Nearly 95% of American households in 2019 had at least one resident with a checking or savings account. With this amounting to approximately 124,200,000 households, it is not surprising that this useful way to store money is extremely popular.
To open up a bank account, you need to provide certain information and you also may need to deposit around $25 to get the account started. This guide will delve deeper into the exact requirements and provide guidance on how to set up a bank account.
What Is A Bank Account?
A bank account is a financial account that is maintained by an economic institution such as a bank or credit union. It offers a place to store your money, which can still be withdrawn or used when you wish.
A bank account will record any financial transactions the customer makes and can help them keep track of their spending through monthly statements via the post or electronically online, as well as through apps that detail your transactions. There is also the option to open different types of accounts including a checking account or a savings account.
You can set up a bank account online or in person at a bank’s branch if it has one. There are also online-only banks which tend to have lower fees and higher interest rates than brick-and-mortar institutions which typically have higher fees and lower interest rates. However, physical banks come with in-person assistance and usually have a wider array of services.
What Is The Difference Between A Checking Account And A Savings Account?
A checking account is particularly useful if you want to pay your bills, write checks and make debit card purchases. Ideally, you would want a checking account that has no or low overdraft fees, free ATM access that is available at lots of locations and no monthly costs. Those who may have previously been denied a bank account, for instance they may have poor credit or had trouble with banking in the past, could look into a ‘second chance checking account’.
A savings account is good if you’re looking to put away money for specific goals such as an emergency fund or if you’re saving for a new home. When opening a savings account, it’s important to find one with high interest rates to help boost your savings further, and if possible with no monthly fees.
What Do You Need To Open A Bank Account?
To set up a bank account, you will need to provide a government-issued ID such as a passport, driver’s license, state ID or military ID. Personal details will also be requested such as your date of birth, contact details and Social Security Number or Taxpayer Identification Number. If you were to open a joint account then you would need all the details of both applicants.
The information asked for will be much the same whether you’re starting a checking account, a savings account or both. Depending on your circumstances, there may be a few more requirements. For instance, those under the age of 18 will need a co-owner i.e. a parent or legal guardian to sign some legal documents for them.
It is also likely that you will be asked to fund your new account with an initial deposit. This typically tends to be around $25 to help get your bank account started. This can be added via cash, check or if you already have an account with a different bank or credit union, then you can transfer money from that existing account into your new account.
Do You Need A Bank Account To Borrow A Payday Loan?
You do not always need a bank account to get a payday loan as it is possible to borrow a doorstep loan. This is a short-term loan that enables customers to borrow a small amount of money quickly.
Doorstep loans involve borrowing physical cash, as opposed to having the funds transferred into your bank account like other types of online loans. The lender then collects the repayments weekly which can be quite stressful and although it is regulated by the FCA, there are many doorstep loans companies that operate without official authorisation. So whilst it is possible to borrow a loan without a bank account, is it not recommended.
It is much easier to secure a loan if you do have a bank account and it is usually a requirement amongst payday lenders. The default rate on doorstep loans is also one of the highest of any type of short-term loan so it is best to only borrow money if you have a bank account.
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Justine is a full-time writer with lots of expertise and a wealth of experience in the financial world. In particular, she specializes in household income and consumer finance across the United States. Follow her articles for useful advice and top tips, guides on how to save money and lots more.