The concept of disruption in the financial services industry is a relatively new phenomenon. Perhaps except for the U.S push for deregulation in the 1970s, the banking industry is not known for its daring approach to innovation or meaningful shifts in the dynamic of the players involved. All of this changed with creating this vast global network of computers that we call "the internet." With the internet, came the dawn of a new digital age that changed the world.
Banking, like most other aspects of life, was revolutionized by the internet. From online banking services to new and rebellious FinTech companies like PayPal, the internet allowed people to access and deliver financial data almost instantly from the comfort of their own homes for the first time. Eventually, this new technology helped give birth to many of the neobanks that so many of us know and use today.
What You Need to Open a Bank Account
While this section may seem to be all too self-explanatory if you have never had any experience with banking, you may not necessarily be familiar with how to open a bank account and may well be wondering, "what do I need to open a bank account."
It should be stressed at the outset that every jurisdiction will have its own legislative requirements and banking regulations that dictate the specifics of what information you will need to provide to open a bank account. This post is intended to serve as a guideline for what is generally required by most financial institutions when opening an account.
It is always best practice to bring two forms of identification when trying to open a bank account. These can be any number of documents, including passports, identification cards, driving licenses, or perhaps even an employee/university card.
You will also be required to provide proof of address. Suppose your identification documents do not have your current residential information on them. In that case, you can also bring a utility bill with you, provided that the utility bill is registered in your name.
Beyond the general proof of identification and residence, some banks may also require you to present them with your social security/tax numbers (or the equivalent) as well as your phone number. While this is not always the case, it would be best to have this information to hand if you need it.
Finally, many retail banks will also require an initial deposit to open your account. Generally, these initial deposits tend to be a negligible amount of money, but you should be aware that they are required. The amount can range from as little as $1 to $100.
Decide What Bank You Want to Use
Deciding what bank to use will undoubtedly be the toughest decision when opening a bank account. The kind of banking solution you select will largely depend on what you need your banking solutions to provide you with and your own specific preferences.
Broadly speaking, you will need to decide on whether you wish to use a traditional retail bank that you can find in your local area or one of the new neobanks (internet banks) that have been growing in popularity over the last five years. Let's take a look at the pros and cons of each of these types of banking.
Neobanks have taken an innovative approach to banking and provide services that retail banks simply don't. Their advantages are varied, and they include lower fees, higher savings interest rates, and less mail being delivered to your door.
Neobanks offer individuals the opportunity to open an account entirely online, using an often very strong mobile application that offers all of the day-to-day services clients will need. All of this coupled with their usually high commitment to customer service make neobanks an easy option for many.
Whilst all of the advantages detailed above are strong selling points for these new internet banks, the biggest advantage of neobanks is the wealth-building solutions that are being implemented directly on mobile applications.
Many neobanks, including the popular neobank Revolut, have begun offering their users the ability to invest their money into a range of assets, including stocks, commodities, and cryptocurrencies. Users can now manage these assets directly on the application using often bespoke and intuitively designed interfaces, removing the need for many users to invest their money elsewhere.
Although neobanks have proven themselves to be a brilliant option for the banking needs of a wide range of people, they are not without flaws. Many of the advantages of neobanks are because they do not have any physical locations. While this may not be an issue for millennials, the less tech-savvy generations of yesterday will be less pleased by the neobank's lack of presence on the local high-street.
Further, because neobanks do not have their own ATMs, you will likely have to pay higher fees when withdrawing cash from an ATM using your neobank card. Although a lack of cash may not seem like much of a problem in this increasingly paperless world, for those of you who still rely on ATMs, neobanks may prove to be a rather costly option.
Where neobanks fail, retail banks provide. The traditional banks that you find in your local area offer the presence and stability that neobanks can't. Since retail banks have retained their physical locations, they can offer their clients the kind of personal interaction that some individuals prefer from their banking provider. This personal interaction allows people to ask any questions they may have about their banking problems and feel comfortable knowing that there is a human being capable of empathy helping them with their issues instead of an emotionless software program.
Traditional banks also have the ability to process cash transactions for you. Since neobanks have no physical locations, they are obviously unable to handle any cash transactions. If you have a cash-heavy business or are simply in need of a banking solution that processes cash transactions, then neobanks are not an option for you.
Lastly, whilst neobanks offer an impressive range of wealth-building tools, there are services they simply cannot provide that traditional banks are.
Many traditional banks offer their clients a range of services and products that require face-to-face interaction, such as notary services or safety deposit boxes, not to mention secured loans.
How to Open a Bank Account Online
Knowing how to open a bank account online is a necessary skill in the digital age. Thankfully, opening a bank account online has become highly streamlined over the last few years. Compared to their retail counterparts, opening an account with a digital bank can now be done relatively quickly.
Let's look at how we can open an account with Revolut, a largely well-regarded and highly rated internet bank that boasts all of the advantages listed above.
If you're still not sure which digital bank to use and need more information to find out which digital bank would be best for you, then please visit our comparison page for digital banks.
Opening up an account with Revolut is done through their mobile application. You can find this application directly on the Android or Apple app store or by going to their website and selecting the signup option. When selected, you will be able to scan the QR code and download the application onto your smartphone.
Once you have downloaded the app, you will have to enter your phone number to begin the signup process. A valid phone number is required to register with Revolut, and you will not be able to open an account without one.
After you have entered your phone number, you'll create your 4 digit PIN. Revolut will then send you a text message with a 6 digit code that you will be required to enter into the app to proceed with the account creation process. This code will verify that the number you entered is valid and belongs to the person opening the account.
Like traditional retail banks, Revolut will require you to provide them with some personal information to finalize your account. This includes your name, email, mailing address, and your SSN/ITIN. The last two pieces of information are your social security/tax numbers and are required by law. You will not be able to create an account with Revolut without providing this information.
