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What Do I Need to Open a Bank Account?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

What do I need to open a bank account?

When you need a place to stash your cash, a bank or credit union is a reliable choice. A bank account will give you access to important services, including checks, a debit card and online banking, as well as the opportunity to take out loans or earn interest from savings accounts. Opening a bank account grants considerable financial freedom and flexibility.

In this post, we’ll cover all the documents you need to open a bank account and help you choose the best account for your needs.

7 documents you need to open a bank account

While specific requirements may vary by financial institution, to open a bank account at most banks and credit unions, you’ll usually need to supply the following information and documentation:

  • Legal name
  • Date of birth
  • Current address and proof of residency (a utility bill, paycheck stub or lease)
  • Social Security number
  • Photo ID: (A driver’s license is preferred, but banks may accept a valid U.S. passport or military ID)
  • Proof of U.S. Citizenship or resident alien status
  • Minimum opening deposit. This is often a nominal amount. For example, Chase and US Bank ask for $25 minimum to start. Certain types of accounts require higher opening deposits, such as Bank of America’s Advantage Checking, which starts with $100.

Online banking: As an alternative to visiting a local branch, many banks also allow customers to open bank account online. With most banks’ online application, you’ll still need to provide your personal information, including your Social Security Number, address, email address and personal information from a driver’s license or other government-issued ID.

Top online bank in 2019

Minimum Account Balance to Earn APY
Ally Bank
Online Savings Account from Ally Bank




on Ally Bank’s secure website

Member FDIC

Ally Bank was named the Best Overall Bank in our study of the Best Online Banks in 2019. This is partly due to the fact that they have one of the best online savings accounts in the market.

Credit unions: To open a bank account at some credit unions, you’ll need to join and some credit unions have an annual fee. Also, credit unions also require proof that you qualify for membership. Navy Federal Credit Union, for example, requires proof that you or one of your family or household members must have ties to the armed forces, Department of Defense or National Guard.

What if you get rejected?

As part of the process of opening a new account, a bank or credit union will likely check your credit and look into past banking habits, including if you’ve bounced checks or unpaid overdrafts. If you don’t meet all the requirements to open a bank account at a traditional financial institution, there are still other options, such as alternative online companies.

Part of the bank’s approval process could include a look at your ChexSystems report. Chexsystem is consumer reporting service that tracks your banking activity and history, including if you’ve written bad checks. Some banks consult your report when deciding whether to open an account or what terms to extend. Consumers are entitled to a free copy of your report. If you’re denied an account, consider checking your ChexSystems report and make sure all the activity is valid. You have the right to dispute any information on the report.

Alternatives to online bank accounts: While they may calls itself a bank, these firms are not your usual usual brick-and-mortar institution. Companies including Chime Bank and Axos Bank, offer alternatives that could work for some customers looking to reestablish themselves. Chime does not do credit checks or use ChexSystems in their process for new accounts. Chime still requires customers to be U.S. residents with a valid Social Security Number.

Simple is another one of these alternatives that offers a really high rate.

Minimum Account Balance to Earn APY
Checking Account + Protected Goals Account* from Simple




on Simple’s secure website

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We'll receive a referral fee if you click here. This does not impact our rankings or recommendations.
Second chance bank accounts: Some traditional banks, including Wells Fargo, and online banks, will offer an opportunity for customers who have stumbled in the past to reestablish good banking habits. However, the restrictions are more stringent and you might miss out on some perks. Second chance bank accounts could require higher deposits requirements and might be accompanied by higher fees. You also might not get some typical banking privileges, such as overdraft protection or a debit card. Online bank Axos offers lower fees and minimums, including $50 to open an account and monthly fees that range from about $7 to $9.

Prepaid debit cards: Another alternative to access cash without a traditional account is a prepaid debit card. Several major banks, including Chase, offer prepaid cards with a nominal monthly service fee. You can use these cards just like you would a traditional debit card and withdraw money from ATMs or pay directly with the card. Some retailers also offer prepaid debit cards, such as the Walmart MoneyCard, which can be reloaded, used at ATMs, and earns points towards an annual cash back reward. You can also buy prepaid Visa and American Express gift cards and use them to make purchases.

What type of bank account should you open?

