How to Open Your First Bank Account

A bank account is one of the most useful tools you can have. It gives you a safe place to keep your money, a way to get paid by direct deposit, pay bills without money orders and build a record that helps you later. If you have never had one, or have been turned down before, this guide walks you through the process.

Why a bank account matters

Living without a bank account costs more than many people realize. Check-cashing stores and money orders charge fees every time. Carrying large amounts of cash is risky, because if it is lost or stolen, it is usually gone for good.

Money in a bank or credit union that is insured by the FDIC or NCUA is protected up to $250,000 per depositor, per institution, for each account ownership category, if the institution fails. An account also makes it easier to set up automatic savings, track your spending and eventually qualify for other financial products.

Jonathan Anthony Burkett, who built Upstormed LLC from very hard beginnings, writes in his memoir, Neglected But Undefeated, that he once had no car, no job and no money. Rebuilding from that kind of place often starts with small, practical steps like this one.

Bank or credit union?

You have two main choices. Banks are businesses owned by shareholders. Credit unions are nonprofit cooperatives owned by their members, and they often have lower fees, though you may need to qualify for membership, for example by living or working in a certain area. Online banks are another option and often have low fees, but make sure you are comfortable without in-person branches.

For a first account, a basic checking account is usually the best place to start. You can add a savings account alongside it, even if you only put in a few dollars at a time.

What to bring

Requirements vary by institution, so call ahead or check the website. Most will ask for:

• A government-issued photo ID, such as a driver's license, state ID or passport. Some institutions accept other forms of ID.
• A Social Security number, or in some cases an Individual Taxpayer Identification Number (ITIN).
• Proof of address, such as a utility bill, lease or official mail, if your ID does not show your current address.
• An opening deposit, if the account requires one. Many basic accounts require little or nothing.
• A parent or guardian, if you are under 18. Many institutions require an adult co-owner for minors.

Watch out for fees

Before you sign up, ask about every fee. The most common are monthly maintenance fees, minimum-balance requirements, overdraft fees, out-of-network ATM fees and charges for paper statements. Ask how to avoid each one. Often a monthly fee is waived if you set up direct deposit or keep a certain balance.

Overdraft fees deserve special attention. If you spend more than you have, some accounts charge a fee for each transaction. Ask whether you can opt out of overdraft coverage so that transactions are simply declined instead. Look for accounts designed to avoid overdraft fees entirely.

Some banks and credit unions offer low-cost accounts that meet national Bank On standards, which are designed to be safe and affordable for people new to banking. Ask whether yours does.

If you have been turned down before

Many banks check a consumer reporting agency such as ChexSystems, which keeps records of past problems like unpaid overdrafts or accounts closed with a negative balance. If you have been denied, you have options:

You are entitled to request a free copy of your report from the agency that was used, and to dispute information you believe is wrong. If you owe a past balance, paying it off or setting up a payment arrangement can help. Many banks and credit unions also offer second-chance accounts, which are designed for people with past account problems. They may have a small monthly fee or fewer features, but after a period of good use, many let you move to a regular account.

A past mistake does not have to lock you out of the financial system for good. As Jonathan writes, we all have to look past our mistakes and trials, learn from them and keep going.

Make your new account work for you

Once your account is open, set up online or app access and turn on balance alerts. Check your account a few times a week so you always know where you stand. Set up direct deposit with your employer. If you can, have a small amount automatically moved into savings each payday, even if it is only a few dollars.

Keep your PIN and passwords private, and never share account details with someone who contacts you unexpectedly claiming to be your bank.

Step by step, a simple account can become the foundation of a stronger financial life. For more encouragement on rebuilding and moving forward, read Jonathan's story on the About page.

This article is general information, not financial advice.

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