The final step in opening an account with Revolut is reviewing the Cardholder Agreement. This Agreement will detail the terms and conditions of your account with Revolut.
Revolut will then quickly review and (hopefully) accept your application within minutes. You are now ready to begin getting more from your money with your very own digital bank account.
How to Open a Bank Account in a Branch
The first step in opening an account with a retail bank is simply to decide which local bank you want to open an account with and head over to their closest branch. Make sure that you take all of the documentation detailed earlier in this post with you when you go. Otherwise, you may find yourself having wasted a trip.
Once you arrive, locate and speak to a bank representative and tell them you would like to open an account. You will likely be asked which type of account you want to open; we'll cover the different types of accounts in the section below.
Paperwork is a foregone conclusion when it comes to retail banks. The bank representative will give you a series of documents to fill out and sign. It may take you several minutes to over an hour, depending on the extent of the paperwork your specific bank requires you to fill out (and how quickly you can write).
With the paperwork completed and signed, you'll soon have your account ready to go. Some banks may require you to fund your account during the opening process, so be sure to have some cash available to do this.
That's it! You now have a bank account, although you may need to wait a while before receiving your debit/credit card in the mail. Let's now go through all the different kinds of bank accounts to decide which one is best for you.
Type of Bank Accounts
There are many bank accounts out there for you to choose from, and it is vital that you select the right account for you. Please note that this post will not cover more specialized accounts such as IRA's or money market accounts. Instead, we will focus on the four most commonly known and widely used types of accounts: current, savings, joint, and children's accounts
Current accounts are basically the bread and butter of your banking infrastructure. This is the account where you can store your money and use it for your everyday financial transactions. Whether it's going to the supermarket or paying your rent, you can do so with your current account.
Most people opt to have their salaries/wages directly deposited into their current account to avoid having to visit the bank to deposit it themselves. Current accounts make it easier to manage your finances as you can quickly see what is going in or coming out through your bank's online banking service.
Savings accounts differ from current accounts in that they are not designed for everyday financial transactions but rather as a safe place to store your money.
These accounts are suited to you if you would like to store meaningful amounts of money later while accruing a modest amount of interest. The amount of interest you will receive is largely dependent on your bank and the amount of money you have to place into your account. You can expect to receive a rate anywhere from 0.01%- 2% as a rough estimate. Some financial institutions may offer you a higher interest rate. However, these are likely to be limited-time promotions or exclusive offers for higher-end clients likely to be depositing amounts in the millions of dollars.
A joint bank account is largely used by individuals who have entered into a relationship and require a joint account to help manage their finances. They can provide a range of benefits when making financial plans with another person. They allow individuals to split bills, budget and discuss financial matters together using the same account. However, these types of accounts carry a risk that current and savings accounts do not.
We should first distinguish between "Both-to-sign" (BTS) joint accounts and "Either-to-sign" (ETS) joint accounts.
In a BTS account, both parties have to sign before you can withdraw funds from the account. As you can imagine, this provides both parties with the security of knowing that the other won't be able to withdraw large amounts of cash from the account without consent.
In an ETS account, which is far more common, either party can withdraw funds from the account without the knowledge or consent of the other, regardless of who originally deposited the money in the account. Individuals considering opening a joint account should be well aware of this risk before doing so. There will be no legal recourse to the injured party in most jurisdictions as both names on an ETS joint account are legally entitled to withdraw any funds in these accounts.
It is important to distinguish between a children's savings account and a children's bank account. There are different age limits for opening these accounts. Although these will differ depending on your location and banking provider, the ages listed below are guidelines.
A children's savings account is a fantastic way for parents to begin saving for their children. They can deposit any money they may have to spare, or even the child's birthday/festive holiday money. Many parents use these accounts to instill in their children the value of saving money and begin to provide their children with some semblance of financial education. These accounts are generally available for children above the age of 7.
A children's bank account is designed for when your child gets a little older. These accounts can provide a great way for your child to access their money without carrying cash around. Parents will also be able to set restrictions on the account to prevent their children from overspending. These accounts are available for children between the ages of 11-18.
While both digital and retail banking has their strengths and weaknesses, neither is comprehensive enough to cover the banking needs of every individual. The reality is that most people will likely need a combination of both retail and internet banking, with many people often opting to open both types of accounts.
If you don't already have an account opened with a digital bank, you should consider doing it immediately. Our comparison tool will help you find the best digital bank for your needs.
Yes. As we noted above, some banks do offer the option to open a bank account online by simply uploading the required documents directly onto their system. However, this is not something that is offered by every bank and you will need to consult with your bank's specific website for more information.
There are a number of ways to open an account that no creditor can touch. A favourite among the legally savvy is to incorporate a company or separate legal entity and have a bank account created for this corporation. This account and the funds inside of it will be considered separate from your personal funds and will not be subject to creditors attempts to garnish your accounts. Please consult a legal/financial professional in your area if you are considering employing this strategy.
Alternatively, there are some types of Government benefits that can be placed in specific accounts that are automatically exempt from seizure or garnishment for those of you who are receiving some form of benefits.
You should consult directly with your bank/a certified financial professional for more information about this option.
The number fluctuates depending on the jurisdiction and the type of bank account you are trying to open. You will be able to open Children's accounts at an earlier age than you would a current/savings account. You will need to be between 16 and 18 years old to open a current/savings account. You may be able to open a joint account at an earlier age provided the other party to the joint account is a parent/legal guardian.
If you intend to open a digital bank account then you will be required to open it online. Retail banks differ depending on the bank or country that you live in. Many retail banks now offer the option for clients to open their accounts online but it is not an option every bank offers. Visit your bank's website to find out whether you can open a bank account online.