Opening a checking account is an important step toward gaining financial independence and taking control of your budget. Every bank and credit union has its own policies but the concept of opening a checking account is similar for all. What steps are involved in opening a checking account? Is there an approval process to obtain a checking account or is everyone approved? A checking account allows you to conveniently pay your bills, buy meals, purchase items online, and more, all from one centralized location. Does it cost anything to open a checking account? Read on for a step-by-step guide and tips on how to open a checking account today.
Checking vs. Savings Accounts
There are two main types of accounts available to be opened with a bank or credit union. A checking account allows for deposits and withdrawals to be made using various methods. Deposits are made using an ATM machine, online web browser or smart phone mobile app. Deposits are also made through a teller who is working inside your bank/credit union or at a convenient drive-thru window. Cash withdrawals are also made via ATM, employee teller or as cash back when making a purchase at participating stores. Bills are payable out of your checking account via checks, debit cards or bank transfers, depending on the company being paid.
A savings account also allows for deposits and withdrawals. Most savings accounts do not allow for debit cards and therefore also do not require credit checks when being opened. It is possible to transfer money between checking and savings accounts, but most bills are not payable directly using savings account funds.
What is ChexSystems?
Most banks and credit unions require credit checks when opening new checking accounts. Some institutions run soft credit checks and others run full/hard inquiries. A soft credit check pulls up your FICO score (credit rating) and limited information about your credit history. A hard credit check taps into your full available credit history. Even institutions running soft credit checks still run an entirely different type of credit check through a company called ChexSystems. ChexSystems reports show whether or not you have negative credit history, including overdrawn or charge off accounts, with other banks. Having negative information in ChexSystems causes your new checking account application to be denied in the majority of situations.
Step-By-Step Guide to Opening a Checking Account
There are numerous steps involved to opening a checking account. Being prepared in advance helps make your appointment and application process as efficient as possible. Knowing what to expect at your appointment also helps prevent disappointment and frustration once there. 10 important steps involved in opening a checking account are:
1. Choose a bank or credit union to join.
2. Ask a representative what documents are required to open your checking account.
3. Gather all required documents.
4. Find out the minimum deposit amount required to open your checking account.
5. Have cash, a money order or a check in your name present for your initial deposit.
6. Schedule an appointment as per COVID-19 allowances.
7. Choose your checking account type when applicable.
8. Choose a type & style for your checks.
9. Sign all necessary paperwork.
10. Receive your checks and/or debit card immediately or in the mail as applicable.
Should I Join a Bank or Credit Union?
Credit unions are similar to banks with a few distinct differences. Credit unions and banks both provide similar financial services. Joining a credit union makes you a member, however, while joining a bank makes you a customer. Credit unions are not-for-profit and cooperative businesses owned by their members. Banks are publicly traded, for-profit businesses. Banks allow any qualified customers to open accounts. Credit unions have fields of membership and are associated with organizations such as churches, military branches, government branches and more. To become a credit union member you must also be, or be related to, an employee of its associated field of membership.
Credit unions tend to have friendlier loan terms, interest rates and financial planning assistance than do the average banks. Banks have more branches and ATMs around the county, however. Choosing which one is best for you depends on your qualifying factors and financial needs.
Documents required for opening a checking account are fairly basic in nature. Proof of identification is required. Your government-issued state ID card, passport and/or state driver’s license all qualify. A second, non-photo form of identification is also usually required. Your Social Security Card, birth certificate, official tax records and more are all potentially accepted documents. Proof of your current residence is also required. Each banking institution sets its own policies. While a government-issued photo ID is required to open a checking account with any banking institution, other accepted types of documents might vary. Consult with your bank or credit union before arriving at your appointment to make sure you have what you need.
Additional Tips for Opening a Checking Account
Most banking institutions provide your first order of paper checks for free, while charging for each subsequent order. Your first checks arrive in the mail one to three weeks after you open your account. Temporary checks are available upon request to use in the meantime if needed. There are also several different types of checking accounts available. Some accounts accrue interest, some include overdraft protection and some are designed for students or seniors. Ask your representative which type of checking accounts you qualify for and which options are best for you. Finally, some checking accounts have probationary periods on funds availability. Deposited checks might be held for many business days before you are granted access to the funds. Ask your representative what limitations apply to your new account and when all restrictions are lifted. Knowing this information prevents potential issues and late payments during your probationary period.