If you’re keeping your savings under the mattress or in a drawer at home, you’re not doing enough to protect what you’re earning.
According to a 2015 survey from the Federal Deposit Insurance Corp., around 9 million households in the U.S. are “unbanked,” meaning they have no bank accounts. An additional 20 million are under underbanked, meaning they have accounts but also use other methods to get money each month.
If you’re among the unbanked, learning how to open a bank account isn’t difficult. You just need to choose a bank and an account type, and make sure you have the right documents.
Choosing a bank
All banking institutions are slightly different. Some charge lots of fees, others offer great interest rates, while still others aren’t even banks.
One of the first things to consider when you open a bank account is whether you want your account with a bank or credit union.
On the surface, the two institutions seem to offer the same things. But there’s a big difference when it comes to how they are run and what they offer.
For example, credit unions are usually not-for-profit organizations. People who have accounts in a credit union are also the institution’s shareholders. Banks are privately owned and are in the business of making money.
Another thing to check when choosing a bank is the amount of fees it charges. Around 45 percent of people in the U.S. pay a fee each month just to have a bank account.
Some also have to pay fees if their balances fall below a certain figure, if account holders overdraw their account total or if they don’t use their debit card enough.
There are banks that don’t charge any fees for their services. If you can open a bank account with one of those institutions, do it.
Choosing an account
The next part of opening a bank account is deciding which type of account to open. Generally speaking, you can open either a checking account or a savings account, or both.
Savings accounts typically earn interest and are designed for stashing away money. Checking accounts usually don’t earn interest (although some do) and are designed for your everyday financial needs. Most checking accounts are connected to a debit card, which you can use to make purchases at a store or to withdraw money from an ATM.
If you’re looking for way to store your money for the long-term and gain some return over time, pick a savings account. If you want an account that’s more transaction oriented, choose checking.
What you need to open a bank account
Part of knowing how to open a bank account is knowing what documents or information you’ll need. A few common pieces of information you’ll need include:
- Identification: Your bank will want to verify you are who you say you are before it gives you an account. Most will ask you to provide your driver’s license or some other type of photo ID (like a passport) if you’re applying in person.
- Social Security number: If you don’t have a Social Security number, you can ask the IRS to provide you with a taxpayer identification number, or TIN.
- Money: How much money you’ll need to open an account depends on the specific bank and the specific type of account you’re planning to open. But you’ll generally need to make some sort of initial deposit.
Opening a new bank account is easy. Most banks and credit unions explain how to open an account and what is needed on their websites, but you can go to a branch in person to open an account.
To be sure, your money is safe and sound at a bank. The FDIC insures up to $250,000 per depositor per bank, so even if there’s a financial crisis or your bank folds, you won’t lose the money you’ve deposited.