Banking 101: What Do You Need to Open a Bank Account?
Many of us are interested in having a place to keep our money. A bank or credit union can offer the opportunity for you to earn interest on your deposits, as well as keep your money safe. If the financial institution is properly insured, you won’t have to worry about losing your money to a bank or credit union failure. However, before you can open a bank account there are a few steps you have to take, and a few pieces of information you’ll have to provide.
Opening a Personal Account
If you want to open an account for personal use, you will need some identification. If you go in person, you will need to show your driver’s license, and the bank may make a photocopy of it, depending on the bank’s policy. Your name, birthday, Social Security number and address will also be asked for. If you open an account in person, you might need to show various pieces of identification to prove your identity, and your residency.
If you open a personal account online, you usually just have type the information into a text box and submit it electronically. Your electronic signature is legal, so there is no need for you to send something in, unless the bank requires it. Some online bank accounts require that you print out a signature document and mail it in. In some cases, you might have to mail it in with copies of identification. However, this isn’t required by all online bank accounts. So, if you are concerned about speed and convenience, you can look for an online account that will let you open an account instantly – without the need to mail anything in.
When you open a personal checking or savings account, you will also need to have money to put into an account. Find out if the bank account has a minimum opening deposit requirement. You can usually bring in a check from another bank, or you can use cash. You might also be able to use an electronic transfer. When opening an account online, you will need the routing number of your bank, and your account number for the electronic transfer. This way, you will be able to have money transferred into your account for your use. Find out how long you have to wait before the funds are available. Some banks won’t allow you to access the money for up to 10 days or more when you initially make a transfer, especially some online banks. Make sure you understand the availability of funds.
Opening a Business Account
Opening a business account requires a little more documentation. In fact, you will have to provide documents to open an online bank account. Most banks will allow you to scan and email copies of the documents, or fax them, if you don’t want to take the time to send them via snail mail. In addition to the identification information needed to open a personal account, you will also need to provide your EIN (if you have one – and you should unless you are a sole proprietorship). You should also provide a copy of your business license or your certificate of incorporation. For a sole proprietorship, you might not have the same documents, so some banks will accept some other proof of existence. Find out ahead of time what constitutes proof of existence so that you aren’t surprised.
Some banks and credit unions might also require you to bring the Memorandum and Articles of Association. When I opened my business checking account, I had to bring the Articles of Organization for my LLC. You might also need to provide your DBA (Doing Business As) or FBN (Fictitious Business Name) if you want to accept electronic fund transfers and checks in your business name. You will need register the name, and file it, before it can be used.
It is vital that you know beforehand what is needed in order to open a business account at your financial institution of choice so that you are adequately prepared. I also had to answer a few additional questions, and confirm that I wasn’t going to use the account to support terrorist activities.
Credit Checks and ChexSystems Checks
You should also realize that there is a possibility that you will have to agree to some sort of credit check or other check before you are approved for an account. Some banks are willing to let anyone open an account, as long as the regulations and laws relating your identification are satisfied. Other banks and credit unions, though, don’t make the process so simple. With credit unions, of course, you have to meet the field of membership requirements.
Some financial institutions also require credit checks. You might find that if you have a questionable credit history, the financial institution may not be so accommodating when it comes to letting you open an account. Additionally, there are some banks that use ChexSystems as a way to screen potential customers. ChexSystems is a reporting system that some banks use. If you bounce a check, or overdraw your account it is reported. Then, when another bank looks into your record, it can see whether or not you have a past history of overdrawing your account. If you are in the system, you might be denied a bank account – and ChexSystems keeps the records for five years.
Many people find out ahead of time whether or not the bank in question runs a credit check, or uses ChexSystems. You can also find out if the financial institution you currently use reports to ChexSystems. It can be helpful information to know. (It is also worth noting that you are entitled to a free copy of your ChexSystems report once every 12 months.) You can ask your financial institution about the information they report, and whether or not ChexSystems is part of the equation.
Even though opening an account is fairly straightforward, you should still have an idea of what information you need to open the account. Doing it online might be a little easier, since you will have access to the information that you need in your home, and can usually get a hold of it. If you go to open an account in person, call the financial institution ahead of time so that you are sure to know exactly what you need.