you may want to investigate your online options. Many banks will let you apply for various accounts on their Web sites, and in some cases, they'll approve your application and let you deposit funds on the same business day.

For more information about banks and other financial topics, vault over to the next page.

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  • Marquand, Barbara. "Five Changes You'll See in Checking Accounts in 2010." (July 1, 2010)
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  • Weston, Liz Pulliam. "9 Ways to Build Credit from Scratch." MSN Money. May 9, 2008. (July 1, 2010)