Checking: A checking account allows you to keep your money secure in the bank and access funds for purchases and payments. Depending on the type of account you get, you’ll receive a debit card, paper checks and access to mobile and online banking. You can use these tools to withdraw cash, make payments and send funds to others.

Savings: If you’re trying to stash money away in a safe place, a savings account is a great choice. With many banks, your money will earn a small amount of interest. If you need funds, you can transfer the money to your checking account.

Money market: Like a savings account, money markets are a way to save your money and earn interest. Typically, money markets will offer higher interest rates, but may also require higher deposits. Interest rates can be variable. There can be service fees associated with these accounts, although they may be waived if you have a minimum balance. There is no fixed time for a money market.

CD: Short for certificate of deposit, this account allows you to access a favorable interest rate in exchange for a fixed term investment. CDs can be as short as one month or extend for years. Taking your money out early can come with a penalty, so make sure you’re able to tie the money up for the term of the CD to maximize the benefits. See our list of the best CDs here.

What to do after you open a bank account

Once you open a bank account, it is important to keep a close eye on all the activity. To maintain an account with good standing, it is wise to follow these steps:

  • Monitor your account regularly. By staying updated, you’ll have a better understanding of your available funds and expenses.
  • Open your mail. When your bank sends you statements, be sure to review them. Or, alternately, sign up for electronic statements.
  • Make sure you have enough money in your account to cover checks, bill payments and withdrawals.
  • Automate as much as possible by setting up direct deposits with your employer and automatic bill pay for regular expenses with set amounts, such as rent or loan payments.
  • Download your bank’s mobile app. You can use this to easily check balances, make deposits, pay bills and send money to other people.
  • To keep up-to-date with your accounts, you can enroll in text and email alerts, and push notifications. Your bank will send notices when bills have been paid, if your balance is low or there is any unusual activity.

The bottom line

A bank account is a major step towards establishing financial independence and a positive relationship with money. When you’re ready to open a bank account, pick a few banks and visit their physical branch or do research on their website. You should compare the types of accounts, fees and available services. When you find the bank that meets your needs, it can grant both financial flexibility and resources to manage your finances and grow your savings.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Alli Romano
Alli Romano |

Alli Romano is a writer at MagnifyMoney. You can email Alli here

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How Do Banks and Credit Unions Make Money?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Banks and credit unions share some broad similarities: They help their customers borrow money, build savings and invest for the future. Both credit unions and banks make money by charging interest on loans and charging fees for banking services. But their business models are very different in many ways, mainly in regards to what they do with their profits.

Banks are for-profit enterprises that serve all and any customers who come to them, and distribute profits to shareholders. Credit unions are not-for-profit institutions that only serve people who become members, often by requiring them to meet certain membership criteria. Credit unions reward their members with bonus dividends or lower-cost services, rather than redistributing earnings to investors.

How banks and credit unions make money

Banks and credit unions both make money by lending out a portion of their deposits, charging interest on those loans and collecting fees and charges for various financial services, such as investing and wealth management.

Interest on loans

The most significant source of profits for banks and credit unions is charging interest on loans to consumers. Common types of loans offered by banks and credit unions include mortgages, home equity lines of credit (HELOCs), auto loans and personal loans, said Ken Tumin, founder of, a LendingTree company.

Banks pay interest on deposits — checking accounts, savings accounts and certificates of deposit — but the interest they earn from making loans is typically higher than what they pay for deposits. In the banking business, the difference between these two types of interest is known as the “spread.”

If a bank pays out 1% interest on $200,000 worth of CDs, and receives 4.5% interest on a $200,000 mortgage, the difference — the spread — is how the bank makes money. Banks have to comply with rules on how many loans they can make relative to their asset bases.


