You’re getting to that age where you finally need to open your first bank account, but how do you do it?
There are many ways to go about your lifelong relationship with a bank, credit union, or online bank. If you don’t do it right, it will cause a lot of frustration until you finally figure it out— *if* you figure it out.
Most people start banking at the same bank their parents bank with, that’s how we did it too.
But, there are a ton of different banks out there to choose from and some are better than others, and some are just downright awful.
Banks make billions of dollars in profit every year from account fees and overdraft charges.
If you don’t open your first bank account the right way, there’s a good chance you’ll be just another person who doesn’t understand the banking system and the banks will profit off of your lack of knowledge.
Never forget that the ENTIRE purpose of banks and credit card companies is to make a profit at your expense.
Our goal is to get you to never be that person. To bank intelligently and never get taken advantage of.
Thankfully not all banks have questionable business practices and there are a lot of good banks and credit unions that have great products and fantastic customer service.
The goal here isn’t to make you think banks are bad. We just want to make you aware that they’re a business and some businesses will do anything to make a profit.
So how do you choose where to open your first bank account?
First, let’s start by talking about what a bank, a credit union, and online banks are.
Banks are for-profit companies.
They offer services to the general public such as checking and savings accounts, home loans, financing for vehicles, short-term personal loans, credit cards, and investment services.
Examples of large retail banks include Chase, Wells Fargo, Bank of America, and U.S. Bank. They make money by charging interest on loans, collecting account fees, and reinvesting all that money to earn more profit.
But as for-profit companies, they are owned by private investors and stockholders, and they also pay state and federal taxes.
Just like any other business, the goal of a bank is to earn a profit for its owners. For most banks, the owners are their shareholders.
Credit Unions are not-for-profit and on the surface, credit unions look a lot like banks.
They both provide services such as checking and savings accounts, home loans, financing for vehicles, short-term personal loans, credit cards, and investment services.
But the real difference between banks and credit unions has less to do with the services they offer and more with how each institution is run.
Members of a credit union typically have a common bond such as working for the same company or organization (like a teacher or firefighter’s credit union), attending the same college, serving in the armed forces, belonging to the same church, or living in the same community.
This isn’t always the case — many credit unions are also open to the general public.
Since they are not-for-profit banking institutions, any profit earned by a credit union is typically invested back into the organization, and credit unions do not pay state or federal taxes.
Because they’re not-for-profit, you typically get lower interest rates on vehicles, home loans, and personal loans if you go through a credit union.
Let’s talk about Online Banks.
Online banks don’t have any physical locations, so they don’t have to pay for the expensive overhead costs like rent that credit unions and banks have to pay, and they don’t have to pay for employees to work at those locations.
Many online banks will reimburse ATM fees to customers since they don’t have any physical locations.
Due to these savings, online banks can afford to not collect as many fees from their customers. They also tend to have the highest interest rates on savings accounts.
This attracts a lot of people because most banks have terrible interest rates on savings accounts.
Online banks tend to beat out the competition with their low fees and high-interest rates on savings accounts.
Online banks are known for their apps, websites, and mobile options. These technology features are meant to help you bypass having to go to a physical branch. They are on the cutting edge of technology when it comes to banking services.
Whatever bank you choose, be sure that they can accommodate a modern, fast, user-friendly banking experience. Many bank apps have features such as depositing checks by taking a picture of it (called remote deposit capture), sending someone money, paying bills, transferring money between accounts, checking your credit score, and a lot more.
Opening your first bank account is pretty simple once you decide where you want to bank and what types of accounts you want to sign up for.
If you’re over the age of 18, you can sign up for a single account where you’re the sole owner of the account.
If you’re under 18, you’ll most likely need a joint checking account with a parent or guardian who is over the age of 18. Be careful who you pick, because this person because they will have full access to your account just like you. They will be able to withdraw and deposit money and see all of your purchases with your account.
if you need to get a joint account because you’re under the age of 18, make sure that they are transferable accounts. This means that you can transfer this account into only your name once you’re 18 years old.
Some credit unions allow high school students to open their own accounts, even if they are under the age of 18.
Before you head to the bank, make sure you meet all the criteria to open your first bank account.
Most banks will require two government-issued identification documents like a State ID, Drivers license, or physical social security card to open an account plus the following information:
- Name
- Date of birth
- Full address
- Phone number
- Email address
- Social Security Number or identification number
- Valid government-issued ID. (Some credit unions will accept a current student ID Card for students ages 17 & under.)
You’ll also need to have at least the minimum amount of money for opening a bank account and this can vary based on the bank and account type that you choose.
Most banks require $25-100 per account being opened, while some credit unions will let you open an account with as little as $5.
You don’t have to physically go to a bank in person to open an account. You can do this right now, from your computer. Most banks and credit unions allow you to digitally sign new bank account documents.
Signing up online for your bank or credit union tends to be a lot faster. Each account takes on average 10-15 minutes to set up compared to in-person which can take 30 minutes or more.
After you open an account online, you still have to physically go to the bank to make your first deposit. If you already have a bank account and can make a money transfer from that account into the new account.
Opening an account online is not the same thing as using an online bank.
If you make the decision to use an Online Bank, you’re still going to need to provide the same personal information as a regular bank or credit union. With some banks, you’re done opening your account once you provide this information.
Once you digitally sign or physically sign the legal agreements, you can start using the account almost immediately. Some online banks don’t require an opening deposit while others require a deposit within 30-60 days of opening the account.
If that’s the case and you need to make a deposit to open an account with an online bank, it may be EASIER to open your first account at a bank or credit union in person, and then open your additional accounts online after that.
Making your initial deposit to an online account is typically via online transfer from an already existing bank account. You can also up direct deposit from your employer.
Opening your first bank account is a pretty easy process. Finding all the documents and getting a government-issued ID if you don’t have one is the hardest part!
Picking which bank is right for you ultimately comes down to you and your needs from a bank. We both have bank accounts at big banks AND credit unions and we use them for different things. So get out there, and open your first bank account!
