How Online Checking Accounts Work

How to Open an Online Checking Account

One major difference with online checking accounts is that many of them will pay interest, while interest-bearing checking accounts are rarer at old-school banks [source: Todorova].The different types of online checking accounts are just as varied as the different types of checking accounts that you can get at a more traditional bank. You can find familiar account types, like free checking or business checking accounts or some more unusual account types.

One unusual account is for people with credit problems: the "prepaid card account." These accounts are basically a prepaid debit card that you can refill, but it acts like a bank account. For example, you can still set up direct deposit into your prepaid card account and even write checks [source: iBank Up]. Some banks specialize in what's known as "second chance" online checking accounts. Aimed mostly at people with bad credit or who are in the Chex System for writing too many bad checks, these usually have more fees attached but can help customers rebuild credit [source: Zhen]. If you're in better financial shape, you might look at rewards checking accounts. Rewards accounts offer even higher interest rates than other interest-bearing online checking accounts, but you usually have to meet more criteria to qualify, like a certain number of debit card purchases each month [source: Ken].

Different banks have different procedures for opening an online account, but if you're going to be doing your banking online, there are a few things that are pretty standard. Web site. You'll need to provide information like your full name, date of birth, social security number, and a form of identification. Many online applications use your driver's license number instead of the real deal. You'll also need a valid email address, since this is most likely how the bank will communicate with you. If you already have account through a brick and mortar bank, you simply register for online access to your bank account, and provide a username and password.

If your new account is strictly online, you'll need to deposit money to open the account, either through a transfer from your current bank, with a check card, or via a check or money order that you mail to the bank. The amount of that initial deposit varies, depending on the bank you choose and the sort of account you open.

Online checking accounts offer a few features that aren't always available with a typical checking account. We'll talk about what perks to expect from online banking on the next page.