Another way that banks and credit unions make money is by charging consumers fees for a variety of services, Tumin said. Commonly charged fees include:

  • Overdraft fees: Overdraft fees comprise 60% of the fees charged by banks, and they tend to fall disproportionately on lower-income customers. Banks and credit unions charge these fees when you don’t have enough money to cover your payment or withdrawal. Fees can run as high as $36 per overdraft transaction.
  • Interchange fees: Banks and credit unions charge merchants fees when you use your credit or debit card, which are known as interchange fees. If a consumer makes a purchase, money is withdrawn from their account — and the merchant pays a fee to both the bank and the credit card company for the transaction.
  • Checking account fees: Monthly fees may be associated with a checking account, or fees may be levied if a consumer doesn’t maintain a minimum balance in the account.
  • ATM fees: If you use another financial institution’s ATM, you typically pay a fee to do so, which goes into that bank or credit union’s pocket.
  • In-branch service fees: If you need a cashier’s check, money order, notary or lock box storage, banks charge per-use or annual fees for these services.
  • Document fees: Banks may charge a fee to pull historical bank records pre-dating a certain time period or to provide print copies of cashed checks. Banks may also charge fees for check printing or paper statements.
  • Loan origination fees: Banks charge fees to “originate” loans, including home loans and personal loans. Loan origination fees may be a one-time flat fee or a percentage of a loan. They may sound low (1%, for instance) but can actually be substantial when considering the total size of the loan.
  • Late fees: Banks charge late fees when borrowers pay credit cards, mortgage loans, personal loans and other forms of debt past the bill’s due date (or past a grace period, which is a few days past the due date). When a checking account is overdrawn, there may be additional late fees if it is not brought back to or above $0 swiftly.
  • Early withdrawal fees: Those who open CDs at banks will pay early withdrawal fees if they withdraw funds before their certificate’s term expires. These fees can cut into earnings from a CD.

Financial services

Many banks offer financial advisory and wealth management services. Institutions charge either a percentage of assets under management or per-transaction brokerage fees.

Many banks offer private banking services to high-net-worth consumers, charging an annual management fee as a percentage of the assets under management. Banks also offer access to investment products for customers in lower wealth brackets.

Credit unions cannot offer financial advisory or wealth management services directly, so they provide them by affiliating with partner registered investment advisors or registered broker-dealers. Credit unions offer these services as a benefit to consumers who want investing advice, and they may make money indirectly through referral fees or other partnerships arranged with an investment advising company.

What do banks and credit unions do with their profits?

Credit unions do not have to pay taxes since they are not-for-profit organizations, which means they avoid one major expense that banks need to pay. Additionally, because credit unions are owned by their members rather than by shareholders, they aren’t focused on generating profits for shareholders like banks are. Often, credit unions return profits to their members as dividends, or they may offer reduced fees or better interest rates on loans or deposit accounts, which can, in turn, attract new members.

Banks, on the other hand, are owned by investors and operate as for-profit institutions. They use their profits to provide returns to shareholders (especially if they’re publicly traded, as most larger banks are), and to pay state and federal taxes, which they must pay as for-profit organizations.

How online banking impacts banks and credit unions

Brick-and-mortar banks and credit unions have been facing more and more competition from online banks. Online banks tend to charge lower account fees than credit unions and pay out higher interest rates on deposits, said Tumin.

While online banks don’t have physical branch locations, they nonetheless offer a compelling proposition to consumers. In response, brick-and-mortar banks are beating them by joining them, offering online banking services of their own to address competition from apps and other tools, which threaten to reduce payment-related revenue by as much as 15% by 2025, according to a report published by Accenture, a professional services firm.

Going forward, banks’ business models will have to change to accommodate the anticipated reduction in fee income. But while these tools may not add revenue for banks, they could potentially lower branch operation costs, which are substantial. By putting more power in consumer hands, a big bank could reduce its branch count, branch hours or individual branch teller staff hours.

“For banks, these tools may be more about cutting back on expenses than adding revenue,” Tumin said.

For credit unions, providing these tools offers the conveniences that banks, which typically have larger branch networks, present. Since credit unions aren’t driven to provide returns to shareholders on Wall Street and are instead driven to manage so that their members receive benefits and favorable rates, credit unions can choose which services are for benefit versus for profit.

Are banks or credit unions better for your money?

Now that you know how banks and credit unions make money, you may be wondering which option is best for your money. As with most financial questions, the answer largely depends on what’s most important to you.

Online banks offer the most compelling savings account rates, with the average savings account interest rising from 0.79% in mid-2017 to 1.52% by the close of 2018. During that time period, traditional banks and credit unions also increased rates, but only to 0.26% and 0.23%, respectively. Pair this with their low-fee checking accounts, and online banks are a compelling option for many consumers, although a lack of branches may deter some people.

