By Amy Fontinelle

Those who are new to banking or who have lived in other countries where the banking system can't be trusted might be wondering why they would want to use a bank at all. It's certainly possible to operate on a cash-only system, but that isn't the best idea for several reasons:
  1. Security
    Storing all your money in cash at home just isn't safe. Your home could be burglarized, flood, or catch on fire. In the event of a burglary, most of those places you thought were great for hiding your money will probably be found. (You aren't the first person who has considered hiding money in the produce drawer of your fridge.) If you bury your money in the back yard, the container you put it in could become damaged or start decomposing and destroy your money. Less dramatically, you could simply forget about all the places you've stashed money, or someone else who lives in or visits your household could find it and take it.

    Once you have more than a few hundred dollars to your name, it's really best to have a secure place to put your money. As long as you choose a legitimate bank that has Federal Deposit Insurance Corporation (FDIC) insurance, any money you put in the bank (up to FDIC insurance limits) is protected by the U.S. government. To date, the guarantee provided by the FDIC has proved to be completely reliable, even during times of financial crisis like the banking crisis brought on by the 2008 subprime mortgage meltdown or the savings & loan crisis of the early 1990s. (To learn more about the FDIC's protection, see Are Your Bank Deposits Insured? and Bank Failure: Will Your Assets Be Protected?)

  2. Convenience
    When you have money in the bank, you can access it from anywhere. A checking account also makes it much easier to pay bills - you'll no longer have to pay bills in person, and you won't need to purchase a cashier's check every time you need to send money through the mail. You can just write a check from your checking account and put it in the mail. You can even transfer money online, often for free.

  3. Saving and Investing
    Once you have enough money, you'll want to go beyond a checking account and start saving and investing your money to optimize your future financial situation. You simply can't take advantage of the opportunity to earn money in the stock market or earn interest on deposits if you're not willing to keep your cash anywhere except your mattress. (Find out what putting your money to work can do for you in Stashing Your Cash: Mattress Or Market?)
Requirements for Opening a Checking Account
Before you spend too much time deciding what bank to use, you should first make sure you will qualify to open a checking account. Here's what banks generally need from customers.
  1. Opening Deposit
    You'll usually need at least $1 to open an account, but some banks will require a higher amount, such as $100, $500, or more, depending on the type of checking account you want. For example, checking accounts that pay interest often have higher opening deposit and ongoing balance requirements.

  2. Identification
    Acceptable identification includes your Social Security number, tax identification number, or permanent resident card and driver's license or state identification card.If you are opening a U.S. bank account and are not a U.S. resident, you'll need at least one and probably two of the following: foreign passport with photo, foreign driver's license, nonimmigrant Visa and border crossing card (DSP-150 with photo), nonresident alien border crossing card (I-586 with photo).

  3. Contact Information
    This will include your address, phone number and email address.
The reason banks ask for all this information is to comply with federal laws that require them to obtain and verify identifying information for every person who opens an account. According to the United States Department of the Treasury, the Patriot Act imposes such requirements on financial institutions in order to detect and prosecute money laundering and the funding of terrorism; to prevent use of the U.S. banking system by corrupt foreign officials; to identify and report suspicious banking activities and more. For the average person, these requirements might be a mild inconvenience, but shouldn't pose any real problem.

Also, you will generally need to be at least 16 and sometimes 18 years old to open a bank account. If you're younger, you may be able to open a joint account with a parent or legal guardian. (If you're opening your very first account, check out Your First Checking Account.)

Next: Banking: How To Choose A Bank »


comments powered by Disqus
Trading Center