How to open a bank account online

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Opening an online bank account is generally safe and uncomplicated. At times, the process is quite quick. In fact, some financial institutions promote your ability to sign up for a new bank account online in five minutes or less, and it’s getting faster every year.

Online banks are increasingly competing for customers, forcing them to innovate and reduce the number of steps it takes for you to open an account. Of course, not every bank will have a streamlined process. Banks are legally required to verify your identity, which can take time, and many institutions are still refining their online sign-up portal experience.

If you’re thinking about opening an online bank account, here’s what to expect, what you’ll need, what to watch out for and why you may want to consider one of these accounts.

How to open a bank account online

Thanks to advances in technology, it’s easier than ever before to sign up for a bank account online.

After you’ve decided on a bank, you can start the online application process by visiting the institution’s website or, in some cases, by using its mobile app. It should be readily apparent where to begin. Most banks will have a button with some variation of the language “apply now” or “open a new account.” Though it’s different from one institution to the next, you will have to complete a few steps to open an account.

First, you’ll need to select the type of account you would like to open. Options vary, but checking accounts, savings accounts and money market accounts are fairly standard. If you’re a college student, you can also choose specific checking accounts designed for you.

Next, you’ll be asked for personal information, including your Social Security or Tax Identification Number, address, legal name and birth date. You may also need to submit documents like a valid driver’s license and a bill with your name and address on it. Some banks let you submit your personal information and documentation through their secure online networks. Occasionally, however, you’ll need to fax or email documents to the institution to prove your identity.

Finally, you’ll fund the account with an initial deposit. Some banks require a minimum funding amount, but some do not. Overall, funding an online account is pretty straightforward and banks provide a number of options for doing so. For example, you may be able to make an initial deposit by linking an existing bank account, snapping a picture of a check or even using PayPal. If you’re applying online for an account at a brick-and-mortar bank, you can also visit a branch to deposit cash. Keep in mind that funds might take a few days to process, but you’ll be able to access your money and manage your account afterward.

If you have any questions during the process, customer service agents for online banks are available by phone or online chat.

What you’ll need

Banks require some documents and information to verify your identity and fund your account. Here’s what you’ll need:

  • Social Security Number, Tax ID Number or other identification;
  • Valid U.S. or foreign government-issued driver’s license or ID with your picture; and
  • Routing and account numbers or debit card information for another bank account you have to make an initial deposit.

Obstacles you might encounter when opening an account

Despite how opening a bank account online has gotten easier over the years, there are still some challenges that come with the process.

For some, the most obvious hurdle is there is no in-person customer service. Online banks can make up for this gap with 24/7 customer service availability via the phone and online chatbots, but it can still be a drawback for those who want to visit a branch and talk to someone face-to-face.

There are also more objective difficulties to overcome, like issues with vetting identities. For example, online banks might try to verify your identity with a question like, “What street did you live on when you took out an auto loan?” One problem is that you may not remember. Missing the answer to such a question could cause the bank to review your application manually, which lengthens the sign-up process.

Life changes can also cause hiccups. If you apply for an account soon after moving, for example, and have trouble providing proof of address, the bank might be hesitant to give you an account. Or, it may allow you to open an account but with restrictions, such as requiring you to carry a minimum balance for a specific amount of time.

Reasons why should you open an online bank account

The popularity of online banks is increasing, and households are more comfortable using an online-only account. Here are a few reasons why you should open an online bank account:

  • Convenience: Thanks to advancements in technology, a streamlined sign-up process can make opening an account online very user-friendly. Not only can you skip visiting a branch, you can bank from anywhere, so there’s no need to switch banks if you move.
  • Higher interest rates: Online banks, in particular, tend to offer higher yields. Since they don’t have the overhead associated with brick-and-mortar institutions, they typically pass along those savings to their customers. Compare the highest savings account rates here.
  • Lower fees: The best online banks charge low fees, if they charge any at all. That means you can skip things like monthly maintenance fees or minimum balance fees.
  • Safety: Checking, savings, money market accounts and certificates of deposit offered through banks are insured by the FDIC (Federal Deposit Insurance Corp.) up to $250,000.

Bottom line

High interest rates, low fees, safety and convenience make online bank accounts worth considering. Plus, the sign-up process is quick and easy if all goes as intended.

Before you consider signing up for an online bank account, make sure to shop around. Find a checking account or savings account with a competitive rate. And confirm the bank offers the other features you need and want, whether it’s a well-rated mobile app, a large ATM network or automatic savings features.

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