Brick-and-mortar bank networks may be more convenient, offering more branches and more sophisticated online banking and investing options. These benefits are positives for some busy consumers, but the convenience comes at a cost — especially when it comes to overdraft and other fees.

“Credit unions may be more consumer-friendly,” Tumin said, citing their low account fees and balance minimums. Because credit unions are member-owned and locally driven, they may give back to their communities and their members. However, they are not open to everyone, as a consumer generally can’t join a credit union for aerospace or military members if they’ve never worked in those fields, for example.

The bottom line

No two consumers need the same things from their bank or credit union, so it pays to research how accounts and fees are structured and which additional services are available. While credit unions and banks make money in similar ways, including through interest on loans and fees that customers pay, they don’t handle profits in the same way.

Where that money is reinvested — in discounts to consumers, or in profits for shareholders — is a key differentiator between credit unions and banks. If you’re going to entrust an institution with your money, it pays to know how that institution ultimately makes money.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Jane Hodges
Jane Hodges |

Jane Hodges is a writer at MagnifyMoney. You can email Jane here

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Credit Karma Savings Account Review

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Credit Karma is the latest fintech company to jump on the mobile banking bandwagon. The company is now offering a free high-yield savings account, which is somewhat of a departure from the product it’s most famous for: providing consumers with access to free credit checks.

Credit Karma joins a slew of firms—including SoFi and Betterment—that have recently rolled out cash management accounts of their own. Credit Karma Savings will offer a generous 1.90%  APY, and the company says it will leverage technology to keep its rates competitive. Credit Karma is partnering with a network of banks to hold your deposits and gain Federal Deposit Insurance Corporation (FDIC) insurance.

What is Credit Karma Savings?

Expected to launch later this year, Credit Karma Savings is a high-yield savings account that will be accessible through the company’s app. Credit Karma claims it will take consumers just “four clicks” to get started.

Once signed up, deposits will collect an APY of 1.90%. That’s 22 times more than the current national average of 0.09% for savings accounts. Credit Karma says it will leverage technology to keep that rate moving competitively, so that consumers won’t have to monitor rates themselves to ensure they’re getting the most for their money.

There are no fees or minimums required to open a Credit Karma Savings account, and deposits up to $5 million are insured by the Federal Deposit Insurance Corporation (FDIC). To achieve this, Credit Karma partnered with MVB Bank to provide banking services, and it will be utilizing a network of over 800 banks to hold deposits.

However, it’s important to note that the amount that is actually insured is dependent on whether you already have a balance in a partner bank and how much that balance is: “Actual insured amounts may be lower or adversely affected based on any balances you hold at a network bank,” Credit Karma said.

Credit Karma Savings vs. other cash management accounts

Credit Karma joins the ranks of other fintech companies that have recently launched high-yield savings accounts or cash management accounts for consumers, all boasting no fees and no minimum balance requirements. Here’s how Credit Karma Savings stacks up against companies with similar products.

Bank APYNumber of partner / network banks Amount FDIC insured

Credit Karma Savings

1.90%1 partner bank with network of 800+ banks$5 million

SoFi Money

1.60%7 program banks$1.5 million

Betterment Everyday Cash Reserve

1.60%11 program banks$1 million

Wealthfront Cash Account

1.82%9 program banks$1 million

Savings accounts with higher interest rates than Credit Karma Savings

Credit Karma Savings’ 1.90%  APY is certainly nothing to sneeze at, especially when looking at other fintech companies that offer similar high-yield accounts for stashing your cash. But other savings accounts—particularly those at online banks—boast even higher rates. Vio Bank, for example, currently has an online high-yield savings account with an impressive APY of 2.07% , while HSBC Direct Savings touts a 2.05% APY.

The bottom line on Credit Karma Savings

Credit Karma Savings offers a number of attractive incentives, like a competitive APY, no fees and a high maximum amount of $5 million that’s eligible for FDIC insurance. If you already have a Credit Karma account, the convenience and ease of being able to open a Credit Karma Savings account isn’t a bad perk, either. If your main goal is to rack up as much interest as possible on your savings, though, a number of online banks offer higher-yield savings account offerings.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Sarah Berger
Sarah Berger |

Sarah Berger is a writer at MagnifyMoney. You can email Sarah here