CD Deals Summary
Fed Holds Rates Steady For Second Straight Meeting - Strategies for Savers
New November Savings Bonds Rates - I Bond Fixed Rate Rises to 1.30%
Fed Meeting Preview and Deposit Rate Forecast - Oct 25, 2023Banking 101: What Do You Need to Open a Bank Account?
We all need a safe place to keep our money. A bank or credit union can offer the opportunity for you to keep your money safe while also earning interest on your deposits. If the financial institution is federally insured by the FDIC or NCUA, you won’t have to worry about losing your money (up to applicable limits) to a bank or credit union failure. However, before you can open a bank account, there are a few steps you must take, and a few pieces of information you’ll have to provide.
Opening a Personal Bank 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. There is typically a minimum opening deposit required, generally around $100, which you will need to bring with you in the form of cash, a check from another institution, or other payment forms that may vary by institution.
As long as there isn’t a line, the entire process usually takes less than 30 minutes. If you are opening a checking account, most banks will give you temporary checks that day until permanent ones can be ordered. It’s normal to have to wait for your ATM card to arrive in the mail a few days later, but some banks can produce them on the spot.
Special Considerations for Credit Unions
The requirements for opening an account at a credit union are generally the same as with a bank, with one exception. Unlike banks, credit unions restrict membership to certain groups of people they serve. This is called their field of membership. To join a credit union, you will need to prove that you meet these requirements. The means of doing so will vary based on the credit union’s field of membership. If it is an employer based credit union, you will likely need to show employee identification or a recent pay stub. If it is a community credit union, then a recent bill with proof of address will generally suffice. Most credit unions provide multiple means for you to prove that you or a family member are eligible to join.
Opening an Account Online
If you open an account online, you usually just have type the information into a form 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. A few online bank accounts require that you print out a signature document and mail it in with copies of identification, but this is rare. For security purposes, you will typically need to verify your email address and possibly your phone number by responding to messages sent to each.
When opening an account online, you have a few options on how to fund it. If you already have an existing bank account, the easiest way to transfer funds is with an ACH transfer. You will need to provide the online bank with the routing number and account number for your existing account along with the amount you wish to transfer, and they will handle it from there. Alternatively, you can write a check and mail it in, but this will, of course, take longer. If you do not already have another bank account, you can wait for the ATM card for your online account to arrive and deposit cash at the ATM.
Credit Checks and ChexSystems Checks
Some financial institutions 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.
You are entitled to a free copy of your ChexSystems report once per year.
Many people who are concerned about these possibilities can 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 ahold 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.
Opening a Business Account
Opening a business account requires a little more documentation. In fact, you will have to provide documents to open even 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 to 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.
Please log in to comment on this post.
Never bounced a check in my life. Only thing I can think of is too many bank accounts.
And the funny thing is, I had an account with that bank for many years with no issues whatsoever.
And its NOT a rewards checking account.
Tariffs and rules must be fully studied and understood to ensure proper and efficient account opening. Otherwise, you will have difficulties as I could have. But also thanks to your article is very useful.
Good luck.