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These days, you don't necessarily need to visit a bank branch to open a bank account. In recent years, a number of online-only banks have popped up. Meanwhile, many traditional banks let you handle the account-opening process entirely online.
Follow these five steps to open a bank account online.
1. Compare Online-Only Banks vs. Traditional Banks
When you're considering where to open a bank account, you need to decide whether you want to do business with an online-only bank or a traditional bank. Which one would be best for your needs?
One key difference between an online-only bank and a traditional bank is branches.
In many cases, an online bank has no branches or maybe only a few. Most, if not all, of your interaction with an online bank is done on a computer or mobile device. Traditional banks, on the other hand, operate branches where you can make deposits, cash checks and more.
Other considerations when choosing between online-only banking and traditional banking include:
- ATM access: Some online-only banks belong to ATM networks that actually offer more ATMs than traditional banks do.
- Fees: In some cases, online-only banks charge fees that are lower than those charged by traditional banks.
- Interest rates: Many online-only banks offer interest rates that are higher than their traditional competitors.
- Cash deposits and withdrawals: Making cash deposits and withdrawals might be easier at a traditional bank branch than at an ATM you may need to hunt down.
- Customer service: You won't find face-to-face customer service at an online bank, unless it operates a branch. So, if in-person customer service is important to you, a traditional bank may be your best bet.
- Products and services: A traditional bank may offer more products and services than an online bank does, such as safe deposit boxes and check-writing capabilities.
Research Online-Only Banks
Because traditional banks have generally been around a lot longer than online banks, be sure to do your homework if you're heading down the online-only route:
- Visit an online bank's website. If you spot spelling errors or find no mention of the bank's executives, for instance, be suspicious.
- Check out online reviews. Reviews can provide insights about customer service and other aspects of an online bank's operations.
- Search the bank's name online. See whether any news stories about the bank show up.
- Use the BankFind tool provided by the Federal Deposit Insurance Corporation (FDIC). Here, you can find out whether FDIC insurance covers your deposits with a given bank. If you're considering a credit union, use the National Credit Union Administration's Research a Credit Union tool to see whether it's similarly insured.
Of course, it doesn't hurt to do the same research when you're considering a traditional bank. You want to make sure that you'll be happy with the bank and that your money will be safe.
2. Choose the Type of Bank Account You Want
Depending on your needs, you may choose to open a checking account, savings account or high-yield savings account.
Checking Account
A checking account usually is geared toward handling everyday income and expenses. It also enables you to write checks, whereas a savings account typically doesn't come with checks. Furthermore, a checking account might offer extras like a debit card or online bill pay.
Savings Account
Savings accounts normally are designed for special purposes, such as creating an emergency fund or setting aside money for a vacation. While a checking account might not pay interest, a savings account typically does.
High-Yield Savings Account
High-yield savings accounts generally pay higher rates than traditional savings accounts do. Keep in mind that, although a savings account may provide some of the same services as a checking account, your ability to withdraw money from a savings account may be limited to, say, six times a month.
3. Gather Necessary Information
When you're applying to open a bank account online, the bank will ask for personal data and documents. Among the items you may need to provide are:
- Contact information, such as your name, address, phone number and email address
- Social Security number or individual taxpayer identification number
- Valid government-issued photo ID, such as a driver's license, passport or military ID
- Second form of ID, such as a Social Security card, a bill with your name and address on it or a birth certificate
4. Make a Deposit
Once you're approved to open a bank account online, you may need to make a deposit. The initial deposit might be $25 to $100. Some banks don't require a minimum deposit, though.
If an initial deposit is required, you normally can supply a bank account or debit card number to transfer money from an existing account to the new account. If this is the first bank account you're opening, you should visit a branch and bring cash to make your opening deposit.
The Bottom Line
Whether you're trying to open a checking or savings account online, be sure you've got the required data and documents on hand and you've reviewed what a financial institution does (and does not) offer in terms of products and services. Also, check to see whether the financial institution's deposits are insured. In the end, you should be satisfied that you can trust the bank or credit union that's holding your money.