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How to open a bank account

There are some things you’re expected to figure out on your own, but it can be intimidating to do so. Filing your taxes, learning to cook, and banking are all regular tasks every adult has to manage.

But if your parents never opened a bank account for you, you might feel lost and confused. What do I need to open a bank account? What kind of account do I choose? And which bank is best?

Wipe that sweat off your brow; we have you covered.

Here is a rundown of everything you need to know on how to open a bank account.

Documents you need to open an account

So, let’s start by answering the big question—what do I need to open a bank account?

Across all banks, the documents you need to open an account are relatively universal. Essentially, the bank needs to verify your identity to ensure you’re who you say you are before opening an account in your name.

You’ll need to have these items on hand when opening a bank account:

  • A current, valid government-issued photo ID. This could be a driver’s license, passport, state ID, or military ID.

  • Basic identifying information. You’ll be asked for information that helps to confirm your identity, including your birthdate, phone number, and Social Security number (SSN) or Individual Taxpayer Identification Number (ITIN).

  • An initial small deposit. Some banks require you to make a small initial deposit into the account. For many banks, the amount required is $25, but this can vary and be as much as $100. You can pay this by cash, credit, debit, or a prepaid card, or make a transfer from another financial institution.

  • Secondary ID. Some banks will ask for a second piece of identification, but this doesn’t have to include a photo. This second piece of identification could be an employment card or a credit card in your name.

  • Proof of physical street address. Some financial institutions want to see proof of address. This can usually be given by showing a recent utility bill.

If you’re opening a joint bank account, you’ll need to come with or provide all the same identification information listed above for the second account owner.

If you’re not 18 and are opening an account as a co-owner, you’ll need to come with your parent or legal guardian, as they’ll need to sign legal documents to open the account.

How to open a bank account

Are you one of those people who look up the parking situation before driving somewhere new? You know, the type of person who just wants to know what's in store for them before they go somewhere.

We completely get that feeling. So, here's a complete step-by-step overview of what opening a bank account will look like. Now you'll know exactly what to expect:

  1. Gather all the documents you need. If you have a specific bank in mind, it might be a good idea to call them and ask what's required to make sure you don't miss anything.

  2. You'll be asked to choose the type of account you want to open (we cover that below).

  3. If you're approved on the spot, your card will likely be mailed to you. If your application requires some processing time, you'll be notified once it's approved or denied by email or phone.

  4. You may need to immediately make a small deposit to activate the account.

And just like that, you'll have successfully opened your bank account.

Can I open a bank account online?

Now at this point, you might be asking yourself, can't I do this online? After all, who does anything in person anymore? If we can order our food delivery without speaking to someone, order our Starbucks drink on an app to be ready ahead of time, and have groceries delivered to our front door, why can't we open a bank account online?

Good news, you sure can!

Some banks accept online applications. In many cases, the approval might take time as the bank has to verify your information. Sometimes, you'll start the application online, but the bank will ask you to come into a branch to finish the process.

Choosing the right account type

We highly recommend understanding what kind of account you want to open before you go to your bank. Sure, the bank representative can walk you through all your options, but this can often be overwhelming in the moment. Better to do your research beforehand and know exactly what you want.

You'll be asked if you want to open a checking or savings account. You should make the choice that best aligns with your financial goals.

A checking account is typically used for everyday purchases and transactions. Alternatively, as the name implies, a savings account is a place to hold your money and allow it to accumulate interest.

Checking accounts

You should choose a checking account if you're looking for an account to pay bills, make debit card purchases, and write checks. Checking accounts make your money easily accessible through a debit card, ATMs, and mobile banking.

When looking for a checking account, you should remember that they sometimes come with fees. Additionally, any money stored in a checking account doesn't earn interest.

Savings accounts

A savings account is an appropriate choice for someone looking to safely store their money without frequently accessing it. If you're building up an emergency fund or saving up for a big goal, a savings account may be a great place to hold your money and allow it to grow.

Savings accounts typically don't have any monthly fees. But know that banks don't allow you to treat a savings account like a checking account.

Ideally, you should opt for a high-yield savings account. Currently, anything offering 2% APY (Annual Percentage Yield) or higher is considered a high-yield account.

A high-yield savings account allows your money to work for you, so you can earn more interest as you save. Varo offers one of the highest savings rates in the country¹ with a high-yield savings account that offers 3.00% APY and the ability to qualify to earn up to 5.00% APY².

Of course, if you need an everyday transactional account and a place to store your money, you can open both a savings and a checking account.

Banking fees

When you open an account with a bank, you always want to make sure you understand if you're going to be charged any fees. The average American pays $7 monthly in banking fees. That is $84 per year that could be staying in your wallet rather than going to the bank.

Before signing up for an account, ask if there are any monthly fees associated with the account. Some banks advertise their accounts as "free of fees," but this only applies if you keep an absurd amount in the account, like $15,000!

Additionally, make sure you know what kind of penalties and fees your bank charges. For example, most banks charge an overdraft fee, ATM fees, an insufficient funds fee, an early closure fee, and an international transfer fee. Being aware of these penalties can help you avoid them.

Choosing the right bank for you

When it comes to choosing the right bank, we have to say fees should be a top factor when comparing choices.

There are now plenty of options for fee-free banking, so there is virtually no reason to go with a bank charging you a ridiculous monthly fee or requiring an account limit.

At Varo, we put our customers first by offering no hidden-fee banking. You can open a Varo bank account with $0 monthly maintenance fees, no required minimum account balances, and no overdraft fee (we help you spend only what you have).

Another factor you may want to take into consideration for your bank choice is accessibility. For example, choosing a local bank or credit union might mean you can't find branches when you're outside the region, or you might have to switch banks if you ever decide to move states.

That's why online banking has become popular for many people in recent years. You can sign up online, have all your banking needs met through your phone or computer, and never have to worry about visiting a physical branch again.

Lastly, find a bank that can offer you other products and services that you know you'll need in the future. If you've recently been strapped for cash, you might benefit from a bank with easy and affordable cash advance³ options.

Closing out an account

If you're opening a new account because you're unhappy with your current bank and are switching providers, you'll want to close out your old account.

Closing an account is a relatively straightforward process. You transfer all the money out and notify the bank you want to close the account.

There are a few steps you'll want to take before you shut it down:

  • If you have a direct deposit from work into the old account, provide your employer with your new account information.

  • You should transition any automatic bill payments coming from the account to your new bank account.

  • If you have recurring transfers, such as retirement contributions, coming from the account, make sure to stop them.

  • Destroy any paper checks you have for the old account.

  • Sign out of and delete your old bank's app on your phone and any other devices.

When you contact your bank to shut down your account, ask that they provide you with a written confirmation that the account has been closed. This is because if you forget a payment or bill that links to that old account, it can sometimes automatically cause an account to reactivate. If your account becomes reactivated without your knowledge, you could incur monthly fees and penalties.

Consider setting a reminder for yourself every month for the first 6 months after you've closed the account. Try signing into the account monthly to ensure it's not activated and being used.

Don’t settle for a bad bank

There are so many banking options out there now, so you don't have to settle for a bad bank. Many people have a misconception that transitioning to a new bank can be a lot of work, but it really isn't.

A good bank is like a good partner—it should leave you feeling cared for and listened to.

Varo is the first all-digital national bank in the country. We stand out from the competition simply by beating them. Varo offers no hidden-fee banking, credit cards that don’t require a hard credit check, and an incredibly high interest rate for your savings account. What more could you ask for?

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