Opening Your First Bank Account

Sooner or later you will need to open a bank account. Probably the first question what you will be asked is what type of account would you like to open.
There are mainly two major types of bank accounts in America:
- checking account, and
- savings account

The checking account is the account type used for regular, daily use. It is excellent for frequent deposits and withdrawals. In most cases it earns you no interest. Checking accounts are usually free to open, but many banks will charge you a monthly fee if the average monthly balance of the account will drop below a certain amount. In other words you have to keep in the bank all the times a certain minimum amount of money (varies from bank to bank, but it is usually a few hundred dollars) if you want the monthly fee waived. These monthly fees are usually around $10/month. However some banks offer free checking accounts with no imposed limits called free checking accounts. The best way is to shop around, visit a few banks and ask them.

You should be aware of a "dirty trick" the banks make with your checking account if you are not careful. Usually you won't be warned about this. Here it is. If you spend more money from your checking account than you have available, and the difference is not more than $50-100, the bank will accept your transaction and will "lend" you the difference. For this service you will be charged a $25-30 flat fee called overdraft fee. You will have to pay back not only what you overspent, but the overdraft fee as well. So be careful, monitor your checking account limits and don't go below zero. What I suggest, from my personal experience, for safety reasons try not to go below $100 on your checking amount balance. In America is quite common to pay for things in "easy monthly payments". This is how TV commercials are luring their customers in buying. Easy monthly payments. And let's say you bought your favorite wonder widget for $197, but instead of paying it off in full, you decide to go for 3 easy payments of $69.95. Now the problem with this is if you don't write it down to remember it, within two months you will forget it. And by any chance if that time you are running low on money on your checking account, such an "automated charge" can overdraw your account and trigger the overdraft fee. So watch your checking account limits.

A savings account is the type of account used for savings. If you want to keep your money in the bank for a longer time this is what you should open. Because the number of withdrawals is limited only to a few free transactions per month only, it is not suitable for daily use such as a checking account. For parking your money in the savings account the bank will pay you a monthly interest. You won't get rich this way, the interest is pretty low, starting anywhere from tenth of percents to a few percents (e.g. from 0.5% to 2% typically), depending on the amount deposited. This interest rate is BELOW the rate of the inflation. This is the reason why keeping money long term in the bank actually will result in loss of money, despite of all contrary beliefs.

If you have at the same bank a checking and a savings account as well, you can even link them together. Do you remember how painful overdrawing your checking account can be? Well, here is way how you can avoid it. You can set up an overdraft protection. Here is how. Let's say you want to buy an expensive piece of furniture and you are not sure if you have enough money left in your checking account or not. If your checking and savings accounts are linked together, whatever amount is missing from your checking account, the bank automatically will take it from your savings account. This way you can protect yourself to overdraw your checking account. For this service the bank will charge you a fee (about $2-3 fee) but it is much less than the previous overdraft fee.

How you can set up the overdraft protection? When you open up your savings account, assuming you already have a checking account the banker will ask you about it. If not you can tell him about and request it to get set up. Ask about their fees as well.

How you can access our money? You can access your money in person in the bank, or via an ATM (Automated Teller Machine). The ATM is a banking terminal on the street or in a public location and allowes you to withdraw, deposit money or to check your balance on the account. With most of the banks you can check your account balance online, via the internet.

Steps to open a bank account

The simple way is to pick up the first bank you see on the street and open your account there.

However if you are not in a rush to open up a bank account, I suggest you to look around first. Look around in the neighborhood and pick up 2-3 banks which are conviniently located to you and have lots of branches in your area. Dealing with banks with lots of offices and branches is convenient, it makes banking easier and the waiting times shorter. You can also ask for references from friends, and ask them why they recommend a specific bank. What they like and what they don't like?

What account to open first? Because most of the newcomers in America are not millionaires, in most cases a checking account is needed first for daily activities. Later on when you made and saved some money you can open a savings account too.

OK, you have your list of banks and the next step is to visit them. Don't have to visit all of them in the same day. Pick up one from the list and step in. As you step in, you will see the windows where the tellers operate. You will deal with them later, when you want to make deposits or withdrawals. You never open a bank account at the teller. Right now you want to meet any of those representatives who are sitting at their desks and assisting customers. They will answer your questions and give you help with opening your account. In some banks there is a waiting list you have to subscribe to first, and the customers will be called by name, and assisted in their order of appearance. Usually you have to take a seat and wait until you are called.

