Do I want a savings account or checking account?

If you’re looking to build your savings, maybe for an emergency fund or for down payment on a house, a savings account may be what you’re looking for. Some important features to keep in mind about a savings account are:

• Your savings account will earn interest, meaning your account balance will grow. You will also earn interest on your interest. This is called compound interest.
• You may be subject to withdrawal limits. 

On the other hand, if you’re looking to open an account for daily transactions, like paying for groceries or utilities, a checking account may be what you need. Usually, you get access to the following features with a checking account:

• Debit cards
• Paper checks
• Direct deposit
• Online bill payment
• Mobile check deposit
• Overdraft protection (often linked to a savings account)
• Balance and transaction alerts to help protect against fraud

Even though you don’t need a checking account to open a credit card, having one does make the process for applying for a credit card and submitting payments easier. Having a bank account, whether it is a savings account or checking account, is also useful if your employer pays payroll through direct deposit. 

You don’t have to choose either a savings account or a checking account. You can open both.

How do I choose a bank? 

Before choosing a bank or a credit union, you may want to get a recommendation
from a trusted friend or family member. Ask them about:

• The fees they charge
• The services they offer, like online bill payment or a mobile app
• The interest they pay for savings accounts

Some popular choices for banks are brick-and-mortar banks, credit unions and online banks. You can visit the Federal Trade Commission website for more information on how to choose the right bank for you. 

Brick-and-mortar banks range from the big names you see in cities to smaller regional banks. These banks will offer the most basic services, like checking and savings accounts. Many even offer free checking accounts. A big name brick-and-mortar bank might be a good idea if you want access to a wide network of fee-free ATMS. On the other hand, if you value visiting your bank in person, you might want to consider a smaller, more local brick-and-mortar bank.

Credit unions are membership-based financial institutions. When you join one, you become a part owner. When you deposit money at a credit union, your money stays in the local community and can be used to help a family get their first mortgage, finance a student's education, or help a local business owner open a new store location. While you usually have to have a professional relationship with an eligible company or organization to qualify for membership, there are many credit unions. A credit union can be a good choice for someone who likes to visit an in-person branch and receive more competitive interest rates on their savings and loans than at a larger regional or national bank.

Online banks typically don’t have a physical location you can visit, but they often offer some of the lowest-cost bank accounts and savings accounts with the highest interest rates. If you prefer a mobile or fully digital experience, you may find that an online bank gives you everything you need—from fee-free accounts with no minimum balance, to waived ATM fees and mobile check deposit.

When choosing a bank, keep in mind that you usually need to make an initial deposit. This can be between $25 and $100 to open a savings or checking account. You should also make a note of how much you must keep in the account at all times to avoid or reduce fees. This is called the “minimum balance requirement.” This may not be the same amount of money you need to open the account.

What do I need to open a checking account?

The Consumer Financial Protection Bureau has a checklist that you can check off and print out to help you gather what you will need to open a checking account. It also has a helpful list of questions that you should ask your chosen bank.

At the very least, you will need the following to open a checking account:

• A form of identification with your picture, issued by the U.S. government, a state government, or a foreign government (each bank or credit union has its own policy on what foreign IDs it accepts)
• A second form of identification: Your Social Security card, a bill with your name and address on it, or your birth certificate
• A Social Security number or ITIN; without this, you may be able to open a no-interest account only
• Money to open the account

The application process for a new bank account is fairly quick. You can usually apply online in 15 minutes or less. It may take a bit longer in person. It may also take a few days for the bank to verify your information and allow you to begin using your account.