Questions to ask

Here is a list of possible questions you might want to get answered before opening a checking account.

	What type of checking accounts do they have? Some banks have 4-5 types of checking accounts and the service they offer with them differs. For e.g. with some checking accouns you can make deposits only via an ATM using your card, and only a limited number of deposits are allowed via the tellers (people who work in the bank). They might have different monthly maintenence fees. In some cases you can write only a limited number of checks free of charge, and the bank charges you a fee for the rest of your checks. Ask the banker to tell you more about the options. Don't be shy. Tell them you don't know anything about their various accounts, and ask their help to explain you the best they can.
	Do you need a social security number in order to open a checking account. Many banks do, but some don't. If you don't have a SSN, keep shopping, you can find everywhere a bank which doesn't require a SSN. But you can keep asking the questions, you will learn a lot.
	What is the minimum to open the account? In other words how much money do you need to deposit at the moment of opening. Usually this is about $100, but for student checking accounts it can be as low as $25.
	Do they have a monthly maintenence fee? If yes, how much? The banks sometimes charge a fee just for keeping your account open.
	Do you have to have a minimum daily balance in order the monthly maintenance fee to get waived? In other words if you keep in the bank a certain amount of money (hundreds of dollars) all the times, you don't have to pay the monthly maintenence fee.
	Do they charge any fee to deposit at the tellers? Do they limit the number of free deposits? If they do you must do most of your deposits via an ATM (Automated Teller Machine, a banking terminal).
	Do they have a limit on how many checks can you write a month free of charge? If you don't know too much about checks don't worry, you will learn a lot more in detail about checks later.
	Do they offer you free checks? Usually the bank will print you free of charge a batch of 250 simple checks, but in some cases you have to pay for those, too.
	Which states is the bank operating in? Most of the banks operate locally in a few states only. If by any chance you are travelling a lot, even coast-to-coast you might need a bank which is everywhere or almost everywhere. I have personally very good experience with Bank of America. They are present in lots of states both on the East Coast and the West Coast, and keep expanding. They have a comprehensive free online banking system as well
	Do they offer online banking (to be able to check your accounts on the internet)? Is it free? Most banks offer free online banking, which makes banking VERY convenient. In most cases you can make transfers between your checking and savings accounts online for free. However if you want to pay bills online, you can optionally enroll to bill payment services for a small monthly fee.

Some suggestions:

If your bank offers free checks at the opening, say yes and order the checks even if you never used checks in your country before. Having your checks ready will give you additional flexibilty. Always, always inspect your new checks. Verify and double check if your name, address, telephone number on the check is printed correctly, and check the account number on the checks (more on this on the Checks section, a bit later). If you have any discrepancy call your bank, tell them you have a problem with your checks and they will reorder and print a new batch of checks for free. You will receive automatically an ATM card as well. This way you can deposit and withdraw money via an ATM. Ask if this card is a VISA checking card or just a regular ATM card.

Why is this important, what is the difference between an ATM card and checking card?The usage of an ATM card is very limited. You can use your ATM card only in your bank's ATMs. If you have a Bank of America ATM card you can't use it in a First Bank or other's banks ATM. With a simple ATM card you can't shop online. To be able to access your money worldwide you will need a checking card with the VISA or Mastercard logo on it. Most banks offer VISAs. This gives you tremendous flexibility because you can access your money at any ATM in the US and worldwide which displays the VISA or Mastercard logo on it. Plus you can use these checking cards to buy stuff on the internet (if you are a computer fan just like me).

Sometimes the bank gives the checking card automatically. Sometimes you have to ask for it. Some banks require to have a social security number in order to issue you a checking card.If your bank issues checking card with photo and copy of your signature on the card, ask for it. It is more secure and prevents fraud. Your photo and your signature is displayed on the card. Usually this is allowed only with a valid Social Security Number.You will get your checks, your ATM and/or checking card in the mail, usually within 2 weeks. Some banks like Bank of America might give you a temporary ATM card valid for only 1-2 months. Don't forget to sign your new check card on the back.

What to have with you when opening a bank account

Usually the following items are required:

	Two pieces of ID, one of them must be photo ID (passport, drivers licence etc.). The other one can be a non-photo ID, like another bank card, social security card etc.
	$100 in cash (or a checkbook). Most banks require a deposit when you open a new account.
	If is necessary, your social security card. If you don't have a Social Security Number, shop around and find a bank which doesn't require a SSN. There are lots of them.